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2016@Mormonism.com

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“Since 1972, Hajicek has been studying Mormon origins.
Since 1981, he has been writing about rare Mormon documents.
Since 1991, half of all new discoveries in Mormon history have been by him.”

Losing Money at an Auction

Auctions and middlemen

The biggest mistake that you can make is to send your rare book to an auction.  I have written this page to help you eliminate the middlemen.  If you sell your book at an auction, the auctioneer is a middleman making a profit.  Further, most bidders at your auction will be other middlemen—dealers buying your book for further resale at a higher price and more profit.  I would rather pay the full amount to a private individual like you, and eliminate the time, uncertainty, risk, and anxiety that keep me from bidding at auctions.

Auctions do not determine the market price

Auctions average only two-thirds of the market price for a book, because it is not a perfect market where supply equals demand.  In a perfect market, all interested buyers would have to be present at the auction.  Instead, the auction determines a segregated market price only among those participatinga fraction of the entire field of collectors.  Most Mormon auctions have only have a dozen regular bidders, and a dozen bidders cannot be the whole market, nor can a dozen bidders determine market value.  Further, the number bidding on a typical high-end book in an auction is usually only about three people, all of them dealers bidding at wholesale prices for resale at a profit.  Also, it is difficult for them to allocate scarce cash resources in advance, especially with no guarantee that they will be the successful bidder, and so they are likely to bid only whatever funds they have available.  Finally, dealers discount heavily for anticipated risk, including the uncertainty of bidding absentee on something unseen, or traveling to attend and then not being successful.  Therefore, even if the auction did determine the market value, it would be a wholesale market value rather than the retail market value, and a deeply discounted wholesale price besides.  Instead, if you sell your book directly to me, I will show you past auction records and pay you more than auction prices, so there is no risk for you.

Why auctions are wholesale markets

Auctions are basically wholesale auctions to dealers for resale, rather than sales directly to affluent collectors.  This is because the end-collector of Mormon books is usually an officer of a multi-national corporation, or a venture capitalist, or an entrepreneur, or a doctor, or a lawyer, or an athlete, or an entertainer, or a celebrityor somebody else who places a premium price on his or her time.  These people:

  • Will not even hear about your auction

  • Will not remember to bid on the day or at the moment that the auction takes place or ends

  • Will not be present in the country on the day of your auction

  • Will not have the time to leave board meetings or family and social activitiesthey are hiking in the mountains as boy scout leaders, or rushing to high council or bishopric meetings, while trying to run their corporations in an uncertain economy, and even busier in the summer

  • Will be preoccupied investing in something else at that particular time

  • Are uncomfortable with the auction procedures, or buying books without professional advise

  • Are dissatisfied with the inaccurate descriptions in auctions, and descriptions shortened even by experienced dealers, and will assume yours is inaccurate too; and the major auction houses have no experts in Mormon books

  • Are too careful to bid on a book that they have not seen and examined personally, and are dissatisfied with poor quality images, and have no way to know if a book is truly complete

  • Are dissatisfied with the amateur packaging and shipping from auctions, and will assume yours is the same way

  • Are dissatisfied with the discourteous sellers from auctions, and will assume you are too

  • Do not have the time for hours of catalog or online searching every week to find something worthwhile

  • Do not have the expertise to get books properly restored and presentable, so they only buy from a specialist

  • Want to retain their anonymity, and so usually only buy books in discreet private transactions with minimal documentation

  • Are too savvy to send large sums of money to a seller without first receiving the book, because of theft of the book or mail loss

  • Are aware of forgeries and counterfeits being offered in auctions, and of course inadvertent misidentification

  • Are too intelligent to tolerate the shill bidding, one-word pseudonyms, and concealed email addresses of sellers.

  • Are too sophisticated to tolerate the arrogance of power by the major traditional auction houses and major online auctions housesincluding disrespectful service departments, revealing private account information, demeaning policies, lack of appeals processes, and unreachable management

  • Are too busy to be playing on the Internet

These are additional reasons that auctions average only two-thirds of the market price for a book.  Bidders must discount their highest bid in consideration of many of these risks.

Personally, I rarely find out about auctions until after they are over, to my disappointment.  For example, recently a Joseph Smith-period Book of Mormon sold to a dealer at the largest auction for $3,500, who then resold the book to another dealer for $10,000, after which it was reoffered by the successive dealer for an even higher amount.  Currently, the most successful individual bidder on Mormon books is a used car salesman and body shop owner in Utah, not the final collector to whom he will resell your book.

Lack of expertise at auctions

If you sell your book at auction, there is an immense amount of work and research in preparing your description.  If you miss any element in your description, the book will sell for only a fraction of its potential value.  Sadly, most books sold online are incorrectly described, and sell to eager dealers who snatch them up for resale at their real price.

Further, auctioneers are generalists who do not have experience in Mormon books, and they would not be expected to fetch as high a price for a book as a specialistwho usually buys the book at the auction for less than he would have paid directly.  I am not aware of any auction house employing any person remotely familiar with Mormonism or Mormon books.  They know nothing about the value of Mormon books, or how to properly describe them, or how to reach the Mormon market.  Therefore, auctions invariably cause the seller to lose money.

Trying to collect your money from a dealer

The best potential price is never realized at an auction, and mostly only dealers bid at them for books to resell privately to their better clients like me.  If you do successfully sell your book at auction, the bidders on expensive books usually back out after the auction for one reason or another, usually “buyer’s remorse” or anxiety about sending a check to a stranger, and in many other cases want to receive your book before payment.  Usually the winner is a dealer from Utah, and some of them will never send your money to you.  Instead, to distinguish myself from those dealers, I will pay you the market price or more, in a cashier’s check, in advance.

Costs of selling at an auction

The biggest online auction will cost you as much as 35% or more in hidden commissions, and usually additional fees and charges, plus as much as 8.5% in sales taxes, plus another 37.3% in state and federal income taxes.  [Update, I wrote this when fees were 17.5% for the buyer and 17.5% for the seller.  These have recently risen in the auction market to 25% the buyer and 25% for the seller.]  On a large sale, income taxes may be due immediately since the IRS searches for high bid amounts.  Most auctions charge their commissions and fees on the reserve price even if the book does not sell.  That totals as much as 65% of the selling price of a book at auction.  You will have to wait until an auction is scheduled, and a catalog is printed, and then you will have to wait 35 days after the auction to be paid.  Instead, I will pay you immediately with a cashier’s check.

Riskily, there may not be an interested buyer present at the auction to bid, as happened earlier this year when a first edition Book of Mormon was sent to auctionand the book might either sell for a small percentage of its retail value, or you as the seller will be forced to pay the commission and costs (or buy-in charges) on a reserve price (minimum price below which you refuse to sell the book) without even selling the book.  Basically, if the book does not meet the reserve price, you bought it back yourself at that price.

Based on the facts above, if you had a book for which I would immediately send you $15,000 in a cashier’s check, the auction would only reach $10,000 including the buyer’s premium.  But before deciding how much to actually place as a bid, the bidders will have to mathematically or intuitively back out in the buyer’s premium, sales taxes, and shipping from the $10,000 that they are willing to pay, reducing their bid to $7,500 (rounded to the nearest increment, their bid is $7,500, which will be the amount they can bid and still have to pay no more than their limit of $10,000).  After paying your own commissions and costs, you will receive about $5,750 from the auction, and only have about $3,600 left after taxes, about 1/4 of what your book was worth.

Market value

$15,000.00

Auction value*

$10,000.00

     Less buyer’s premium of 17.5% (value/1.175)**

$8,511.64

     Sales tax of 8.5%

$850.00

     Shipping

$150.00

The amount of a maximum bid on a $10,000 book

$7,511.64

     Estimated (no longer published) selling commission of 17.5%

$1,314.54

     Insurance

$150.00

     Cost of illustration

$300.00

The amount you receive before taxes

$5,747.11

     State income tax of 9.3%

$534.48

     Federal capital gains tax of 28.0%

$1,609.19

The amount you keep after premiums, commissions, costs, and taxes        

$3,603.44


    
          *2/3 of the market value, explained above.
          **[Update, I wrote this when fees were 17.5% for the buyer and 17.5% for the seller.  These have recently risen in the auction market to 25% the buyer and 25% for the seller.]

 


Instead, please give me the chance to give you the fair-market (generally full-retail) value for your book, which would be $15,000 in this example.  Again, there is no risk, because I will pay you with a cashier’s check in advance.

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