In the first three installments (Part 1, Part 2 and Part 3) we discussed how auctions work in general terms, and how to inspect merchandise that you might consider bidding upon. Now it's time to get ready for the auction, so we'll start with a discussion of auction terms and rules, and how to bid.

Step One: Register
Every auction I've ever attended (and that's hundreds of them) requires that you register and get a bidder's number before you can make a winning bid. Usually this means that you supply some form of identification, such as a driver's license, and often your address as well. Chances are the auction house will use this information to add you to their mailing list, and they also have contact information should you make winning bids on stuff and then disappear without paying. That's something I've never tried because I like the stuff I bid on and I'm usually very happy with the price I pay.

Step Two: Get a catalog if there is one.
Some auctions have a written catalog that gives you an idea when various lots will come up. When I first started going to auctions, I would jot down the winning bid price for each item and then review those figures and look at collector's books to see how the prices compared to the "book value."

Smaller country auctions don't have catalogs and sometimes even the lot numbers are disorganized. In this kind of setting the auctioneer may just grab an item and auction it off. While this may seem haphazard, the auctioneers are generally pretty savvy. They start with some small pieces to warm up, and then select items of greater value when the bidding starts to pick up. But if there is a catalog that describes each piece (however briefly) and the order in which items will come up, it's worth purchasing.

Step Three: Make sure you understand the rules for the auction and common auction terms.
Generally, the auctioneer will recite the terms and conditions of the auction at the start of the sale. In addition, the basic terms may be set out in any newspaper advertisement for the auction, or listed at the top of any flyer or printed catalog.

Let's look at some of the basic provisions you'll probably encounter

Payment. Usually auction houses will accept cash and some credit cards. Frequent visitors may be able to pay by check and take merchandise with them. Strangers will generally be asked to leave the merchandise until after the check clears.

Terms. Each object is sold as is, where is, and when the winning bid is announced, the bidder owns the object. That means most often if you discover after the fact that the lamp you thought was a vintage bronze was actually made in China a month ago, you own it. It also means that if you drop that precious vase on the way to your car, you own the pieces.

Auctioneers who run a reputable shop try to describe each piece accurately as they auction it. That includes describing any damage to the item. Many better auction houses will take back an item if there is obvious damage that was not disclosed when the piece was auctioned. This comes up most often with chips on pieces of glassware and pottery.

So the fact that you own the item upon the declaration that the object is "sold," means that you had better know what you're bidding on. That's why the inspection period is so important. There's also the drawback that you're responsible for anything that happens to the object thereafter.

However, there are some plusses. If you buy a "box lot," a group of items, usually inexpensive ones, that are sold as a group (often in a box, hence the term) for one bid, you may find from time to time that there's a really precious item in the lot that the auction house missed. You own it. Similarly, if you buy a dresser with a drawer that won't open, and when you get home you find there's something valuable inside that drawer, you own whatever that is as well. Remember, you bought the item you bid upon "as is, where is."

Reserve or Upset Price. In some auctions, particularly very high-end art and furniture auctions, some or all the items sold may have a reserve price. This means that the owner of the item being auctioned has told the auctioneer that the item can only be sold if the bidding goes above the reserve price. This is sometimes called an "upset" price as well. Generally the auctioneer should announce that there is a reserve price, but won't say what the price is.

Buyer's Premium. Today many auction houses charge what is known as a buyer's premium, often 10%. That means that the buyer's premium percentage will be added on to the final bid price. So, if your winning bid is $110 for a bronze lamp, when you go to pay, if there's a 10% premium, you'll be charged $121, or the $110 that you bid plus $11 (10 percent of $110), for a total of $121. And don't forget there's also possibly sales tax.

Sales Tax. In states where there is a tax levied on goods sold, the auction house will be obliged to collect sales tax unless you are a registered dealer with a sales tax resale certificate. The theory here is that the sales tax is only charged to the final user, so if you're buying something to sell to someone else (as is the case with antique dealers) then you should be exempt from paying the sales tax, but as a reseller, you'll be obligated to collect the sales tax from the final purchaser.

If you are a dealer, or more likely a designer or decorator, and have a resale certificate, you should make that fact known to the people at the front desk when you first register and get a number.

Don't be angry that you have to pay sales tax. It's not a decision made by the auction house. An auctioneer explained this succinctly to a very upset woman in front of me in the pick up line not long ago. Seems she was from a state that didn't charge sales tax and she was angry that she was expected to pay it in the state we were in. She just couldn't understand why she had to do that. "Lady," the auctioneer said bluntly, "I don't charge sales tax, the state government does that, I'm just obligated to collect it for them."

This means that your final price for an item will include the amount that you bid, plus any buyer's premium, with any applicable sales tax added on based on the total sale price, including any premium. To go back to our bronze lamp example, the auction house would charge me $121 (my winning $110 bid plus the $11 buyer's premium) and then figure sales tax on the $121. In New York City that would add another 8-1/4 percent!

No Children. This is a rule that you'll often see posted in auction houses. The auctioneer needs to maintain a semblance of order in the room, and kids who cry or talk can often create a distraction that interferes with the activity. I find that this rule is not fully enforced. For example my six-year-old daughter has been coming to auctions with us all her life. She understands how to be quiet and I even let her pick out something that interests her and I'll bid on that object for her. It's cheaper than a baby sitter and not long ago she spotted a great cast bronze dog that has become a family treasure.

These are the most common rules that you'll encounter. In most auction settings, it makes sense to keep the rules simple and they stem from a common tradition. Obviously, the most important item for you to know beforehand is whether or not you'll be paying a buyer's premium on top of your bid price, and if so, what percentage that is.

We are nearing the end of the fourth part of our Special Report on Auctions and we still haven't gotten the auction started and discussed bidding strategy and technique. The good news is that we'll start the auction (and the action) at the beginning of the very next section. But for now, to complete this installment, there are several other auction terms that we need to define, so you'll know what the auctioneer is talking about. These aren't really rules as such, but they're important.

Left Bid. Some times, individuals attend an inspection session, but for whatever reason cannot attend the actual auction. In the case of dealers, they may be at a different auction that is taking place at the same time. In this case, the auctioneer should announce that there are left bids and that the auctioneer or a member of the staff will bid for that absent person. Now this might be an area for auction trickery, using a non-existent "left bid" to push the bidding in the room higher. However, auction houses that want to try to push the bidding higher can use the same technique with "shills," or people who bid but don't actually buy, in the room.

As I mentioned in an earlier installment, and as we'll discuss at length in the next installment, the defense against unscrupulous tactics such as this is to have a top price in your head for each item you will consider bidding upon. You simply stop bidding when that price is reached.

At the auction houses I frequent, the auctioneers are very honest with left bids. They will tell the audience when the bidding has exceeded the left bid, and also, if the winning bid is a left bid, the auctioneer will identify the bidder by some type of name. "Mark that sold to Tommy," for example. Some auctioneers will also tell the audience when the maximum left bid has been reached. After all, if you're bidding on a beautiful rug and the "left bid" is at $500 and that's the maximum amount the person left, then it is in both your interest and the auctioneer's to let you know that if you bid $550, it's yours. Of course, $550 is really $605 if there's a 10% buyer's premium in effect. But then, the left bid would also pay a 10% premium.

One Money. This simply means that a group of items, say a bedroom suite, is being sold for a single price. Perhaps there are two beds (each bed consisting of a headboard, footboard, and rails most states prohibit the resale of mattresses), two end tables, two dressers and a vanity with a bench. These seven items are put up for "one money," rather than auctioning off each piece individually. The theory here is that they're a set and should stay together.

Choice. Sometimes an auctioneer will have several similar items, let's say five stained glass windows, none of which is an exact match. He may elect to sell them "choice," meaning that the bidding is for any one window, and the highest bidder can select one or more of the items. So, if the top bid for "choice" on five stained glass windows is $75, the winner can take his/her choice for $75 (plus any premium), or take two for $150, or take all five for $375. If the winning bidder takes one or two windows, the auctioneer may offer the rest to the back bidder for the same $75 price, or may put all the remaining items together and sell them for "one money."

So Much A Piece. Sometimes identical or near identical items are auctioned so that you're bidding for one item but the understanding is that you'll be purchasing the entire set. If there are six dining room chairs, the auctioneer will announce that he's selling the set, but the bidding is for "so much a piece." This is also sometimes called "Six Times the Money" or three times, or two times, or whatever the number of items. This way, if the winning bid is $100, the total you will owe is $600, plus any premium. This tactic has two benefits. First, it makes the price seem less, and second, it makes calculating how much you're paying for each item easier. After all, if the bidding for the whole set was at $825, how much is that a chair? Another benefit to this method is that it sets a single price for an item where there may be some differentiation. For example, a set of six dining room chairs may include two chairs with arms and four without. If your winning bid is $100, that's what you'll pay for each chair, even though two have arms and four don't.

Bidding Increments. In a live auction, unlike eBay, time is money. That means the auctioneer wants to sell as many lots as possible before people start to leave. Hence, there are generally accepted increments, so the bidding doesn't grind along from $72, to $73, to $74, etc. In most auctions, the increment may be One Dollar from $1 to $10, Five Dollars from $10 to $25, Ten Dollars from $25 to $100, Twenty Five Dollars from $100 to $500, and Fifty Dollars above that. Naturally, when you get to fine art that sells in the millions of dollars, the increments get higher and higher.

Generally the auctioneer won't bother to set out the increments, but he/she will cue them in as the bidding progresses. "I've got $25, do I hear $35, $35, $35? Will you offer $30, $30, $30? Thirty bid and now $40, $40, $40, do I hear $40, $40, $40?"

This unusual vocalization is known as the auctioneer's "chant." It's one of the most interesting parts of the entire auction process, and there are as many different chants as there are auctioneers. A good auctioneer, with a good chant, can move a lot of objects and raise the prices a bit by keeping the auction house excited. The chant, the bidding, and knowing when to bid (and when to stop) is where we'll begin next time.

Pick Up. What if you buy some gigantic armoire that you can't take with you? Generally an auction house will hold items for a period of time. They may also offer delivery services, since if you buy a bedroom suite and a dining room suite, you probably need some help getting the stuff to its final location.

However, there's one final step before the action begins.

Step Four: Find a seat where you'll be comfortable.
Many auction regulars like to sit in the back or to the side of an auction so that they can keep an eye on other bidders. Others like to sit right up front so they can look at the merchandise one more time when it comes up for bid. I don't have any particular preference, other than a comfortable spot with an unobstructed view. When I arrive at an auction, I set my jacket on the chair of my choice and then go spend all the rest of the available time prowling the merchandise and inspecting the stuff that interests me. I wait to register until the auction starts. I can do that while the auctioneer is going over the terms of the sale and talking to the audience. I don't want to waste valuable inspection time standing in line.

What if something comes up that I want to bid on while I'm standing in line to register? I go ahead and bid. If I win, and the auctioneer asks me for my number, I just yell out, "Next number" and go to the head of the registration line. I confess I've used this trick more than once to buy a $3 warm up box lot and cut to the front of a long registration line. Who says the tricks at an auction are all reserved for the auctioneer?

[Part One] [Part Two] [Part Three]  Part Five

Reprinted with permission from the Sheffield School of Design web site at http://www.sheffield.edu