The Risks of Online Auctions

riskOnline auction websites have been around for a few years, and there are many different types of auctions and participants (both buyers and sellers).

For example, maybe the website itself acquires the merchandise and puts it up for auction (usually purchasing the merchandise on a third-party website like Amazon, after the auction has ended), or maybe the site brings together buyers and sellers acting as a platform where they can sell and buy goods from each other.

These online auctions promise great deals, and offer excitement. However, there are some risks for the buyer to keep in mind before you give them a try. So, if you’re considering participating in an online auction and want to avoid the potential problems you may have read about, here are some tips to keep in mind.

Feedback and Reviews

Fake positive reviews or feedback can make you believe you’re dealing with a reputable and trustworthy seller, when you may not be. For example, on an auction site like eBay, buyers and sellers rate each other, giving positive or negative feedback based on their experiences. Unfortunately, very often the person who really was ripped off or defrauded will leave negative feedback for the seller, but the seller with respond with their own negative feedback for the buyer, ruining their reputation as a form of revenge or spite, or just to discourage them from leaving negative feedback. This means that some buyers may refrain from leaving negative feedback in order to protect their own reputations.

Meaning, this isn’t necessarily an effective system at all, so be wary of the feedback you read on a site like this. Also, some of the feedback could be fake or false since it is relatively easy to forge positive comments on eBay, for example. Sellers can do this by setting up fake transactions, and then following them up with fake feedback. It is even common that real customers’ accounts are hacked and used for these fake transactions.

Do your Homework

Another risk that is far too common in online auctions is overbidding or overpaying for an item. There could be several reasons why this could happen, but the main one is that the auction participants don’t do their research on the real value of the item. So, be sure to do your homework before going into an auction. Check out retail websites for the items you’re going to bid on to find out how much you could buy them for outright (without an auction), and then decide what the maximum amount is you’re willing to bid and stick to it. Don’t forget to factor in any extras fees and costs to this amount (auction fees, shipping fees, etc.).

Some participants end up overbidding because they have been bidding from the beginning of the auction and don’t want to feel like the time and effort they put in was all for nothing. This isn’t logical or helpful, so if you fall into this category, then just want until the end of the auction to bid. That way, you won’t become emotionally attached to the auction and keep bidding even when it doesn’t make sense, and you’ll only participant in auctions that are worth it (the bid price is still low enough towards the end).

Something to keep in mind is that if the price on the item looks too good to be true it probably is (beware of fixed-price deals on auction websites that are way too low), and if the transaction seems fishy or confusing, that’s another red flag.

Check out the AD and the Seller

When you bid online, you can’t see the actual the merchandise before you bid on it, so you have to trust that the description and photo listed on the website are accurate and honest. Unfortunately, there have been reported cases where the auction winners claimed that the item they won wasn’t what they were expecting, or that it was used, damaged or broken. There have even been cases where the item wasn’t received at all, unfortunately.

Therefore, before you participate in an auction for an item you want to win, make sure you read the ad carefully first. You need to know exactly what condition the merchandise is in, and any other relevant information such as related fees (some sellers add on excess shipping and handling fees, so check for this information).

Generally speaking, watch out for ads that are overly enthusiastic in their use of symbols and exclamation points (these may be scams), or ads with lots of mistakes and errors about the product itself (this could be a red flag that the person who is selling the item isn’t familiar with it and may just be trying to make some fast and easy money).

You should also check out the seller before bidding on any items they have up for auction. Look out for anything suspicious, such as location discrepancies (for example, their location is in the United States, but their billing account is in another country. Also, check that the photos look real (meaning, the seller took them and didn’t take them directly from a retail website).

If you want to contact the seller directly to ask questions before participating in one of their auctions, this isn’t a bad idea. Ask them about the condition of the item, and walk away from sellers that are unprofessional or don’t reply to you (obviously).

Form of Payment

Paying for your item with a check, wire transfer or money order is very risky, as your chances of recovering that money if the auction turns out to be a scam is slim to none. Instead, use a credit card (not a debit card) or PayPal so that you have some kind of coverage and protection (although how much protection and coverage you have varies from service to service). So, if a seller only accepts one of the riskier payment options, avoid them.

Online auctions can be a great way to save money, but they can also be risky. As long as you do your homework in terms of knowing the value of the item you want to bid on, reading the ad carefully, studying the seller and their policies, you will reduce the risks and be more prepared.