Selling Material through an Auction House
This chapter deals with selling collections or individual items through an auction house. If you have a high-value or medium-value collection, you should read it. This chapter does not cover online auctions such as eBay. Those are discussed in chapter 15.
10.1 General Information
Short of finding a collector who will purchase your material directly, auction houses are generally the best way to sell high-value items. Most auction houses will only auction collections worth $3,000 or more. That’s a $3,000 sale price, not a $3,000 catalog value. However, many auction houses will also make an offer to purchase outright just about any material you send them.
Note: If you know your material is worth less than $3,000, the auction house may or may not make you an offer for it. They may send you a letter asking you for shipping instructions to return the material at your cost. Others will require that you state your asking price as a basis for further discussion.
Auction houses advertise in Linn’s every week. (See chapter 25.) Check out their ads in the newspaper, but also ask any collectors you know about their experiences with auction houses. Collectors and local stamp clubs are also good sources of information.
If you would like to discuss selling your collection or part of it, do the following:
1. Call up one or more auction house(s). If you have any kind of inventory available (especially of the best stamps), have it handy.
If you do not have an inventory of what’s in the albums, that is okay. It is not necessary for you to identify individually in a Scott catalog all 200,000 stamps you inherited!
2. Ask to speak to a buyer. They’ll usually ask you if you’re selling a USA or foreign collection.
3. Once you get the buyer, just tell him/her what you have, and that you are interested in selling it. The buyer will ask you some questions to help him/her get a rough estimate of the value of your collection. These will be questions similar to what you answered in chapter 5. The buyer may ask you to pull out a particular album and check if such-and-such stamp is there. The whole thing may take you two minutes or an hour.
Here are some other questions you should anticipate being asked. What method did you use to access the value of the material? What is the earliest item in the collection? What is the highest value item in the collection? Are there any covers?
Don’t be afraid to ask questions. This is a business deal. If you are not comfortable with this firm, talk to another one. If you have concerns, express them. They’ve been through this before; you haven’t.
4. If the buyer is interested in what you have, he/she will ask you to ship it to their appraisal department. You will get detailed instructions on how to do this. Some houses have insurance policies that can save you on your insurance costs when you mail the package. Ask if the material will be covered by insurance while it is at the auction house.
5. In about a week, you should get a form to sign. Read it over carefully, be sure you understand it, then sign it and mail it back. If you don’t understand something, call them back and ask.
6. The next thing you should get is an estimate from the buyer. This could be in a letter or via a phone call. You may get an outright offer to buy the material at this time. You may accept the offer. If you do, you’ll get a check for a known amount in a short period of time. If you would rather continue with the auction process, it will take longer to get your money--at least six to nine months. You stand a risk of getting less than the cash offer, but you might also get more. If your material has an expected sale price under the house minimum (usually $3,000), you may receive a cash offer to buy, but may not have the option to continue to auction. It is sometimes possible to get a cash advance from the auction house against the expected sale realizations. If you do this, there is a small possibility you might have to pay some of the money back if the realizations are not as high as expected.
7. If you both decide to auction the material, you will later receive a catalog with your lot or lots marked for you.
8. About thirty to ninety days after the auction you will get a check for your part of the sale. They will keep their commission which usually runs 10% to 20% of the sale. You may see a sliding scale percentage: if the material is expected to sell for under $10,000, the commission may be 20%; on material from $10,000 to $25,000, perhaps 15%. On material of higher value, the commission is usually negotiable. It is not uncommon to see a smaller commission if the lot is expected to sell for over $25,000. Again, this varies by auction house. They will be happy to quote their rates.
If an auction house has a 10% commission, for example, they normally make 20% of the sale. The seller pays a 10% commission and the buyer pays a 10% commission on top of the hammer price. It is also possible to see a situation where the buyer pays a 15% commission and the seller pays a 20% commission, leaving the auction house with 35%.
Ask about any other fees that may be charged for insurance (usually 1% of actual hammer price), or separating the material into individual lots, etc. You should have a clear understanding of what fees you are expected to pay.
9. When you see a firm’s auction catalog, you will note that they illustrate many of the lots being auctioned. These are usually the more expensive lots. If you wish to have your lots illustrated, and they are not ones the firm would normally illustrate, you will be asked to pay an additional fee. In general, the possible increase in the price realized at auction will not cover that fee.
The major problem in dealing with an auction house is time. It may take six to nine months or more to get your money. Your material has to be appraised and described, and then placed in the next available auction which may be several months away. Catalogs have to be printed and mailed. Bidders need time to send in their mail-order bids. Finally the day of the auction arrives, and the lot is sold. This could be to a mail-order bidder, a telephone bidder or someone who was attending the auction. Next, the material has to be shipped to the buyer. If the buyer finds that the lot matches the published description, he/she sends a payment to the auction house. Then the auction house sends you a check. The after-the-sale part could take thirty to ninety days. You’ll have to decide if you can live with this wait.
If you are selling a very valuable stamp, the buyer also has a certain amount of time to get it expertized if he/she chooses to do so. If it is a fake, you aren’t going to get any money. Many auction houses will require expertization of "risky" stamps before they will consider auctioning them at all. This may add one to three months to the process.
Another concern is, "What if the only bid they get for my $10,000 stamp is 10 cents?" This could happen, but usually doesn’t. If you are worried about this, state in writing that you want a reserve bid of $2,000 or whatever you like. Unless the auctioneer gets a bid higher than your reserve, the lot comes back to you. Be sure to ask the auction house if there is a fee for a reserve bid. Some auction houses accept reserve bids; others have totally unreserved sales. Ask about it.
If the auction house does not accept reserve bids, you can place a bid for your own lot. This is risky. If you win the lot, you’ll have to pay both the buyer’s and seller’s commission which could add up to 20% or more of your bid unless you and the firm have previously agreed on some other arrangement.
Some auction houses will set a minimum bid on their lots. This kind of auction is sometimes called a minimum-bid auction. Most serious buyers, however, prefer to patronize unreserved public auctions. In an unreserved public auction, there are no minimum bids required.
10.2 Private Treaty
If you are selling your house, you usually list it with a real estate agent. The agent is responsible for showing the house, advertising it, and (hopefully) arranging to close the sale. In the world of stamps, a private treaty sale is the same kind of transaction.
Most auction houses will be happy to enter into a private treaty arrangement with you. They will act as your agent in trying to find a buyer. They will advertise it, show it, and (hopefully) find a buyer that will pay an acceptable price for it. These companies know buyers around the world who buy unusual or extremely expensive items. You don’t. There is usually a time period (typically three to six months) to complete the sale. If a buyer is not found in the specified time period, the seller may usually leave the material for an additional period of time at a reduced asking price or request that the material be returned without cost or obligation. If a buyer is found, the auction house collects the money, deducts their commission (which may be lower than their auction commission) and sends you a check.
Again, call the auction house and talk to them. They will know if an auction or a private treaty is better. As a matter of fact, just keep it simple. Assume that you are going to auction the material from the beginning. They will tell you if that’s the way to go, or if another alternative is better.
Private treaties are not handled just by auction houses. Mail-order dealers and larger local dealers may also handle them. There they are called consignments. See chapter 8, section 8.5.
10.3 Mail Sales
You may also encounter the concept of a mail sale as you speak with various auction houses and dealers. In a mail sale, a catalog is printed and distributed to potential buyers. The buyers send in their bids by mail, and the highest bid wins. There is no public gathering to make final bids as there is with the regular auction process.