[QUOTE=beaujolais;8847177]
From The Paulick Report:
“There are also two different types of reserves available to consignors, each with different commissions. One type is called live money only, and requires auctioneers to bid only against live bids (those coming from buyers) up to the reserve price. The other is an ‘all the way reserve,’ which requires auctioneers to bid up to the reserve price, whether there are also live bids in play or not. The commission for Keeneland’s purposes is based on the final bid, whether it’s a live bid or not.”
I’m not fully understanding.
Live bid - o.k., so that means a real bid from a buyer or their agent in person or by phone (?, they do that I believe, correct)?
All the way reserve - Is that if, say, the bidding stops at $12,000 (random amount herein chosen, just to use as an example), the auctioneer keeps calling it, at increasing increments, up to the sellers chosen reserve (say, $20,000). Now, would one choose “all the way reserve” in case the bidding stops at $12,000, to allow for a possible bid of a buyer who might just then decide that they really do want the horse and puts in a bid when the auctioneer calls $15,000 (or so)?
I would think most sellers would choose “all the way reserve” as if the commission for either type is the same, it allows for a buyer who might choose to get in at a higher price after a stall in the bidding? It would make the sale time in the ring go a bit slower but there would be possibility more money to be made(?)
Why would a seller not choose “all the way reserve”?
I realize I may have this completely wrong and apologies for my lack of knowledge.[/QUOTE]
With a live money reserve, the auctioneers make no bids unless “real people” are bidding against them. When the real bids stop coming, the auction ends.
With an all the way reserve, the auctioneers will bid to the chosen number regardless of what real bidders are doing.
Suppose I want $100,000 for my horse.
I set a live money reserve of $95,000. (This is the last bid the auctioneer will make on my behalf.) The next bid will be the $100,000 I want–if it comes. If it doesn’t the horse will RNA at $95,000 and I will owe 5% of that price to Keeneland and (depending on the contract with the consignor) ~ 5% of that price to my consignor.
Same horse, I still want $100,000. I set a live money reserve at $95,000. Real bidders begin the auction (with an all the way reserve, the auction is often started by a bid from the auctioneer.) The bidding stalls at $65,000 and I buy the horse back. Now the commissions I owe to Keeneland and to my consignor are less than they would have been because of the lower ending figure.
In the first example, I pay $9,500 in fees. In the second, I pay $6,500. So live money only sometimes saves the seller money. On the other hand, an all the way auction runs more smoothly and is easier for the auctioneer to control.
Some people don’t like live money only because they don’t want the market to put a value on their horse that might be lower than the number they have told their friends or partners.
In either case, best outcome is that the horse sells. Even better if the bidding flies past the reserve and keeps going making the whole debate about which kind of reserve is better moot.
