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Bargain-Buying at Live Auction Sales

Need a new supply of cheap products for your business? Use these tips at live auctions to get the deals!
February 17, 2005
URL: http://www.entrepreneur.com/article/76338

Live or offline auction sales provide a host of excellent buying opportunities for entrepreneurs who are willing to spend time researching and attending sales. These efforts are usually rewarded with incredible buys, which can be resold for two, three, or even four times as much as cost.

There are four main types of offline auction sales: public auction sales, police auction sales, government surplus and seized-items auction sales, and estate sales. There are other types of offline auctions, such as charity auctions and retailer inventory-reduction auctions, but these seldom provide many buying opportunities with resale potential. Likewise, seldom will you find new merchandise being offered at auction sales, unless it is a retailer or manufacturer bankruptcy sale. For the most part, live auctions are for the purpose of selling secondhand goods, such as cars, homes, furniture, antiques, tools, and equipment. Therefore, buy-and-sell entrepreneurs dealing in the sale of new products would do well to focus their buying efforts on sources that are better suited, such as wholesalers and manufacturers.

Auction Terminology

Before bidding at an auction, you first have to know auction terminology. The following are a few of the more common auction terms:

Auction-Buying Tips

Remember, the greatest auction-buying tip you will every get is simply this: Caveat emptor, which is Latin, meaning Let the buyer beware. Seldom are auction items covered by a warranty or guarantee of any kind. There are the occasional exceptions to the rule, but for the most part, you get what you buy. Therefore, the onus is on you and no one else to ensure that you know what you are buying, its condition, and its value before you make the bid. The following are a few indispensable tips for buying at auction sales:

Types of Auctions

Public Auctions

The most common type of auction sale is a public auction. As the name suggests, these sales are open to the general public. Items available for sale vary greatly--cars, real estate, furniture, business equipment, restaurant equipment, antiques, collectibles, tools, machinery, and anything else imaginable. Items being auctioned can be supplied by private sellers, estates, businesses, and trustees, or any combination of these supply sources. Auction sales featuring household items are generally conducted on weekends and evenings, when the largest number of the target audience is available to attend. Business and bankruptcy sales are typically held Monday through Friday during normal business hours.

Regardless of the type of auction you attend, you must plan and think big. Make the experience worth your while in order to justify your time and expenses. Buying an item for $20 and reselling it later for $40 might be doubling your money, but if it was the only item bought at the sale, a $20 gross profit hardly justifies the time and expense. In fact, you would be losing money. Only attend sales that have the potential to make you money. Buy items that are $100, $1,000, and more, and look to double or triple these amounts when reselling. Calculate your total fixed costs for the day including an hourly rate for your time, and factor in your costs to market and resell items. Chances are you will come up with a figure in the range of $250, which means if you cannot earn $250 in gross profit from the items you intend to purchase at the sale and then resell, in all probability it would be best for you to skip the sale. Depending on your overhead and other factors, the $250 minimum gross-profit base may be less or more; nonetheless, you still need to know in advance how much profit you have to generate from each sale before attending.

Resources

Police Auctions

Police auctions represent an excellent opportunity to purchase a wide variety of secondhand products at very low prices. Many police forces in the United States and Canada host quarterly, semiannual, or annual auction sales to sell stolen items they have recovered, but were never claimed by owners (that is, the people the thieves ripped off in the first place). At police auctions you will find a vast array of products for sale, including bicycles, tools, car parts, home electronics, computers, jewelry, and shoplifted merchandise, much of it for a mere fraction of the original retail value and current resale market value. There are several levels of police forces--city, county, state, and federal.

So the best way to find out about police auctions in and beyond your area is to log on to police websites, or call and ask who conducts sales and how the organizer can be contacted. Most forces hire auctioneers. As noted below, some are starting to utilize online auction services to sell recovered property. Online or off, police auctions are conducted in the same manner as any auction; you bid on the items you wish to purchase, and, providing your bid is the highest, you will get it. As always, preview items of interest first, stick to your preset bid amounts, don't impulse-buy, and have the right transportation.

Resource

Government Auctions

Government surplus and seized-items auctions and tender sales are other excellent buying sources, especially for large-ticket items that can often be purchased for 10 percent of their original value, making them extremely profitable for resale purposes. Many government agencies routinely hold auction sales or sealed-bid tenders to dispose of government surplus assets and equipment, foreclosed property, seized property, and unclaimed property. A few of these agencies include:

There are many more government agencies at the federal, state, county, and city level that also routinely hold auction sales to dispose of surplus, foreclosed, and seized property. Most of these sales are conducted like traditional auction sales, but sometimes the sale is by sealed tender, which means you complete a tender form and submit the amount you are willing to pay for a specific item. Tenders are opened after the closing date and the item is awarded to a bidder, mostly, but not always, the highest. Tender forms are available directly from the government agency holding the sale, or the auctioneer conducting the sale.

To find government auctions in your area, contact city, county, and state offices to make inquiries and ask to be included on the auction-sale notification and schedule list. Items routinely auctioned include computers, real estate, automobiles, machinery and tools, jewelry, furniture, electronics, and boats. Depending on the agency and type of items auctioned, sales can be conducted live, online, or both. Most are still live at present, but this is rapidly changing because the internet offers exposure to a broader audience of buyers.

Resources

Estate Sales

Estate sales can be conducted in a similar fashion to an auction, as buyers bid on items live or by sealed bid to purchase one or more items from the sale. Or the organizer of the estate sale may elect to price items individually and hold the sale over a number of days or weeks, until all or most items have been sold. Estate sales can be organized and conducted by auctioneers, estate sales specialists, family members, lawyers, or executors. Regardless of who organizes the sale and how it is conducted, one thing remains constant: Due to the need to settle accounts and inheritances and to dispose of property, it is very possible to purchase items at well below their true market value. Your ability to buy cheaply will be enhanced further if you are prepared to purchase more than one item, or even all of the items for sale. Estate sales are typically advertised in the newspaper classifieds and on websites, as well as in newsletters of companies that organize such sales. To find these companies, search under Estate Sales in your Yellow Pages directory.

Excerpted from 202 Things You Can Buy and Sell for Big Profitsfrom Entrepreneur Press