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Member Info
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Join Date: Mar 2012
Posts: 8
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Thanked 41 Times in 6 Posts
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Answers to Posted Questions by PGCA Members
Dear C.O.B. and Phil C.,
Since both of your questions deal with reserves I thought I would answer them in one response. First of all, thank you very much for these terrific questions. There has been a little bit of misinformation on reserves and some incorrect speculation about how they are handled at my auction and thus I am grateful for an opportunity to clear them up.
Many but not all people request reserves when they are consigning valuable guns. Reserves, when used, can have a critical impact upon the success of the sale. It of course provides protection but if the seller wishes too high a reserve, it will generally assure that the gun won’t sell. As I’ve indicated in my previous letter, reserves at my auction are usually below low estimate, and in the very worst case, at low estimate. Therefore the reserve impacts upon the estimate. High reserves mean a high estimate.
There are always at least two reasons a buyer bids on a gun at auction, a) It is something he wants; and b) the estimate is reasonable and realistic and thus he feels he might have a chance at buying it. Therefore a high reserve will almost always disparage bidders and those usually result in no bidders at all. Whereas an enticing and conservation estimate will almost always drive the interested party to participate. Success at auction is based on a simple formula which goes like this: The greatest participation = the greatest competition which = the greatest rate of return. Therefore, (1) if the estimate in the catalog is rather conservative, a number of people will participate all with the same idea in mind, “I’m going to own that gun”, and this is the formula for success. Low reserves and highly conservative estimates usually equal the greatest participation and strong and sometimes spectacular sale prices. (2) Less than enticing reserves result in minimal participation and rarely is there a frenzied participation and aggressiveness that occurs in scenario number 1, and therefore if the gun sells, frequently it is right at the reserve or a little above. (3) High and aggressive reserves will almost assure that few or no bidders participate at all. Thus a no sale and you get the gun back.
When a client requests a reserve we always try to encourage them to go with the most conservative reserve possible because we know the likelihood of a sale and the potential of the gun selling for
a lot of money is dependent upon a conservative and realistic reserve and thus estimate. Based on our recent past experiences with similar guns we will usually suggest (if asked) what an appropriate reserve should be. If the client is satisfied with our suggested reserve and should the gun not sell at auction, there is no cost to the seller except for the 1% insurance charge (the gun had to be insured whether it sold or not) and whatever the packaging and shipping charges are for return (unless he picked it up himself). If a client’s required reserve figure is far above where we think it will sell, we generally decline the consignment. Obviously anything we offer costs us a fair amount of money to process and promote, and if we’re certain it is not going to sell, everyone loses.
Sometimes if a client wants what we consider to be a high reserve and is insistent on including the gun in an auction, in some cases we might acquiesce but tell them that if we offer it and it does not sell that there will be a special buy in fee that they will have to pay us if it doesn’t sell. (This rarely happens.)
On very rare occasions a client might not request any reserve at all or agree to an appropriate reserve, but later after we have paid to photograph it, catalog it, print it in the catalog, promote it and insure it, etc., for some reason might request a much higher reserve. Technically the terms of our original agreement are already outlined in the contract and can’t be changed after the item is consigned, however in such case, there is a clause in our contract that allows for this but it also stipulates a special buy in fee will be charged if it does not sell. Obviously if the reserve is raised, we would also have to change the estimate to reflect the new, higher reserve. Since the catalog is already printed, it’s too late to put it in the catalog so we make a note online, make an addenda on our online catalog explaining that there is a new, higher estimate, we put a note beside the gun on display with the same information, we put a note in the catalog to remind the auctioneer to announce it at the time of sale, and we will contact anyone who set up for an absentee bid on this gun and alert them of the change also. (All of this is very rare.)
When a gun has a reserve, it stipulates in our contract that the reserve will be confidential and thus we will not divulge the exact reserve to anyone (however we will admit if asked that there is a reserve on that lot). “If for any reason the item is sold less than the reserve, the auctioneer will pay the consignor an amount equal to what the consignor would have received (on a net basis after deductions of commissions and all costs, fees or charges).” Therefore, if you consign a gun with a reserve of $6,000 and by accident the reserve is not executed and the gun is subsequently sold at $4,000, you will be paid the same monies you would have had the gun sold for $6,000, so our contract guarantees and protects you along those lines. Rarely does this happen and so if a gun was reserved at $6,000 and the bidding only got up to $4,000, our clerk, executing the reserve bids, would “buy your gun in” and the gun would be a no sale and returned to you as outlined above.
In regards to the return of a modern shotgun which has been offered at auction. As a licensed federal firearms dealer we are required to specifically follow federal law and your home state mandates. By federal law if we ship the gun, it must be delivered to an FFL holder. If you do not have an FFL, it is a simple procedure to make arrangements with a nearby gun dealer who will receive the gun for you, log it into his books, then log it out to you. This procedure must be followed by all federally licensed firearm dealers – there are no exceptions. If you drive to our facilities to pick up your modern shotgun, and if you are not an FFL holder, you will need to fill out Form 4473 (the same form you would have had to fill out at the gun dealer’s had you picked it up at the gun dealer’s), and then by law we are required to comply with background check requirements and then you are free to take the gun with you.
I think I have covered all of your questions. I am sorry for such a lengthy reply but I’ve tried to make sure to cover everything so hopefully there are no misunderstandings. Thanks again for your great questions.
Sincerely,
Jim Julia
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04-11-2012, 04:18 PM
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