Parker Gun Collectors Association Forums - JAMES JULIA'S MARCH 2012 AUCTION

March 28, 2012

Parker Gun Collectors Association
P.O. Box 151
Waconia, MN 55387

Dear Parker Gun Collectors Associates:

My name is James Julia. I own James D. Julia Auctioneers. I am also a member and supporter of the Parker Gun Collectors Association. A friend of mine just contacted me and made me aware of the current string of blogs here regarding my auction house and the practice of reserves, etc.

I am not sure of how many of you have actually participated live at my auctions before and/or consigned to me, but to those of you that haven’t, I’ve been involved in the auction business for approximately 45 years. During that time I have tried very hard to develop a reputation for honest and fair dealings and have been reasonably successful at the same. In doing so I have tried to develop a business model with printed conditions of sale that cover what I do and how I do it in an attempt to avoid any confusion or misunderstandings. In developing this business model and in implementing it, my goal is to be fair to three parties, (a) the seller; (b) the buyer; and (c) the auctioneer.

When developing my business model I was fully aware of the adage that is credited to Abraham Lincoln, one that I fully agree with. As I recall it goes something like this, “You can please some of the people all of the time, all of the people some of the time, but you can’t please all of the people all of the time.” With that in mind, I know that no matter what I do, I will never please or satisfy everyone, but that is my goal.

1. Since there has been a lot of discussion of reserves at my auction, I would like to address that.
2. Also, one of the forum bloggers by the name of “Opening Day” indicated “Julia told me to pound sand when I asked him for a refund of the buyer’s premium.” I would like to address this also.

1. Regarding auction rules and reserves – How auctions are conducted vacillate dramatically from one auctioneer to the other, depending upon what state and/or city he operates in. New York City has perhaps the most stringent rules of all. Some states have absolutely no rules whatsoever, but all auctions in 50 of our states are required to be conducted in confirmation of UCC (Uniform Commercial Code) Statutes. These are the statutes that all auctioneers are supposed to abide by. Under UCC Statute §2-328, “Sale by Auction” Point (3) “Such a sale is with reserve unless the goods are in explicit terms put up without reserves. In an auction with reserve, the auctioneer may withdraw the goods at any time until he announced completion of the sale. In an auction without reserve, after the auctioneer calls for a bid on an article or lot, that article or lot cannot be withdrawn unless no bid is made within a reasonable time.” Therefore, technically, according to the UCC statutes, unless an auctioneer announces the sale is unreserved, there is absolutely no requirement on his behalf (at least in this state and most of the other states that I am aware of) to make any remarks about reserves at all since the auction is considered to be held with reserves.

However, I have a more defined procedure, one which is intended a) to be fair to the consignor, b) to be fair to the buyer, and c) to be fair to the auctioneer.

A. In regards to the seller, it specifically states on the reverse of my auction contract, under point 11. “Reserves” A reserve is an agreed-upon, confidential minimum price between the consignor and the auctioneer. If for any reason the item is sold for 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) had the items sold at the reserve price. So if I agree to a reserve with a client, I contractually agree that a) the reserve will be confidential and b) that if the item sells, that the least the person will receive is what the reserve would have been or more if it sells for more. Obviously if it does not sell, there is no sale and they simply receive the item back.

There is a specific reason for why the reserve is confidential, and that reason is to entice and encourage the client into establishing the lowest reserve possible. Buyers at auction want an opportunity to buy something good, but also an opportunity to buy it at a reasonable price. If my estimate is very high on a lot, it implies that the reserve could be very high thus less participation and a great likelihood that the item will not sell. On the other hand, if the client agrees to a very conservative reserve, the estimate can be conservative and therefore bidders are greatly enticed to participate. A consignor, therefore, on many occasions will risk a very conservative reserve with the idea and the likelihood that the item will bring well beyond their reserve. But since the reserve is confidential, if the gun does not sell, the seller is not stigmatized by everyone knowing what his reserve was.

The contract also protects the consignor should a mistake happen resulting in the gun selling under reserve. An auction is a complex business interaction, the culmination of many months of effort take place on one day. In that one day, we are fielding literally thousands of absentee bids and phone bids dealing with a large number of live bidders and continually fielding incoming phones calls, emails, etc. Behind the scenes is an incredibly complex series of multiple business transactions, all of which are intended to deal with everything in an expedient, honest and efficient manner. When so much is going on from time to time there can be a mistake, and if a reserve is $15,000 on a gun and by mistake the reserve is not executed and the gun sells at $12,000, I am obligated by contract to pay the consignor the $15,000, and that’s why it is in the contract, to provide that special protection to my consignor. One might say, “Well, if it didn’t meet the reserve, just don’t let the buyer have it”, but you can’t do that. According to UCC statutes 2-328, (2) “A sale by auction is complete when the auctioneers so announces by the fall of the hammer or in other customary manner.” Therefore, once the auctioneer says sold he cannot legally reopen the bidding because of financial reasons. The sale must stand. It is a good deal for the buyer, but the auctioneer gets the short end of the stick. Of course he made the mistake, so he should pay. The consignor is protected by my auction contract, and he will get the full $15,000, less any appropriate commissions.

B. In regards to the buyer and reserves – In the conditions of sale at the front of my auction catalogue, under point #9 “Reserves. Some items in this auction may carry a conservative reserve. Therefore the auctioneer may bid on behalf of the owner or for the auction house. The purchaser will be the highest bidder acknowledged by the auctioneer. Please note that when a lot carries a reserve, the reserve is usually somewhere below the low estimate in the catalog. Actual reserve figures cannot be divulged, but we will tell you if an item carries a reserve should you ask.”

This clause was specifically designed for the protection of my buyer. I specifically want the buyer to know in advance that there is a possibility that a reserve could exist, and I don’t rely upon the UCC statutes or the understanding of them by the lay person, I specifically state it in the conditions of my sale so that my potential buyer knows this. UCC statutes do not state where the reserve must be, and subsequently if the gun is estimated at $18,000-$22,000, literally the reserve could be $25,000, and some auctioneers may do this, but I don’t. I specifically indicate that usually the reserve is below the low estimate. Sometimes because of a mistake it ends up on the low estimate, but usually it is below the low estimate. By stating this it warns a bidder before he comes, that the gun estimated at $18,000-$22,000 might carry a reserve, but if it does the reserve might be as high as $18,000. Subsequently, that buyer makes a decision before he comes as to whether that price range is amenable to him. If he only wished to pay $15,000, he is taking a gamble to come.

The third aspect about that condition of sale is that it specifically states, if you want to know if there is a reserve, I will tell you. So if the buyer coming for that specific Parker, estimated at $18,000-$22,000 does not want to make the trip if there is a reserve in effect, all he needs to do is call me. We check our records and if the gun carries a reserve, we will acknowledge that. We cannot and will not tell him precisely what the reserve is because I have a contract with the buyer that states that his reserve is confidential (for the reasons mentioned above). We will, however, give them a hint if they push us. In this specific example here, if the client were to say, “I’m traveling all of the way from Ohio to bid on this gun, and I understand there is a reserve. Can you tell me what the reserve is?” Our response would be, “We can’t tell you what the reserve is, but (assuming the reserve is $15,000, we would go on to say), we can tell you that the reserve is close to the $18,000 but under it. If you’re willing to buy this gun for somewhere approaching $18,000 or a little under, you should come because you do have a chance of buying it. But if you are hoping to buy it for $10,000-$12,000, don’t come because that won’t happen.”

C. In regards to the auctioneer – In my business model, I, as an auctioneer, am a businessman and I am in the business to make money and in order to make money, I must attract consignors. Many potential consignors with valuable Parker shotguns are not willing to put up a $15,000 or $20,000 shotgun and take a risk on it selling for $6,000. (Although this rarely ever happens at our auctions, you never can guarantee it.) Subsequently, I understand this and if the client wishes, I am willing to negotiate a reserve but I try to negotiate reserves that are realistic and reflective of value.

This is not a perfect system. It is not always possible to know exactly what a gun is worth, and sellers sometimes have unreasonable expectations. If we are convinced that their requested reserve is beyond what the gun will likely sell for, we will honestly tell them and encourage them to consider something less or we won’t take it at all. Sometimes we take a gun with a reserve on it that we think is realistic and as it turns out, it doesn’t sell and therefore our reserve was not realistic. Like I said, this is not a perfect system.

The above is the business model that I have established regarding reserves, and as I said earlier, is an attempt to be fair to the seller, fair to the buyer and fair to the auctioneer. I realize that not everyone would agree with my business model and depending upon whether you are a buyer or a seller, you might reason that it should be done in a different manner, but this is the model that I have chosen, and as I’ve said, I’ve tried to do so in a transparent manner that would be fair to everyone.

In regards to how the reserve is executed – For those of you who have been to my auction, you’ve all heard my spiel which I repeat over and over again at the commencement of every auction, and part of that spiel is in regards to how bids are handled, whether it is a reserve or an absentee bid. If we have a reserve or an absentee bid on a gun, it is bid competitively by a clerk who very obviously sits at a table in the auction hall with the bidders. She treats reserves and absentee bids the exact same way. If she only has one bid, and let us assume it is a reserve, she does not start with the reserve. She lets the audience start the bidding and then she competes with them until she wins or loses the item. Assuming that the reserve is $15,000, someone in the audience might start the gun at $9,000. If the auctioneer is asking for $10,000, the clerk executing the reserve will automatically bid the $10,000 on behalf of the reserve. The person in the audience might bid $11,000. Again the clerk bids $12,000 executing the reserve. The audience goes $13,000; she goes $14,000. If the audience bidder goes $15,000, then they would buy it (if no one else in the audience goes more. (The clerk is all done of course because the reserve was met.)

When the gun is hammered down on a reserve, I simply announce the reserve number. All bidders and reserve have a bidder number. This is how we keep track of who the absentee bidder or who the reserve is for our bookkeeping records. If you sit in the audience and if the bookkeeper purchased something, you obviously do not know at that moment whether she purchased it for a live bidder or whether she bought it on a reserve bid, but to be reasonable about the matter, the fact is you were not willing to go any higher and whether it was a reserve or another live bidder that bid that extra bid, it was beyond where you were willing to go. Remember, my auction contract with the seller specifically states that the reserve is confidential.

(I presume this is what “Chilled Shot” is referring to when he references a friend whose gun did not meet reserve and yet he couldn’t get his gun back.) “Chilled Shot’s” friend did get his reserve price – I guarantee you. But I can also guarantee you that after the sale has taken place, whether we’ve made a mistake and sold it for under the reserve or sold it over the reserve, I cannot go back and cancel a sale and take the gun back due to the UCC statute mentioned earlier. So “Chilled Shot’s” friend did receive the reserve price and if he did not receive the reserve, less appropriate commissions, I would greatly appreciate being notified, with his name and details so that I can go back and investigate.

After the auction we continue to be transparent and honest if the gun did not meet its reserve and did not sell, it is not posted on the prices realized list, making it very clear that it did not sell and didn’t meet its reserve. Again, this is not a rule or a requirement in most states. We do that because we consider it to be an honest disclosure to all observers and participants.

Also, in consideration of our buyers, sellers and the auctioneers, we have a practice after the auction that anything that did not sell is posted on a public listing, and if you should have interest in it, you can simply call our office, extend to us an offer which we will convey to the seller. If the offer is accepted by the seller, then we can sell it via private treaty.

In regards to reserves being automatically half of the low estimate – this is absolutely NOT the case at my auction house, and again – during my spiel at the beginning of the auction, I disclose to everyone in attendance that if an item does not open for 25-30% of its low estimate, it will be passed and not reoffered during the auction. In other words, if a gun is estimated at $15,000-$22,000, and if the gun doesn’t open at around $5,000, it would simply be passed by and we would go on to the next lot. The idea being that if no one is willing to pay 1/3rd of its lowest estimate, then there really isn’t any significant interest. If the item does not meet its reserve and does not sell, the owner may simply take his gun back after the auction or if he wishes us to try it again, he must readjust the reserve. Obviously if the gun was reserved at $15,000 and it didn’t sell, the reserve must have been too high, and so subsequently if we are going to offer it again, the reserve must be lowered in order to be realistic and fair to the buyer, the auctioneer and the seller.

One important thing to note here is that not all auctioneers use the same conditions of sale. Most high profile auction companies, such as mine, use conditions that are somewhat similar to mine but there can be dramatic and major differences at small local auction houses. I have heard plenty of cases in which some auctioneers didn’t abide by the UCC statutes, and they might sell an item and then five minutes later cancel the sale for some reason or reoffer the item again for some reason. I have heard of some small auction houses that might have an item with a $5,000 reserve and they publish the reserve figure in their ad or announce it at the auction. I have heard of some auctioneers executing reserves by getting a friend to sit in the audience and disguise themselves as an auction participant and bid the reserve. Most auction houses are reputable and intend to do things in an honest manner just as we do, but that’s not always the case.

I hope what I have said here has clarified reserves and how they are handled at my company.

2. One of the bloggers titled, “Opening Day” made reference to being badly treated by me and/or my firm. I tried to find out who “Opening Day” is. I noticed in the forum rules, it says we are supposed to use our name, and I hoped that I could find his name so that I could go back to our records and find out just what happened. If “Opening Day” would contact me at jjulia@jamesdjulia.com, I would greatly appreciate it. In fact, if you have a string of email correspondence between yourself and my auction company, and if you would forward that along to me, it would be very helpful. I would like to know the details.

Usually when a problem occurs and there is an altercation, it is brought to my attention at some point in time, and I never ever tell anyone to go pound sand, regardless of how reasonable or unreasonable they are. As I said earlier in this letter, my response to all issues at auction are based on printed conditions of sale and contractual agreements – things that I must abide by – all of which were developed for the benefit of the buyer, the seller and the auctioneer. It is not infrequent that a situation arises in which I respond based on the printed conditions, but a consignor is upset with me because the conditions weren’t in their favor. I cannot change the conditions of my sale for that individual because it suits their need. It may be that this is not the situation here – but if there was something promised by me or my firm that was not followed through upon, I need to know. If there was something that wasn’t responded to, I need to know. That is not the way I do business, and as I said earlier, for those of you who have done business with me for a long time, you know that to be true.

I am sorry that my letter is so long but obviously there are a number of people here that had questions or speculation about reserves, and I hope that my response adequately explains just exactly how things work and why. Thank you for the opportunity to share this with you all.

Sincerely,

Jim Julia