There are a lot of believers in the need for a reserve at auction, even if it has to be hidden from the public. I believe that it really isn’t necessary, and with the openness created by the Internet, the marketplace should be a secure barometer of what it’s worth. An opening bid at any price, should call all buyers to attention.
I think the Dandois sale at Sotheby’s last week was a watershed auction sale. Never have so many high quality decorative arts items been sold without a reserve in a long, long time. The sale obviously had many items on reserve, but a significant number of lots without a reserve brought two to three types the high estimate; no insignificant feat. I’ll have to admit, Sotheby’s created a fantastic “stage” set for the stylish furniture and works of art. But you would expect that from Sotheby’s. However I bet there were several items that did fall between the cracks. Preparation works with opportunity anywhere in life.
It is a shame that the seller gets hood winked by the auctioneer to employ a secret reserve. Then again, most dealers are guilty as an accessory when they consign to auction. It really serves no purpose other than inflate a price which gets an added push with up to a 25% buyer’s premium. The seller is then placed on the roulette wheel for a game of chance: will the bidding hit the reserve. Deception with sham bidding is their only hope. For the auctioneer, nothing ventured, nothing gained. If it sells, that buyer’s premium will be a generous piece of the action; if it doesn’t reach the reserve, there is not risk on their part and it’s the seller’s problem.
The elimination of the reserve, while favored over having an open reserve will allow all parties a chance to win. For the seller, he will be able to liquidate the item with the bonus of attracting a wider audience than ever thought possible with the Internet. With more buyers come the highest prices. The reserve is meaningless when you are able to create a marketplace. Today, Internet auctions require the timing element of at least disclosing the reserve to get the bidding going. The reserve is the only impediment and isn’t necessary, if you are bringing saleable items to market. If it’s just ordinary or not very special, don’t expect a beneficial result.
I had a conversation with an older gentleman who worked at one of the active auction galleries in New York City in the late 1950’s, Plaza Galleries, operated by the O’Reilly family on 79th Street. I know my grandfather probably bought there and I do remember the place. We talked about the auction industry, when “rings” of dealers use to “hammer” out an item after a sale. It was right out in the open until it went into backrooms and was finally busted by the Feds. I also remember my grandfather telling me never join a ring and just buy it at the auction (against the ring if necessary). The ring operated the same way as the secret reserve; there’s the price, and then there is the controlled price. Perhaps secret reserves should be busted by the Feds too!
The trepidation in the industry to allow the marketplace to be open and transparent is so unnecessary. With knowledge that pricing is an open challenge, all parties to the sale will get their opportunity. It is the skill to be in the market and the timing to buy, sell, or broker that makes for success.