Auction Types: Consignment Vs Liquidation Vs Estate

auction types consignment vs liquidation vs estate sales

There are several different types of auctions, and they all offer unique benefits to both buyers and sellers. Whether you’re looking into public car auctions, liquidations, or online auctions for collector’s items, you’ll generally have no problem finding options in your area. 

Seller Benefits 

The advantages to sellers at an auction are numerous. They get to set the time and place of the sale, and the auction process is quite fast and efficient. Buyers come ready to buy, and there is no haggling over price. Competitive bidding often drives prices higher than they would normally reach. Additionally, there is little to no clean-up afterwards since every item up for auction has to be sold. Arguably best of all, auctions remain a consistent option even in difficult economic conditions

Buyer Benefits 

Naturally, no one would bid at an auction if there weren’t advantages for buyers. Many of these are the same as the seller’s benefits in that buyers also move past the haggling process and are able to quickly and efficiently purchase property. They also come with the knowledge that the seller is fully committed to the sale, and they know they are competing fairly with all other bidders. 

Of course, to experience any of the advantages of an auction — as a buyer or a seller — it’s important to have an understanding of some of the most important terms and practices involved. 

Consignment 

Items sold at an auction house are generally going to fall under a consignment agreement. This is an agreement where an item is put up for sale by a third party (in this case, the auction house), and the original owner of the item is paid after the third party manages to sell the item. The third party will take a percentage of the earnings as a consignment fee, and the original owner will receive the rest. 

Consignment is a practice common to antique stores, art galleries, and all other businesses that can involve third party sellers. The particulars of a consignment deal will obviously vary on a case by case basis, and while it’s easy to think that these would always go in the auction’s house favor, this isn’t necessarily the case. In some agreements, an item has to reach a certain asking price before the house can collect a fee. 

Liquidation Auctions 

While this term is sometimes used interchangeably with other types of auctions, a liquidation auction specifically refers to a business selling its assets. This naturally includes unsold inventory, but it could also refer to equipment, vehicles, furniture, or anything else of value a company owns. This type of auction is often part of the bankruptcy process and is generally held just before a business closes down. 

Liquidation sales and auctions are a low cost way for businesses to halt legal processes or hostile creditor actions and make money to pay back creditors. A big advantage for buyers is that items sold or auctioned during liquidation can be significantly cheaper than they would be otherwise, but it isn’t a guarantee. 

Estate Auctions 

An estate auction shares many similarities with a liquidation auction. In fact, you could essentially consider an estate auction to be the liquidation of an individual’s assets rather than those of a business. 

Estate auctions of typically held for one of two reasons. Either a person is recently deceased and their possessions need to be disposed of, or a person needs to sell their property before making a move. Auctions can be advantageous over tag sales in these circumstances since an auction has a better chance of ensuring all items are sold. 

Other Types Of Auctions 

While most will undoubtedly think of auctions as events where each buyer consistently bids higher and then pays their bid in exchange for the item, there are alternatives to this approach. Dutch auctions, for example, work in the opposite way. The price for an item starts high and is gradually lowered until there is a buyer willing to accept the price. Sealed-bid auctions have all buyers make a single sealed bid, and when they are all revealed, the highest bidder wins. There are even reverse auctions where different sellers will compete for the attention of buyers

Going Once, Going Twice, Sold!

Regardless of type or circumstances, auctions can be lucrative opportunities for all involved. The more one attends, the easier it becomes to find excellent deals.

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