Auctions: Inner workings : Chapter 8
How to bid at auctions:Preparation, preparation and more preparation is the key. The more prepared you are the less chances that you will make dumb mistakes. Bidding is a relatively easy process, hence I won't dwell on that. Instead, I will concentrate on the basic mistakes people make at auctions.
1) Know what you are bidding on. Let's say that you have inspected a small plastic strapping machine. It appears to be in good condition. Ignore the minor dings and dents, after all you are buying a used piece of equipment. On the other hand , if you don't like the dings and dents, don't bid! End of story.
Let's assume that you like the unit and want to bid on it. Do you know what a brand new unit like this costs? Lets say that the price of a brand new unit is $2,000 dollars. This unit appears to be a few years old. Check the name plate. Chances are the serial number and other info provided by the manufacturer might provide this info. try to get this info if you can. Talk to the plant guys or the auctioneer...they might be able to help you.
Once you have determined the age and condition, how do you go about determining the value on this?
Establishing Value.
Let's say the unit is 3 years old. Based on the age alone you know that the company, in all likelyhood, had depreciated this unit down to zero. Hence the book value is zero.
Don't get too hung up on what the company's book value is. You are at an auction. Value will be determined by the highest bidder. Figure out your costing on this unit.
a) What will the auctioneer or the mover-on-site charge you to load this unit onto a truck?
b) What will be your trucking costs, to transport this to your place?
Let's say the transportation costs = $200 dollars. The loading expense...lets say = $200 dollars.
c) Does the auction charge a 10% buyers fee? If so figure this into your calculations.
d) Establish an upper limit....the maximum you are willing to pay for this unit.
Let's say you think this unit is worth a @1,000 to you. If you bid a $1,000 dollars your total cost is going to be....$100 dollar auction commission + $400 dollars for loading and transportation charges for a net cost of $1,500 dollars!
This is 50% more than you had planned to pay! Hello??? Anyone home??
I have seen this happen over and over. The worst part is listening to the high bidder justify this mistake.
Throw all the above advice out the window...if you are bidding on a one-of-kind antique car or object that you must have.
Above all do your homework. Know what you are bidding on......
