“This auction shoulda done better!”, “This auction woulda done better if you did your job right!”, “This auction coulda done better if the starting bid was higher than a dollar!”.

We’ve heard these arguments a few times over the years from sellers and have explained why the online auction does what it does. Usually, an online auction appears to underperform due to the seller’s uninformed expectations or they saw similar items as theirs “selling on eBay” for more. Let’s get real here, first a seller should recognize the auction process and why even courts mandate auctions in cases such as divorce, bankruptcy, estates, etc. courts Never mandate an estate sale company to liquidate, because estate sales companies drive value down and do not produce a true Fair Market Value.

An auction is a market driven bidding system that produces a true fair market value or FMV. Many people have misguided beliefs about what FMV is. Some think FMV is what they believe their stuff is worth. FMV has nothing to do with what you think your items are worth and everything to do with what others think they are worth. Others believe FMV is what things are currently “selling for” elsewhere such as eBay, etc. So here is the definition of Fair Market Value according to the U.S. Treasury.

“The fair market value is the price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts. United States v. Cartwright, 411 U. S. 546, 93 S. Ct. 1713, 1716-17, 36 L. Ed. 2d 528, 73-1 U.S. Tax Cas. (CCH) ¶ 12,926 (1973) (quoting from U.S. Treasury regulations relating to Federal estate taxes, at 26 C.F.R. sec. 20.2031-1(b)).[4]”

The bottom line of FMV is simply this, neither buyer nor seller are pressured by the other and the price is arrived at through a median of exchange such as you guessed it, an auction. So, when a seller claims the auction “shoulda” done better, they need to realize the auction did exactly what it was supposed to do. The final bids are the true FMV of the items sold. To claim that it is “selling on eBay for more” is just misguided. The difference is “selling” and actually “sold” are two different outcomes. A great example, a beanie baby was “selling” on eBaya couple years ago with a “buy it now” asking price of one hundred thousand dollars ($100,000), after clicking on the “Sold” box it showed the same beanie babies sold several for less than three dollars ($3.00).

When items sell for less, some sellers are disappointed because they have seen the “selling” tags and not the “sold” tags. It is interesting that when an item sells for less than the seller was hoping, they are displeased, but when the item sells for more than they were hoping, they don’t say, “well it sold for too much so you can keep the difference from what I thought it should have sold for.” No, the seller is ecstatic that the item sold high. This is what resetting the FMV of an item is, the item sells for more than the average sold price over the last 12 months which helps increase overall FMV for other likeminded items on the market. Even professional appraisers value items based on “sold” not “selling”.

If you are considering having an auction, keep in mind an auction is the best way to show FMV at tax time. An online auction is the most efficient and transparent way to liquidate your family estate, commercial assets, business, or inventory.

Contact Auction Spear today to schedule a FREE No obligation assessment to maximize FMV and empty the building. Visit our corporate site www.AuctionSpearinc.net or our auction platform at www.AuctionSpear.com for more info.