Is auctioning always the best choice when selling assets?
Various different models will leave you with assets and investments that you need to sell. This could be a property, a vehicle, various commodities or even unique items that are rare on the market. When you decide to sell an item or asset like this, you will typically have a few choices. Either you can sell outright and fix a price or you can set it up for auction. The auction has become a more popular and mainstream concept in recent years due mainly to the success of eBay. But it’s certainly not the only type of market place like this online where you can sell assets at auction.
Today, real estate agents are more eager than ever to auction a home that they believe could fetch a better price in this type of market. In the commercial world, companies are selling unused or unwanted assets and hoping that they get big bucks for the purchase. You can learn more about this on https://financiallysimple.com/,
But is auctioning during a sale always the right choice? Let’s look at some of the factors that you’ll need to consider here to ensure that you can make the smart decision with this type of setup.
Auctions are best suited for sales that are going to attract a lot of attention on the market. You need the competitive, fierce pursuit here for this to be successful. This means that you need a few people vying for the product otherwise the auction isn’t going to work. If there’s no heat, there’s no competition then the price stays at more or less what you’ve fixed it. This will usually be just below the actual value which means that you could come out the auction at a loss or only just breaking even.
The best example of where this can and can’t work effectively is probably the retail industry. In the retail world, it’s still quite rare for houses to go to auction. Why is this? Typically, buyers don’t get caught in a frenzy over what is probably a standard home. There might even be another similar home on your street or in your town which means there’s no need to get carried away.
Homes that go to auction are usually unique, due to the exceptionally high price, the features or indeed the history. A home that someone famous once resided in will typically go to auction because this is a specialist purchase. Similarly, you might find that a home with a cool feature like an Olympic swimming pool will also benefit from this type of sale. So, it’s not just about value but the competitive nature of the market.
Where Buyers Don’t Know The Value
Success at auction will also typically depend on the knowledge of the buyer. Here let’s think about eBay. You might have noticed that newly released items that are on the market and available from other stores aren’t typically auctioned. If they are, they are certainly not successful. That’s because buyers know exactly how much these products are worth and they can get it elsewhere at a lower price anyway. We’ll talk more about the concept of scarcity a little further down. Other items, are a little bit of a mystery to buyers. They don’t know how much it is worth and an auction asks them to put their own value on the product. eBay actually suggests that you put the absolute max you are willing to pay immediately and then automatically updates your bid to match as other people try and outbid you. It’s a clever tactic and one that can lead to massive ROI for the seller on the market but this isn’t always the case. While it might be seen as luck whether a sale like this is successful, there are typically a variety of other variables at play as you can see on https://www.thechronicle.com/.
For instance, the product needs to be exciting enough or attractive enough that they are willing to go beyond the actual value price. When does this occur? Well, believe it or not, the state of the product can be key here. With second hand products, there are a variety of factors working in your favour. First, buyers don’t know the actual value of the product so it’s based on their perception. Second, they are already seeing a saving because the auction price started off low. Third, they tend to forget about this saving as more bid driving the price up. It’s worth pointing out that this holding true on commercial and public markets. So, for instance, if you look at a site like https://www.equifyauctions.com/, you’ll see various piece of equipment up for sale at fantastic prices that provide fantastic returns for sellers.
This highlights the fantastic power of auctions.
What About Scarcity?
As promised, it’s important to consider scarcity as a variable too. Any economist will tell you that scarcity is good for profits. If a product is scarce and in demand it becomes more value. If you have a video game and try to sell it, your probably not going to make a profit. If you have a limited edition video game and auction it, you will see a substantial return. With scarcity auctioning has been a blessing and a curse. It has brought new chances for profit, but it has also brought higher levels of scalping onto the market. If you’re not sure what scalping is it simply means buying products in bulk and then selling them for a lot more than their retail value. You see this with everything from concert tickets to limited merchandise and much more. You can find out more about investing in limited merch on https://www.investortees.com/.
Again, second-hand products are useful here. Second-hand products are often out of stock, off the market or no longer in production. This makes them both unique and scarce, ensuring that value climbs. Indeed, auctions can be one way to fight the common effects of depreciation.
We hope you see now how auctioning products can impact chances for sale success on the market and when it might not be quite as useful.