Online Auctions for Beginners: How do They Work? — Gray's Auctioneers (2023)

Even if you’ve never been to an auction before, you’re probably familiar with the basics of how they work thanks to movies. The general gist is that an auctioneer describes an item and prospective buyers raise their paddles to place bids on that item. That’s a very simplified version of how it works. And now that most in-person activities have become virtual, many auctions have also gone 100% online, which changes the nature of the process.

Before we get into how online auctions work, what are the benefits of online auctions? Aside from better deals and only paying what you want for items, there are many benefits. First, there is plenty of variety - auctions usually have a few hundred items in a single catalogue. Second, you don’t need to physically attend in order to participate. Third, buying at auction is eco-friendly. Instead of buying new items, you’re recycling. Read all of the benefits of buying at auction in our blog post about .

So, how does an online auction work? Is it just like eBay or some other eCommerce store?

Today, we’re going to run through the basics of an online auction and tell you how they work.

Understanding the terminology

First and foremost, auction houses have specific terminology that describes different aspects of auctions.

  • Auctioneer - A trained professional who presides over the auction, initiating the sale of a lot by describing the item and starting the bidding. Once the first bid is made, others may offer higher bids. Bidders may be present in the saleroom, on the phone or online. Auctioneers also place bids on behalf of absentee bidders and finally determine when the highest bid has been made. If a work sells, the auctioneer announces, “sold.” If the item does not meet its reserve or there are no bidders, the auctioneer signifies this with a “pass.”

    (Video) GraysOnline - How to Register and Bid at Auction

  • Catalogue - traditionally, a printed catalogue with all the items in an upcoming auction. Now, this has gone 100% online but is still referred to as an auction catalogue.

  • Valuation - each item available at auction has gone through the process of valuation. This means that a professional has done investigative research to determine what the value of the item is by looking at a variety of factors like provenance, history, artist, what the item is made of, and many other factors.

  • Lot - an item offered at auction. Usually shows images, descriptions and a minimum bid amount.

  • A bid - an amount of money a potential buyer is willing to pay for an item.

  • Bid increment - the amount by which the auctioneer increases the bidding. The auctioneer will request bids of 10% higher than the previous bid. For instance, if the bidding opens at $1,000, subsequent bids of $1,100. Auction houses are required to show their bid increments table so you can be prepared ahead of time.

  • Sellers commission fee - a fee paid by the consignor, or the person who wishes to sell something at auction, which goes towards the research, valuation, and promotion of whatever item they wish to sell.

  • Hammer price - the winning bid of a lot at auction.

  • Gavel - Another name for the auctioneer’s hammer used to close the bidding.

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  • Fair warning - one last chance to bid before the auctioneer closes bidding on a lot

  • Buyers premium - buyer's premium refers to a percentage charged by the auction house in addition to the hammer price. The auction house usually charges the buyer for the privilege of buying at auction where prices are typically less than retail. This fee helps cover auction house costs.

  • Preview period, also known as Exhibition - when auctions were not 100% online, this was the timeframe when potential buyers could inspect the lots in an auction.


Before the auction begins, you must register ahead of time for the auction. This is an easy process and takes just a few moments. Be prepared to have your name, address, phone number, and payment information ahead of time.

Generally speaking, there are multiple payment options for an online auction. The majority of auction houses accept a wide range of credit cards as well as other forms of payment. You won’t be charged anything until you win an item. Once the auction approves you as a bidder, you can go ahead and start bidding on your favorite lots.

(Video) Buying Cars at Auction Online (How it works)

Different types of bids at online auctions

There are two different types of bids you can make at a live online auction. The first is a pre-bid which is a set amount you bid before the date of the live online auction. During this period, other people can bid against you with their pre-bids.

On auction day, the auction goes live. During a live online auction, many auction houses have a capability to allow you to watch or listen in on the live auction. Here at Gray’s, for instance, we live stream via video in the bidder console…

When the auction begins, our auctioneers start the process of explaining what each lot is, and from there, you can make what are called “live” bids. This is done by either pushing a button to increase your bid via your computer or the auction house’s app, or by calling in your bids. The process will keep going until no one else bids, and the auctioneer declares the lot sold. The highest bidder wins the item. If an item isn’t sold, it’s declared a pass.

Mistakes to Avoid in Online Auctions

In order to avoid disappointment and ensure that everyone has a positive auction experience, it’s important to know which mistakes to avoid.

First and foremost, do your research before bidding on an item. The auction house has already come up with the valuation, but in order to make an informed decision, you should do your own research before deciding how much you’re willing to pay for an item.

Bidding tips

Don’t start with your maximum bid, rather, start with the minimum amount you’re willing to pay. When someone outbids you, increase your bid. For pre-bids or absentee bidding (when you won’t be available to join the live auction), put in your maximum.

Never place a bid that you’re not willing to pay. The bid that you place is final and must be paid, which leads us to…

Read the auction houses’ terms and conditions and understand your obligations.

(Video) Online used car auction warning | 7NEWS

Lastly, have fun during the online auction, but don’t make irrational decisions. Many times, bidders get caught up in bidding wars and place higher bids just for the sake of winning, then experience buyer’s remorse because they overpaid.

Be Wary of Some Online Auctions

“Don’t believe everything you see on the internet,” was what our parents told us years ago. So you should proceed with caution before joining an online auction.

Make sure they are a reputable auction house, gallery, or institution before you register and start bidding on items. See if you can find online reviews or opinions to judge their validity.

Online Auctions at Gray’s

Here at Gray’s, we have been offering auctions and free valuations for 15 years. (Deba has been in the business for more than thirty years). Before 2020, we offered live online and in-person auctions. At this point, we have decided that the safest thing to do is to hold our auctions 100% online. And we always have one right around the corner!

Be sure to register for auction alerts so we can notify you about our upcoming auctions.

Stay informed about the exciting and ever-changing world of art and auctions - whether you’re a seasoned collector or just getting your feet wet. We curate & deliver the most essential & exciting art and auction news, once a week (in a way that won’t make you fall asleep.) Sign up via the form below!



How does bidding work on Greys online? ›

To place a Standard bid, select a bid price from the drop down menu and click 'place bid'. As a general rule most bidders will select the next increment needed to win the item. Ensure the Standard bid button is highlighted, select the quantity of the item you want and the bid price you wish pay.

How do you bid on an online auction and win? ›

11 Tips for Bidding With Success in Online Auctions
  1. Understand the Auction Rules. ...
  2. Add Items to a Watchlist. ...
  3. Know the Bid Clock. ...
  4. Set a Budget. ...
  5. Use Automated Bidding. ...
  6. Research the Item. ...
  7. Test, Inspect and Compare Items On-Site. ...
  8. Compare Similar Items.

What are the rules of online bidding? ›

Many sellers set a time limit on bidding and, in some cases, a “reserve price” — the lowest price they will accept for an item. When the bidding closes at the scheduled time, the item is sold to the highest bidder. If no one bids at or above the reserve price, the auction closes without the item being sold.

How does the auction process work? ›

An auction is usually a process of buying and selling goods or services by offering them up for bids, taking bids, and then selling the item to the highest bidder or buying the item from the lowest bidder. Some exceptions to this definition exist and are described in the section about different types.

Why do people bid early on online auctions? ›

eBay and sellers encourage people to bid early is because it makes them more money. eBay's search results show the number of bids an item has received, and the current highest bid.

Do you sell at the bid price? ›

The term "bid" refers to the highest price a buyer will pay to buy a specified number of shares of a stock at any given time. The term "ask" refers to the lowest price at which a seller will sell the stock. The bid price will almost always be lower than the ask or “offer,” price.

What is the trick to bidding at an auction? ›

Instead, ensure you have a game plan in place before you go to auction.
  1. Do your homework. ...
  2. Ask someone else to bid for you. ...
  3. Get there early. ...
  4. Body language. ...
  5. When to bid and how. ...
  6. Set the pace. ...
  7. Stick to your budget. ...
  8. What to do if it's going to pass in.
Dec 14, 2022

How do you bid on a first price auction? ›

A first-price sealed-bid auction (FPSBA) is a common type of auction. It is also known as blind auction. In this type of auction, all bidders simultaneously submit sealed bids so that no bidder knows the bid of any other participant. The highest bidder pays the price that was submitted.

What is an example of online bidding? ›

Ebay is a fine example where all three types of auctions are used. Apart from eBay, website, OnlineAuction, and Overstock are some examples of online auctions platforms.

What is the 15 minute rule in bidding? ›

If a user places a bid within 15 minutes of the scheduled end time, the auction automatically switches to a mode where the end time is extended until no bids have been placed for 15 minutes.

What happens if you bid in an auction and don't pay? ›

Most auction houses choose not to pursue complicated, expensive, and time-consuming lawsuits, so failed bid cases rarely end up in court. Instead, unpaid items are usually returned to the original consignor, put into a future auction, or sold privately.

How long do I have to pay after winning an auction? ›

According to eBay rules, buyers must pay for the item within 4 days of purchasing or winning an auction.

How do I prepare for an auction? ›

But remember, experience is your best friend, so be sure to take your time getting to know the process!
  1. Arrive early. ...
  2. Be prepared to buy. ...
  3. Be sure you have a buyer's number. ...
  4. Understand the terms of the auction. ...
  5. Bid with confidence. ...
  6. Know what you're buying. ...
  7. Listen to the auctioneer. ...
  8. Know your rights.

Does a bid cancel buy it now? ›

When someone bids, the Buy It Now option usually disappears; however, in the case of reserve price listings, the Buy It Now option remains until the reserve price is met. In some categories, the Buy It Now option may continue to be available after the first bid for a limited time.

Can you retract a bid on Grays? ›

Grays is committed to protecting the integrity of the sale process and as such we are unfortunately unable to withdraw a bid once it has been placed.

How does in app bidding work? ›

In programmatic advertising, in-app bidding is a sales method that allows mobile publishers to offer their ad inventory in an auction where all advertisers can participate simultaneously in a fair competition for ad space.

How does bidding on search terms work? ›

Definition: A PPC bid (or keyword bid) commonly used in Google Adwords, is a bid placed in a pay-per-click auction to help secure ad placement at the top of search results. Online businesses bid on specific keywords or keyword groups in an attempt to secure ad space for important terms relative to their business.


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