Part Two of Two on Auctions - Establishing a target price

Following on from last month’s blog post, the second phase for each auction is where rules and maths come into play. It’s at this stage that I establish a bid price for each book. But to get to an acceptable buy price I need a few things. A maximum hammer price, my proposed sale price, all associated buying costs, and my ROI. As a business owner and to make sure I can keep offering books to collectors at reasonable prices, I need to get that first number correct. In practice, that means I miss out on plenty of books. Often, it's simply because another bidder was willing to push the price higher than made sense for me. And frequently, another copy will surface eventually, it's rare that a book is genuinely a single surviving copy. So, while I might have to wait, patience usually pays off.

1. Setting the bid price

By the time a book reaches my shortlist, I have a good idea roughly what it is. What I don't yet know is what I should pay for it, and that's a separate, more mechanical exercise that I work through in three steps before the sale.

a.     First, I establish a proposed sale price, grounded only in evidence. I usually do research of live listings on AbeBooks, other dealer websites, or verified sold results where available. I never a guess at what a book "should" be worth. If I can't find a genuine comparable because a book truly is scare, then a different approach applies. I will run through that in a future blog.

b.     Second, I work backwards from that sale price to a maximum hammer price. Buyer's premiums and fees don't apply to the hammer price alone, they stack on top of it. Therefore, I have to consider them before I ever place a bid. If premium and associated fees add up to roughly a quarter to a third of the hammer price, my true all-in ceiling sits well below my proposed sale price, not equal to it.

c.     Third, I check the return the numbers actually produce once every fee is included. That’s the buyer’s premium, taxes, card fees, shipping, not just the headline hammer price. If the margin doesn't hold up under that full accounting, it isn't a number I bid to, no matter how much I like the book.

2. Shortlisting eight, but only buying two 

At the most recent auction I worked through this way, I went in with a shortlist of eight books, and I came out with two. From what I've seen so far, that ratio is fairly typical, and not an unusual result. Some lots go to bidders willing to pay past the point that makes sense for me and that's fine; it simply means that book wasn't mine to buy at that price. Others get passed over once the full-fee maths doesn't clear a sensible margin. It can feel like a low hit rate if you're only counting the lots, but the shortlist isn't really the goal, it’s about getting the right book, in the right condition, at the right price for future collectors that matters.  

A few lessons I’ve learned along the way

The Tell of an Overpriced Lot

Another oddity I see fairly often is a lot with a starting bid, or an estimate range, that sits well above the open market. Searching AbeBooks, Biblio, and specialist dealer sites, I've sometimes found the exact same edition listed for less than the auction's own starting estimate. That tells me something useful about who else is likely to be in the room: bidders willing to start that high are either collectors themselves and don’t need to consider margin in their buy price, or that they haven't done the comparison I do in the research phase and are bidding on excitement rather than evidence. It's a good reminder that the room's estimate is an opinion, not a fact, and that the homework from Part One is what lets me tell the difference.

The Big Trap: Fees After the Hammer

The lesson I learned the hard way is just how many fees stack up after the hammer falls. Buyer's premium alone can run anywhere from 25 to 30 percent of the hammer price, which means the true cost can escalate quickly on higher-value lots. Taxes work the same way, and card or bank fees are often added on top of those. Buying interstate or internationally adds another layer: books aren't small or light, and I've found many auction houses either don't offer shipping at all, or aren't especially upfront about what it will cost. If you've bought several large books at once, a house may simply direct you to a third-party shipping company, and the quote that comes back can be high enough to turn a narrow margin into a razor-thin one or at worse into a small loss. None of this shows up on the lot page. All of it has to be reversed out of your ceiling before you bid, not discovered afterwards.

The Room Doesn't Care What You Paid For It

What strikes me every time I engage with an auction house is how completely indifferent the process is to a seller's story. It doesn't matter what the book cost the person selling it, what they hoped it was worth, or how good the story is that goes with it. The room prices the book on the day, against whoever else showed up wanting the same thing. It’s this that creates opportunities to find great books at good prices. Some auctions I have attended result in silence and the auctioneer dropping the price at bidding, while others are hot, with a lot of competition.

While this is an uncomfortable process if you're used to fixed pricing and haven’t done your research, I've come to think that it is a very honest mechanism to price a book. A listing price is only an assessment and, in some circumstances, either lower or higher than what the perceived value may be depending on other factors (i.e. to encourage bidding, or to meet a seller’s expectations).

I've come to treat my ceiling almost as a promise I make to myself before I ever make a bid. It is a promise I make to ensure I stay disciplined on the day. The books I'm proudest of owning are, without exception, the ones I priced honestly with myself before I ever saw another bid.

Why This Matters More as I Narrow the Focus

As Ink & Signature moves toward books that carry ideas, the texts that argued for something, that changed how people thought about power, or markets, or the mind, or the self, my auction bidding process becomes more important. Books that are genuinely scarce material surfaces: presentation copies, association copies, and the rare volume a specialist dealer has priced correctly, are also books that usually command higher prices. If I over-bid or pay retail for a $50 book, there is no real harm, I can offer this to collectors at a discount and take it at a learning experience. Buying a book for several thousand dollars at a premium becomes a bigger mistake. If I need to discount that book, the cost to business can be far more detrimental. It’s for this reason I have to stay disciplined, I cannot let "just this once, just a bit over" drive my behaviour at auction, even if the book is a particular title or condition I genuinely want.

What I have learned and the impact

Every auction I sit through, whether I bid or not, sharpens my skills in identifying what is valuable. A game I regularly play with my partner is guessing what a book may go for. We usually gamble a free lunch for who gets closer to the final sale price. But apart from that game, it also helps me build my skills in knowing the books I’m looking for, and how to stay disciplined in the times when it matters. So at the end of an auction after I have researched deeply and shortlisted eight books, but only bought two, I can feel confident that is the correct outcome, and not a disappointing result, that's the process working.

Over to You

Have you ever sat in a book auction, an estate sale, anywhere, and felt that pull to go past the number you'd promised yourself? Or watched a fee arrive after the fact that you hadn't planned for? I'd love to hear about it in the comments.