What Is Bid Sniping, and is eBay a Real Auction?

November 28, 2011

So what is bid sniping you might ask? For those who buy regularly on online websites such as eBay, you are probably familiar with this term. For those who are not, I will explain.

When the bidding for an item is scheduled to end at a specific time, many bidders will wait until the last few seconds before the time expires, and place their high bid in an attempt to be the winning bidder. This leaves the previous high bidder little or no time to increase their bid before the clock expires. The result is the new high bidder winning the item with less opportunity for competition. There are even programs available to facilitate this bidding strategy for the sniper.

Some would call this a race to see who can win the item for the least amount at the last second. In most cases we would argue that the seller has lost opportunity for true market value to be achieved as the clock determined the end of the transaction, and not true competitive bidding.

So to answer the question, does it work? I would say it works well for savvy buyers. I am not sure the sellers would agree that it works for them. It also doesn’t work well for buyers who are unfamiliar with the process and lose out on an item they would have been willing to pay more for, but were caught off guard due to this practice.

This is one reason you could argue that eBay is not a true auction. In contrast, online auctions conducted by professional auction companies will utilize an extended bidding feature that minimizes this bidding strategy.

Extended bidding works by allowing the auction company to set a predetermined time the bidding will extend on an item if someone places a bid in the last minutes or seconds of that item closing. The increment will vary from company to company, but it is not uncommon to see anywhere from 5 to 15 minute bidding extensions.

How it works: If the extended bidding feature is set at 5 minutes, then when a bidder places a bid anytime in the last 5 minutes of the item ending, the bidding will be extended another 5 minutes. This allows time for the bidder who was outbid, to then place another bid if they choose. If they do place a bid, then that item will now extend 5 minutes from that bid as well. This can go on indefinitely, as long as two or more bidders continue to bid.

When extended bidding is used, bidders are not able to take advantage of the bid sniping strategy. In addition, competitive bidding is utilized in a manner that better serves the seller, as well as buyers who want to know that they had every opportunity to bid and purchase the item at their price.

Do you buy items via online auctions that allow extended bidding? Does this affect your bidding strategy or have any impact on when you place your bid? Please share your thoughts on this topic.

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10 Myths of Real Estate Auctions – Myth 5

June 22, 2011

Myth 5 – The auction company places people in the crowd to bid for the seller.

This is one of my biggest pet peeves. It is called shill bidding and it is WRONG!

There is no need for this type of activity, and a reputable auction company will not plant bidders in the audience.

It is important to read the terms and conditions of the real estate auction to understand what type of bidding is allowed. If a property is being sold ‘subject to owner confirmation,’ and it is disclosed that the auction company can bid on behalf of the seller up to the reserve amount, then this is perfectly legal and acceptable. The key is full disclosure. In this case bidders know who they are bidding against and can make an informed decision as to whether or not they want to increase their own bid.

If the property is being sold without reserve, or absolute, there is no allowance for the auction company to bid on behalf of the seller. This is the purest form of an auction.

Sometimes there is phone bidding, online bidding or absentee bidding at a real estate auction. These bids will be handled by a staff member and it will be known that these are qualified buyers who have filled out the necessary paperwork and made the necessary deposit prior to auction day.

If you do business with a professional real estate auction company, there will be no shill bidding. It is important to examine a company and understand their ethical practices.


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