Online Auctions: Understanding The Basics

Auctions that are held online are a tremendous platform for trade, offering sellers and buyers a diverse variety of goods. Another way to describe online auctions is to think of them as a virtual flea market containing an almost infinite assortment of merchandise from around the world. They give a seller a virtual storefront to sell anything from sports and collectible memorabilia to the latest technology. National retailers are getting in on the action by auctioning off services or overstocked inventory. Before you look for online auctions to start shopping, it is important to understand how they work.

What is the online auction process?

The way an internet auction functions resembles the way a flea market operates. Live auctions have much in common with online auctions, but continuous data collection is happening behind the scenes at an online auction. Like the local auction, you have bidders and sellers, losers and winners. At the conclusion of the auction, the winner is expected to pay for what they bid on. This is where the similarities between live and online auctions end.

Online auction site registration

Before you can buy or sell an item at an online auction, you must first register for an account. This registration tracks items you sell or bid on, keeps track of the bids, determines the winning bids, and offers the opportunity for bidder and seller feedback. It is recommended that you set up an email account only for use with auction sites so that you can track the progress of your bids. This also helps prevent spam from coming into your inbox and making you lose important emails.

How winning bids work

At a scheduled time, the bidding for each online auction ends. When there are sales of multiple items, the highest bidding participants at the end of the auction have an obligation to buy the items they win. The auction will close without a winner if no one bids at or above a set price. The buyer and seller communicate at the close of a successful auction to arrange for payment and delivery of the item(s) auctioned. This communication is usually done through email.

Two types of online auctions

Person-to-person and business-to-person are the two types of online auctions available. Single sellers or a small business offer their items or services directly to their consumer. Business-to-person auction sites have sellers who have an inventory of merchandise to offer and they will accept payment from winning bidders. Usually, the seller, not the auction site, has possession of what is being sold. When the auction has ended, the seller deals directly with the highest bidder to make arrangements for payment and delivery.

Payment options for winners

Depending on the auction platform, a buyer may have several payment options. These may include cash on delivery, money order, cashier’s check, personal check, debit card, credit card, and escrow services. Be aware that not all sellers or auction platforms accept all of these forms of payment.

You may have the greatest consumer protection if you use a credit card to purchase something at an online auction. The card issuer may agree to give you a credit if the product you purchased is not delivered or if you receive the wrong product. Many sellers in person-to-person auctions require payment by money order or cashier’s check before they are willing to send you the item you won at auction.

Using escrow services

A fee is involved, usually about five percent of the cost of what was purchased, when an escrow service is used for an online auction. The escrow service accepts payment from the winning bidder by credit card, money order, or check. Then, the service will hold onto the money, releasing it to the seller only when the buyer has received and approved the item(s) they purchased. The purpose of escrow services is to protect the buyer and their money. However, the deal may be delayed if you decide to use an escrow service. Before you engage in a business transaction with a seller who uses this service, make sure you investigate their reputation.

Investigating online auction fraud and consumer concerns

Unfortunately, online auction fraud is a large problem. Most sellers who receive complaints are involved in one or more wrongdoings. They may not deliver the goods advertised or they could give the buyer a cheaper version of something they advertised. Another issue is when they do not deliver quickly, or disclose all the terms of the sale or information about the product. Be sure to do some research about the reputation of the website, company, or auction house that is hosting the online auction before bidding.

For more information about live and online auctions, call High Plains Auctioneers at (806) 244-6776 today. You can also Contact Us for more information about Bidding and Selling at auction. Feel free to check out our Upcoming Auctions to see what we currently have to offer.