Representatives with EHE Auctions announced today that it will now focus solely on reserve auctions rather than absolute auctions.
Milissa Wise, Director of Operations for Expert Heavy Equipment, the parent company of EHE Auctions, which provides a marketplace for buying and selling used heavy construction and farm equipment, explained that the company made the decision to shift toward using only reserve auctions however still maintaining a live platform. This is due to the fact that reserve auctions minimize the risk to the seller and bring more transparency for the buyer.
Wise explained that the majority of the larger auction companies within the industry that offer live bidding focus on the absolute auction strategy, which she says, means the seller does not get to set a minimum price they are willing to accept for their equipment or vehicle.
“Sellers have traditionally agreed to absolute auctions in the past, because auction companies have implemented safeguards that help reduce the risk for the seller.”
“The problem with this strategy is that there is really no way to predict exactly how an item will perform,” Wise said. “The United States is the No. 1 global provider of used construction equipment.”
Because of the extensive branding with the larger auction houses, Wise said, there are numerous global buyers.
“Predicting how a global buyer will perform is more difficult than predicting a U.S. buyer, because there are many more variables to consider,” Wise said.
As an example, Wise said that there has been a strong demand of used construction equipment in Southeast Asia for the past few years.
Because the demand has been consistent, Wise said, it was easier for the auction companies to predict sale prices based on recent results.
However, the banks in that region began making the credit terms more difficult, because of decline in projected GNPs in the area, so this tightened the demand greatly.
“This in turn affected the strength of the currency in these countries therefore making their buying power substantially less than it was just 30 days prior,” Wise said. “So machines that sold for $28,000.00 in August, sold for $23,000 in September. That is a 18 percent decrease in price minus the seller’s fees, listing fees and transport fees which can bring the price down another 3 percent to 12 percent. These are real world variables that the auction company simply cannot anticipate. And these real world variables can leave a very bitter taste in the seller’s mouth if they are getting anywhere from 21 percent to 30 percent less than the expected sale price.”
As a solution, Wise said, EHE Auctions works with the seller to set realistic reserve prices based on condition, hours and the most recent auction results.
“Our strategy ensures the seller is completely protected and it removes any risk,” Wise promised. “This also benefits the buyers, because they can gauge more definitively the sales prices. In addition, the reserves are set at a realistic number. The buyer will still get a good deal, so it is a win-win for both the buyer and seller.”
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