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| The Basics | The smart bidder's guide to auctions
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Whether you're waving a card at a warehouse or poring over eBay items, here's how to shop, bid and pay wisely.
By Bankrate.com
From online battles over collectible plates to real-world bidding wars for national treasures, auctions are one of the hottest retail venues going.
Auctions often combine competition with commerce, spectacle and spending, not to mention drama. That was the case, when Sotheby's auctioned Picasso's "The Boy with a Pipe" for $104 million, the world-record price for a painting at auction.
But whether you're buying fine art or a used car, smart auction bidding starts well before the main event.
The formula is simple: Study everything you can about the item for sale. Research the price history of similar objects. Set your own price range and don't get caught in a bidding war. Know the reputation of the seller. Then, whether you're logging on to eBay or sitting in the front row of Sotheby's, you're armed and ready.
Do your homework
Buyers should "make sure they have done their research," says Leslie Hindman, co-author of "Adventures at the Auction: The Ultimate Guide to Buying and Selling at Auction -- in Person and Online."
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Go online to learn what similar items are fetching. Talk to dealers and auction houses. Become familiar with the way appearance and condition affect value. "It's just like you're looking at real estate," says Hindman.
And get neutral professional help. For art and valuables, many dealers will lease their services, either by the hour or for a percentage of the sale price, to advise you on the object you're considering. For a car, take a mechanic or auto dealer with you.
The rules will vary depending on the type of auction. Police and auto auctions are advertised weeks or months in advance. But frequently, potential buyers have only an hour or two to look over the merchandise. Often at police auctions, items are sold in lots, rather than individually, says Mona Vallon, senior police property manager for the San Diego Police Department.
Many police departments don't test or guarantee the merchandise.
"Take into account the fact that an item may or may not work," says Vallon.
Some departments are using third-party sites to test, refurbish or certify their merchandise to sell online. A popular site called Property Room serves hundreds of departments.
With auto auctions, potential buyers can't put the car up on a rack, a move that would reveal a host of potential problems, says Jeff Ostroff, CEO of CarBuyingTips.com.
Instead, use your eyes and ears. Check the lines of the car from different angles. Is anything out of alignment? Are there signs of rust under the hood or on the floorboards beneath the carpet? Is there any evidence of after-market welding? Do the doors fit and close properly? Does the paint match perfectly?
Pros have an elcometer, a device that measures the depth of the paint, says Ostroff. Normal paint is "three to four mils," while a repaint is likely to measure 12 mils, he says.
Next, check out the vehicle identification number with Carfax, a company that compiles data on autos, to learn if it's ever been seriously damaged. Carry a cell phone with you and contact a friend to check it for you on Carfax while you scope out the car, advises Ostroff.
Another tip: Major body panels will have the VIN etched into them. Do all the numbers match? Or are you looking at a Frankencar, pieced together from parts of various autos after a wreck?
Ostroff's last bit of auto advice: "Never buy a car without the title," he says. "There's nothing but trouble there."
At the other end of the spectrum, top auction houses make it much easier to get information and examine the items for sale.
Sotheby's typically puts items on public display for five days before the big event. "You can pick it up, touch it," says C. Hugh Hildesley, executive vice president of the auction house. Most auction houses also encourage buyers to bring an independent expert.
"Rule No. 1: Make sure you've thoroughly inspected what you're going to bid on," says Hildesley. "It's very dangerous to bid on something that you haven't inspected beforehand."
In addition, auction-house specialists who catalog items are a good source of information, says Hildesley. Not only do they know the objects, but they can compare them to similar things they've seen.
When you buy from an online site, often all you have to rely on is the word or description of the seller. Ask the seller to fax or e-mail additional pictures if you need them. Request any records. Has it been maintained? Sold previously? Appraised or graded? Ask about flaws and its condition.
Reputation counts
To find a reputable auction house in your area, Hindman suggests talking to people who work in bank trust departments. They work with estates, so they know the terrain.
With online auctions, it's more difficult to evaluate sellers. Read comments from previous customers. What kind of a track record does the person have?
"I would watch the type of product the person's offering," says Tom Lane, chairman and CEO of Property Room. "If they switch from low-priced items to high-priced items overnight, I'd be a little suspicious."
Get the seller's address, recommends Susan Grant, director of the Internet fraud watch program for the National Consumers League. "Lots of time people don't have a physical address for the seller."
If you're buying a big-ticket item, such as a car, get the seller's OK to see it in person, says Ostroff. But get as much information as you can before you go. And never meet with the seller alone.
Protect your wallet, too. If you pay by credit card, you retain the right to dispute your purchase. But you're also giving a stranger your credit card number. If you opt to use a feature such as PayPal, the No. 1 choice for eBay buyers, ask your card company what happens if you fund the account with your credit card and then have to dispute a purchase.
Never wire money.
"Once you wire money, it's gone," says Hani Durzy, spokesman for eBay.
If the item is being shipped, ask for a tracking number so that you can confirm the shipment.
If you choose to use an escrow service, make sure it's legit, such as escrow.com. Fake escrow services are one of the hot new scams, says Ostroff.
Before bidding at a site that claims to be selling merchandise for a police department, call the department and verify.
In cases of fraud, some sites, such as eBay, will guarantee purchases under certain circumstances. Find out what the rules are and what safeguards are offered by the site.
But even with guarantees, an unhappy purchase doesn't always rise to the level of fraud. In that case, the site may ask you to work something out with the seller. Best solution: Learn as much as you can about the seller and the merchandise before you bid.
Know the rules of the game
Auctions are a game. If you want to win, you have to know the rules. Just to make it interesting: No two auctions are exactly alike.
Some general guidelines: The bid won't be your total price. There are usually buyers' premiums, based on a percentage of your winning bid. There may also be shipping charges and taxes.
Some auctions will allow you to take the merchandise that day. Others have a waiting period or conditions you must meet. With an online auction, often the seller sets those terms. Ask ahead of time.
"Don't be caught by surprise after you've won an auction," says Durzy.
If it's an auto or police auction, chances are it's cash only. With most, money is due on the spot and all sales are final.
The one auction constant: Once you've offered the winning bid, you're obligated.
Before you go to the auction, set a limit on how much you want to spend. If your objective is a good deal, what would you pay for the same thing elsewhere? Factor in your time, shipping or travel expenses and set a limit.
"Bid with your head and not your heart," says Vallon. "There's always going to be another one, whatever it is."
Vallon has seen buyers pay several hundred dollars for bikes that were worth $4,000 to $5,000. She's also seen kids and their parents get so carried away they end up paying more than retail.
If you are buying fine art, jewelry or antiques, look for quality.
"It's better to buy one really good thing than 20 mediocre things," says Hindman.
And if you're a collector, says Hildesley, "be absolutely sure you're in love with the object you're going to buy."
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