Going to an auction can be an exciting way to get great bargains -- and it's a lot less intimidating than you might think. Unfortunately though, the auction business has long been a haven for con artists looking to separate inexperienced collectors from their cash with misleading advertising, high-pressure sales tactics, and outright lies. Fortunately, most scam auctions are actually pretty easy to spot if you know what to look for.
None of these signs of flimflam are foolproof. But if you're at an auction and find that more than a few of them are true, watch out. I've been attending auctions for years and have compiled this list of red flags based on my own experiences, chats with legitimate auctioneers, and media reports on fraudulent auction houses.
- Coupons, discounts, and other gimmicks
Legitimate auctions sell stuff on consignment -- and unless you're at an auction that's for a single estate, there are many, many consigners. For that reason, auctions generally don't have the authority to offer coupons.
- There aren't very many people there
A large percentage of the crowd at any auction is likely to be comprised of dealers. Most of the dealers in any area know each other, and they know who's legit and who isn't. They also know what auctions to stay the heck away from. If you're at an auction and don't find yourself in the midst of a large crowd of dealers, you're probably at a sale that was set up as a trap for unsuspecting newbies.
- It's in a hotel, meeting hall, or other rented, temporary venue
A good tip with auctions (and most other large ticket purchases) is this: avoid buying from someone you won't be able to find again if there's a problem. Traveling swindlers often hold their sales in hotels and meetings halls that are rented by the day. And by the time you realize that the watch they said was worth $10,000 -- but you bought for $5,000 -- is really worth $2,000, they're on to the next town, and the next sucker.
There are some legitimate auctions held in rented venues. But as a general rule, it's a lot harder to pull off a con game when you have to show up at the same place every day.
- It name-drops major financial scandals
Mitch Lipka recently reported on a grifter
who was luring people to his auction with the headline "Bernie Madoff Auction" even though the sale had nothing to do with the financial scandal.
Occasionally, there are legitimate court-ordered sales of items seized on behalf of law enforcement or creditors in high-profile cases. In those cases, you'll probably see lots of media attention and you'll be able to confirm the legitimacy of the sale with the government agency (in the case of the Madoff sale, the U.S. Marshals) that is overseeing it.
- Appraisals are offered that are far higher than the prices the lots are selling for
High-end auctions, and even some country auctions, offer estimates for what items will sell for. But an appraised value is an almost sure sign of flimflam. Think about it. If an auctioneer says something is worth $10,000, why would he try to sell it to you for $1,500?
- It sells almost exclusively merchandise from "name brand" artists: Chagall, Dali, Erte, etc.
This is a hard one because it's not a real rule. But many hucksters who target naive beginner collectors sell only works reputedly done by major household-name artists, because they know that's what people want. Legitimate auctions generally contain a more diverse mix.
According to the Fine Art Registry
- Everything comes with a certificate of authenticity. . . from the same company
, "COAs are highly questionable when presented with a piece of artwork." Most experts don't take certificates of authenticity seriously -- and it's actually quite common to find works by frequently-forged artists like Chagall, Miro, and Dali at fly-by-night auctions complete with certificates of authenticity. It's one thing if an item happens to come with a certificate of authenticity that was obtained by the original seller. But if every lot comes with a freshly printed COA, run.
- Googling the auctioneer yields message board complaints
Before you hit up an auction you see advertised in the paper, do yourself a favor: Google the auctioneer and see what comes up. You might just find message board complaints, Better Business Bureau reports, investigations by reporters, etc.
- The auctioneer has a history with the state licensing board
Many states require auctioneers to be licensed, and some keep publicly accessible information online so the public can see whether an auctioneer has a history of regulatory complaints and inquiries. Check this site to find out if there's a link for your state
- An overall high-pressure sales environment
Professional auctioneers are used to selling to dealers and other knowledgeable consumers. An auctioneer who is patronizing and constantly insisting that you're getting amazing deals and must act now because this is a once-in-a-lifetime opportunity is more likely to be scamming you than helping you. Avoid auctioneers who "protest too much" about the value of their merchandise.
- A few people buying nearly everything
As long as there have been auctions, there has been shill bidding. That is, the auctioneer has a few co-conspirators in the crowd who bid just like regular people, except the shill's job consists of nothing more than bidding up the prices to try to make you overpay. If the auctioneer can't get the price he wants, the shill will "buy" the item and then it's carted off just as though it had actually been sold, except that no money changes hands, of course.