The Problem of Non-paying Bidders at Auction: What To Do If It Happens to You

By Renee Corbino

Qing dynasty vase, sold to non-paying bidder.

Qing dynasty vase, sold to non-paying bidder.

In November of 2010 at Bainbridge Auctions in London,  a Chinese vase became the most expensive Chinese piece ever sold with a hammer price of 51.6 million pounds ($83 million USD). Called the “Ruislip Vase,” this piece remained unpaid for nearly two years following the sale. Bloomberg reports that this vase,   rumored to have been purchased by Wang Yaohui, the Beijing-based chairman of Zhonghui Guohua Industrial Group Co., Ltd, has declined to pay for reasons that have yet to be uncovered. The vase was sold in a private sale for less than half of its record breaking $83 million USD.

Non-paying bidders are an enormous problem in the auction industry.  With an online global economy, it is nearly impossible to research and vet every single bidder, and buyers are able to retain a significant amount of anonymity. Although some bidder history is provided through online bidding platforms, it is impossible to know for sure if a bidder will pay you or not, and even clients with an excellent track record could still decide at any moment that they won’t pay for an item.  Other provisions, such as deposits, references, and bidding contracts are often employed by the auction house, but there is no way to fully stop the problem.   Lawsuits of course are an option, but suing a bidder in an unfamiliar international court is nearly impossible, not to mention expensive. More often than not, these unpaid items are quietly returned to the consignor, put into another auction with a lower estimate, or sold privately for a significant loss.

What to do if you find yourself in this situation.

First: You can take the item back.  Although technically once the hammer falls the responsibility passes to the bidder, if the item goes unpaid it unquestionably reverts back to you.  In some cases the auction house will pay you for the item(s) at the price that was bid, and then they retain ownership of the item and the responsibility to get the money.  This may not be a good option for you, as the auction house could re-sell the item later at a profit.

Second: You could demand that the auction house pay you based on the selling price of the item.  You would need to have firm proof that the auction house was negligent in approving this person to bid or in their attempts to collect payment.  I do not recommend this route, as it is in the best interest of the auction house to collect the funds, you have to trust that they will do everything that they can to try to get payment. Read your auction contract carefully, as many have provisions for just this situation, stating that if they don’t get paid, they can’t pay  you.

Third: You could be patient and see how it plays out.  The consignors of the “Ruislip Vase” waited almost two years for the resolution and ended up taking a loss by selling it at a private sale.  For higher end items, a private sale brokered by the auction house could be your best option.  Although you will certainly take a loss, well publicized items do not do anywhere near as well the second time around.  They can be perceived as tainted or as having problems, and many will see the price as artificially driven up.  The auction house has contacts who are interested in the piece, and they will work with you to see the best possible price.

Fourth: You can request that the items go back into a similar auction.  For most items, this is truly the best option.   9 times out of 10, you will receive a similar amount at a subsequent auction.  If this item was in a higher end online auction, try to get the auction house to put it in the auction AFTER the next one; that way the market rests a bit before seeing your items again.  However, if your item is not exceptionally unique or rare, the next auction should not affect the price.

Its impossible to correct the problem of non-paying bidders without forcing bidders to attend in person, and pay immediately with cash.  Charge backs, stop payments on checks, and wire transfer delays are all ways that bidders fraudulently bid on items. Although non-paying bidders are a risk, most bidders follow through with the transaction.

Non-paying bidders are simply a product of a large, global audience for your items.  Ultimately, its a small risk to have widespread exposure for your items, which will ultimately result in a higher price.

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About Renee Corbino
Renee Corbino has a decade of experience in the auction industry. Her expertise covers a broad spectrum of fine and decorative arts and antiques including: paintings, silver, ceramics, furniture, netsuke and more. She received her Bachelor’s degree with a double major in classical studies & art history from the University of Maryland, College Park and her Master of Decorative Arts from the Smithsonian & George Mason University.

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