An auction is a way to trade without setting a clear price. That is, a certain product or group of products is put up for sale, and then the buyers themselves bid on this product. Who offers the best - he receives a purchase. It would seem that there is nothing complicated, but everything is not so simple. There are several types of auctions, each of which has its own characteristics. In some cases, the buyer, in order to win, you must specify a higher price, in others you can lower the price. And what if the buyer mistakenly indicated the wrong price and can’t pay or the goods have gone wrong right after the purchase? In order not to get into a disadvantageous situation, you need to know some features of this method of trading.
Auction Classification
The most common types of contests and auctions are considered English and Dutch auctions. The difference between the two is that the first starts at zero price per lot, and during the bidding process the price rises. The peculiarity of the second type, Dutch, is that trade begins with a high rate, then the price either decreases or rises. The one who offers the highest price wins.
There is another type of auction - American, but it does not concern the pricing, but only determines the procedure for putting and selling lots. So, the goods are not exhibited separately, but all together. And then they are issued in the order specified in the list of participants. This type of auction is practically not used either for live trading or on online platforms.
The advantage of the auction over other methods of selling goods
In contrast to the sale of goods at a fixed price, bidding in the form of an auction enables the buyer to purchase a thing at the market price, and not at the price set by the seller. This is its essence. The type of auction used in a particular case depends on where and what goods are sold. For example, in online trading, the English auction is mainly used, and in the sale of land - Dutch. But this is not any accepted, legalized rule for all. It’s just that in most cases it’s more convenient for both sellers and buyers.
When selling ordinary goods, including on the Internet on special sites, the auction gives the seller a chance to sell the goods at a better price, and in some cases determine the price and demand for a completely new product. For example, an entrepreneur has produced something new, but he does not know whether there will be demand and what will be its level. Putting a product at auction, a businessman checks how buyers are ready to purchase a new product and how much they are willing to pay for it.
Who can take part in the auction
There are closed and open auctions. A private auction can only be accessed by invitation; anyone can take part in an open auction. The main thing is that he has a desire to purchase goods and enough money to buy. If the auction is held on the premises, then participants must first register and pay a 10% prepayment (the amount depends on what conditions are spelled out in the rules).
Bidding always takes place in a special room. The host announces the initial price, and after the buyers begin to bargain with each other, shouting the price that they are willing to pay. For this, special gestures can also be used.
What goods can be sold or bought at auction
Many people think that only luxury goods, antiques, paintings by famous artists and other expensive and rare items are sold at auctions. In fact, you can sell anything on it, starting from a pair of socks and ending with an apartment or a house. Modern means of communication enable customers to place bets and buy any product without leaving home anywhere in the world.
Although any product can be sold at auction, consumer goods trading mainly exists in the form of online auctions. With live trading, auctions are arranged to sell more serious goods: furniture, household appliances, land, houses. It can also be arranged in the event of bankruptcy of the enterprise. Then the equipment, materials and unsold goods “go under the hammer”.
Foreign sites
The largest auction sites are in London and New York. They sell and buy expensive things on them: collectible publications, antiques and art objects, and not only of American or English origin. The same sites exist in other capital cities of many countries of the world, but they are much smaller and are not used in the form of an international auction. To sell less expensive goods, as well as goods sold locally, the organizers build temporary sites or conduct tenders entirely on the Internet, for example on Ebay.
In most cases, auctions are held in trading pavilions, public or other convenient places. About when, where and under what conditions the auction will be held, what goods (lots) will be exhibited, announced in advance on television or in newspapers.
Domestic auction sites
For a long time, auctions were not held in Russia, although there was no official ban. There was simply no market, no goods that could be sold at auction. Everything changed with the transition of the country's economy from the socialist to the capitalist type. The kind and order that the organization of auctions acquired in Russia is largely due to the characteristics of the Soviet and post-Soviet economy. In Russia, auctions are increasingly closed, in contrast to Western countries. And even if they announce an auction in a certain region, they usually do this not in large media, but in a small newspaper of small, unreadable type.
Despite the state’s requirements to sell certain goods, such as land, at open auctions, bidding is still closed. Usually, land plots for large farmland, enterprises, and industrial equipment are sold at such auctions.
There are also online auctions in Russia. They are not as large as the American sites, but they are. They mainly sell old coins, Soviet and imperial securities, antique furniture, paintings, handicrafts, household items, Soviet-made equipment. The most famous Russian auction on the Internet is Newmolotok and Meshok. However, they are not as popular as similar sites. Therefore, most often for auction trading, our compatriots turn to foreign sites. They have a wider audience, and there buyers are more likely to purchase antiques. In addition, their prices are an order of magnitude higher than at Russian sites.
How to take part
Usually the address and date of the auction, as well as the venue, is published in the media or a personal invitation is sent to the participants. Participants come to the indicated place, register, deposit funds. Each is recorded in a special journal and seated in places in the hall. In Russia, auctions are most often held in cultural centers or in assembly halls of schools and universities.
All participants wishing to participate in the auction must have a passport or other identification document, an invitation, if the conditions of the auction require it, and the funds that he is willing to spend and which he needs to make to register.
The organizers exhibit goods-lots or declare their name if goods are sold that cannot be seen and touched. For example, an apartment or an enterprise. The price of a lot can increase (decrease) arbitrarily or have a fixed character. For example, the price of a lot may increase exclusively by 1000 rubles. That is, each raising of the hand will mean that the buyer is ready to raise the price by 1000 rubles from the previous participant.
Trading Rules
The rules of the auction, their contents, as well as the process itself, depend not only on the type of auction, but also on the characteristics of the goods. Rules are agreed in advance and announced before the start of bidding. Usually they are indicated in the same announcement, which announces the date, time and place of the event, but can also be published directly on the spot before the start of bidding. The rules should indicate:
- initial price of the put lot (lots);
- composition and size of the lot. How many different products are included in it, how they are sold, all together or separately;
- the order and size of the increase in the price of the lot, how the price increases (decreases);
- procedure for determining the winner of the auction;
- the procedure for transferring things into the ownership of the winner;
- conditions for declaring a transaction invalid ;
- conditions and procedure for terminating the transaction, in case of refusal by the buyer to pay for the goods or refusal to transfer the goods from the seller.
The rules developed by the auction organizers must not contradict Russian laws and the Constitution. In our country, this type of transaction is regulated by the Civil Code of the Russian Federation, article No. 448.
When and how can I get the goods won
The procedure for payment and receipt of the purchased at the auction should be spelled out in the rules, published and known to all participants, regardless of the type of auction, quotes and number of participants. Usually the goods are transferred or sent to the buyer immediately after payment. In some cases, for example, when buying land or a car, the acquired goods must be registered in order to fix the right of ownership. In any case, the right to receive goods arises only after the completion of bidding and payment.
How to refuse an item purchased at auction
The ability to refuse a purchased item depends on the type of tender or auction. If the goods are not satisfied with something or there is not enough money to pay, then the buyer has the right to refuse the purchase immediately. The possibility of refusal is prescribed in the law and no matter what is written in the rules, the buyer has the right to do this both before payment and after it. At the same time, if there is a problem, it is better to refuse before payment, since after it the termination of the transaction can be difficult. In some cases, the buyer will be obliged to pay a forfeit or a fine, but this is possible only when such measures were spelled out in the rules, that is, the buyer knew about them before bidding.
In accordance with the law, goods sold at auction are not refundable, even if they do not meet the country's quality standards. Since the very concept and types of auctions imply that the buyer himself evaluates the quality and sets the price. If several days have passed after the purchase, the seller may not return the money in exchange for the goods sold.
Consequences of termination
If the goods have not been paid, then in most cases the termination of the transaction does not lead to any consequences. The goods are put up for auction again or transferred to another bidder who has previously offered the highest price. It all depends on the type of auction that the procedure for conducting and terminating the transaction should be spelled out in the rules of the trading platform.
For example, on EBAY, a transaction can be terminated within the first hour after the transaction is concluded - the money will be returned immediately, no penalties. If for some reason it was not possible to do this, you can agree with the seller that he terminated the transaction and returned the money, but this is possible only in the first 10 days after the transaction is concluded and only by the good will and desire of the seller.
Other sites may have different rules. Therefore, before participating in the auction, you must carefully read the rules.