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Buyers
and Sellers Guide to Internet Auctions
An Internet
Auction Guide for Buyers and Sellers
Whether you're looking for a collectible or thinking
about selling that treasure you discovered in the attic, an Internet
auction may be just the thing for you.
Since their first appearance in 1995, Internet auctions
have become one of the hottest phenomena of the web. They offer buyers
a "virtual flea market" with an endless range of merchandise
from around the world — and they give sellers a "storefront"
from which to market everything from sports memorabilia to computer
systems to millions of international buyers.
Whether you're a buyer or a seller, there's a smart
way to "do" Internet auctions. Here's how to make sure you
get the most from your auction action.
How Auctions Work
Internet auctions are bazaars. In most cases,
sellers offer one item at a time, but sometimes sellers offer multiple
lots of the same item. The auction web sites often refer to auctions
of multiple items as "Dutch" or "English" auctions.
At some sites, the seller may be required to sell all items at the price
of the lowest successful bid. At other sites, the seller is entitled
to the prices bid by each of the highest bidders.
Occasionally, Internet auction sellers set a "reserve
price," which is the lowest price they will accept for an item.
Some sites disclose the reserve price during the auction.
The bidding for each auction closes at a scheduled
time, when the highest bidder "wins." In the case of sales
of multiple lots, the participants with the highest bids at the close
of the auction are obligated to buy the items. If no one bids at or
above the reserve price, the auction closes without a "winner."
At the close of a successful auction, the buyer and seller communicate
— usually by e-mail — to arrange for payment and delivery
of the goods.
Kinds of Auctions
Internet auctions can be business-to-person
or person-to-person.
Operators of business-to-person auction sites have
physical control of the merchandise being offered and accept payment
for the goods. In person-to-person auctions, individual sellers or small
businesses offer their items for auction directly to consumers. Generally,
the seller — not the site — has physical possession of the
merchandise. After the auction closes, the seller is responsible for
dealing directly with the highest bidder to arrange for payment and
delivery.
Payment Options
Buyers may have several payment options, including
credit card, debit card, personal check, cashier's check, money order,
cash on delivery and escrow services. However, all sellers do not accept
all forms of payment.
Credit cards offer buyers the most consumer protections,
including the right to seek a credit from the credit card issuer if
the product is not delivered or if the product received isn't the product
ordered. Typically, sellers using business-to-person auction sites accept
payment by credit card. But many sellers in person-to-person auctions
don't. Usually they require payment by cashier's check or money order
before they send the item to the winning bidder.
Some sellers agree to use an escrow service. For
a fee — generally 5 percent of the cost of the item, paid by the
buyer — an escrow service accepts payment from the buyer via check,
money order or credit card. The service releases the money to the seller
only after the buyer receives and approves the merchandise. This helps
protect buyers from ending up empty-handed after paying their money.
The flip side? Using an escrow service can delay the deal. As with any
business transaction, investigate the escrow service's reputation before
signing on to the service.
Occasionally, sellers agree to send items COD, with
the buyer paying when the item is received.
Consumer Concerns
According to the Federal Trade Commission, Internet
auction fraud has become a significant problem. Most consumer complaints
center on sellers who:
- don't deliver the advertised goods;
- deliver something far less valuable than they
advertised;
- don't deliver in a timely way; or
- fail to disclose all the relevant information
about the product or terms of the sale.
Tips For Buyers:
-
Identify the seller and
check the seller's feedback rating.
-
Do your homework. Be sure
you understand what you're bidding on, its relative value and all
terms and conditions of the sale, including the seller's return
policies and who pays for shipping.
-
Establish your top price
and stick to it.
-
Evaluate your payment options.
If possible, use a credit card. It offers the most protection if
there's a problem. Consider using an escrow service if the seller
doesn't accept credit cards.
Know the Seller
- Find out who you're dealing with. Verify the
seller's identity before you place your bid, and be wary of sellers
who you can't identify. Some sellers may use a forged e-mail header,
which makes follow-up contact close to impossible.
- Get a telephone number for the seller and use
it to confirm that you have some way other than e-mail to contact
the seller.
- Check to see how the seller has treated other
buyers. Some auction sites post feedback ratings of sellers based
on comments by other buyers. This may give you some idea of how you'll
be treated, but beware of "shill" testimonials.
- Before you bid, find out what form of payment
the seller will accept. If the seller accepts only cashier's checks
or money orders, decide whether you are willing to take the risk of
sending your payment before you receive the product.
- Find out who pays for shipping and delivery.
Generally, sellers specify the cost of shipping the item and give
buyers the option of express delivery for an additional fee. If you're
uncertain about shipping costs, check with the seller before you bid.
- Check on the seller's return policy. Can you
return the item for a full refund if you're not satisfied with it?
If you return it, are you required to pay shipping costs or a restocking
fee?
- If you have any questions about the item, e-mail
or phone the seller. Don't place your bid until your questions have
been answered.
Know the Product
- When considering whether to place a bid, know
exactly what you're buying. Read the seller's description of the item
or service, and if a photograph is posted, take time to look at it
closely.
- Try to determine the relative value of an item
before you bid. There's no guarantee that something is a good deal
just because it's on the Internet auction block. "Brick-and-mortar"
stores and online price-trading sites may be good reality checks on
price. If you find a bargain at an auction site, remember the adage
about deals that seem too good to be true. They usually are.
- Read the fine print. Look for words like "refurbished,"
"close-out," "discontinued" or "off- brand,"
especially when shopping for computer gear or electronic equipment.
- Consider whether the item comes with a warranty,
and where you'll get follow-up service if you need it. Many sellers
don't have the expertise or facilities to provide services for the
goods they sell. If that's the case with your seller, be sure you're
willing to forfeit that protection before placing a bid.
Know the Auction Site
- Check how the auction works. Don't assume that
the rules used by one Internet auction site apply to another. Some
sites offer step-by-step tutorials that take potential buyers through
the bidding process. Taking a few minutes to go through the tutorial
might save you frustration or disappointment later.
- Find out what protections the auction site offers
buyers. Some sites provide free insurance or guarantees for items
that are undelivered, inauthentic or just not what the seller claimed.
Bidding
- If you decide to enter the bidding, proceed with
caution. Establish your top price and stick to it.
- Don't bid on an item you don't intend to buy.
Remember that if you're the highest bidder, you are obligated to follow
through with the transaction. Auction companies often bar "non-
paying bidders" — those who back out of a deal — from
future bidding.
- When bidding, take steps to protect your privacy.
Don't give out personal identifying information like your Social Security
number, driver's license number or bank account number. No seller
should need it.
- Save all your transaction information. Print
or make note of the seller's identification, the item description
and the time, date and price you bid on the item. Print and save a
copy of every e- mail you send or receive from the auction company
or the seller.
Wrapping Up the Deal
- After you receive an e-mail with news that you've
"won" an auction, arrange to pay for your purchase. Pay
with a credit card, if possible, but it's likely that the seller will
require payment by certified check or money order.
- If you're not comfortable sending a certified
check or money order to the seller, consider using an escrow service
or paying for your item cash on delivery.
Tips For Sellers
-
Provide an accurate description
of the item you're selling, including all terms of the sale and
who will pay shipping costs.
-
Respond quickly to any questions
bidders may raise during the auction.
-
Contact the high bidder
as soon as possible after the auction closes to confirm details
of the sale.
-
Ship the merchandise as
soon as you receive payment.
Your Legal Obligations
- Federal laws prohibit deceptive or misleading
acts in commerce, including Internet auctions. You are required to
advertise your product or service and the terms of the sale honestly
and accurately.
- Sellers are prohibited from placing "shill"
bids or false testimonials. Some sellers improperly create a fake
identity and bid on their own auctions to drive up the offers. Likewise,
some sellers place glowing testimonials about themselves in the comment
section of Internet auction sites. These practices are not only unethical,
they're also fraudulent.
- Sellers are prohibited from offering illegal
goods through Internet auctions. While many auction sites monitor
their sites and attempt to delete illegal items, the ultimate responsibility
for ensuring that a sale is legal rests with the seller and buyer.
Some auction sites post a list of prohibited items as a guide.
- After the auction closes, sellers are required
to ship the merchandise within the time frame designated during the
auction or, if no time frame is specified, within 30 days. If you
can't meet the shipping commitment, you must give the buyer an opportunity
to cancel the order for a full refund or agree to the new shipping
date.
Advertising Your Product
- Describe your item or service — and its
condition — as fully and accurately as possible, including whether
it's new, used or reconditioned.
- Anticipate questions buyers might have and try
to answer them in the description of your item or service. When possible,
include a photograph of the item. The saying about a picture being
worth 1,000 words rings especially true in Internet auctions.
- When putting an item up for auction, set the
minimum bid at the lowest fair price you're willing to accept. Specify
who will pay for shipping, and add whether you'll ship internationally.
- State your return policy in your auction description,
and if you require the buyer to pay shipping costs or restocking fees
for returns. Tell bidders where to get follow-up service. If you don't
provide service for the item, say where the bidder could get it.
The Art of the Deal
- If a bidder asks a question about the item you're
selling or the sales terms, respond as quickly as possible.
- When the auction closes, print all the information
about the transaction, making a note of the buyer's identification,
the description of the item and the time, date and price of the bid.
Print and save a copy of every e-mail you send and receive from the
auction site or successful bidder.
- Contact the winning bidder as quickly as possible
after the auction closes. That's the time to confirm the final cost,
including shipping charges, and to tell the buyer where to send the
payment.
- Most sellers in person-to-person auctions require
buyers to pay by check or money order because they don't have the
capability to accept credit card payments. These payment methods offer
fewer consumer protections than credit cards, so be aware that some
buyers may not be comfortable using them. Some online auctions and
third parties enable sellers to accept credit card payments. Review
the terms of these offers carefully. If you accept credit card payments,
bill the buyer's credit card account only when you're ready to ship
the product.
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