Are auctions a case of ‘let the seller beware’? Should people who offer their property to auction houses be informed of the risks? If so, how should they be informed? Or, should the auctioneering industry be regulated, requiring such things as trust accounts and a requirement that consignees be paid within 21 days?
gulation may be a way to avoid certain problems with auction houses; however, regulation is often costly to impose and enforce. There are other ways to reduce the risks of fraud when auctioning an item through a third party.
- Request immediate settlement of the transaction when the auction is concluded;
- Have a thorough consignment contract between auctioneer and consignee that protects both sides;
- Carefully inform the consignee about the risks involved in the auction process;
- Allow the consignees to demand that a trust account be set for the proceeds from the auction of their items;
- Consignees could perform some due diligence of the auctioneer and try to establish its financial solvency;
- Have property insurance, or request the auctioneer to provide liability insurance, for the pieces in consignment; and,
- Trust a reputable auctioneer such as Sotheby’s or Christie’s (although this was the case with Ritchie’s Auctioneers, in business since 1967).
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