Alan's Internet Auction Tutorial, Buyer Beware Auction Frauds

Tutorial: Buyer Beware of Auction Frauds

Most Internet auction sellers are honest. However, you’ve got to watch out for the few swindlers whose main goal is to cheat you out of your hard-earned cash. Here’s a list of top ten frauds that buyers should watch out for. If you believe one of these events is happening to you, report the activity to your auction’s security department. (e.g., safeharbor@ebay.com).

10. Shilling – In this scam, a seller works with a co-conspirator to get the most out of your proxy bid. For example, suppose you place a $100 bid on an item whose current high bid is at $35. If no one else bids on this item, you’d win it for the $35. However, if the seller suspects that you’ve placed a higher (proxy) bid, then he’ll have his coconspirator bid up the price little by little until he outbids your limit. Then the coconspirator will retract his last bid making your bid of $100 the high bid. You’ve had $65 stolen out of your pocket! Keep a close watch on the auctions you’re bidding on. If you see your proxy bid going up and up until you are outbid – only to find out that you’re still the top bidder, then suspect shilling. If there’s time before the end of the auction, you may also want to retract your own bid.

9. Internet pick-pockets – When an auction ends and you’re the winning bidder, you’ll typically get an e-mail from the seller telling you how you can pay. Some sly criminals have come up with the idea to beat the legitimate seller to the punch and to send you a fake message telling you to send your money to them instead. If you send your cash or money order to the wrong person, it may be hard to get your money back. Look at the return e-mail address from the seller to make sure it isn’t from some other person trying to pull a fast one on you.

8. Staged bidding wars – In this version of bid inflation, a buyer has one or two other buyers try to begin a bidding war. If the buyer finds a willing participant he will continue to escalate the price until the legitimate buyer (you) no longer raises his bid. Then the fake bidders will retract their high bids leaving you as the high bidder.

7. Counterfeit Feedback – It’s fairly easy for a group of chums to give each other positive feedback to build up reputations. While you’re examining a seller’s feedback, look to see if those leaving positive feedback are all from the same email host such as something@hotmail.com. This is a clue that the feedback may have been faked. If a seller is faking his feedback, then he’s likely up to no good with what he’s selling.

6. Misrepresented Merchandise – Many collectibles are valued according to their condition. If an item contains damage, it can severely decrease its value. Honest sellers will describe damage in detail and may even include pictures of the damage within the ad. You should keep a copy of the auction ad, including pictures, to compare to what you receive. If your merchandise includes damage that was not described, then you should ask for a refund.

5. Dutch Auction Bid Inflation – Dutch Auctions are a little hard to understand and some sellers use this to their advantage. Suppose you bid $15 in a Dutch Auction and end up being one of several winners. The lowest winning bid on the auction is $12. However, the seller sends you a notice telling you that you won the auction for $15. He’s trying to get an extra $3 of your money. In a Dutch Auction, every winner pays the same amount – the lowest winning bid.

4. Imitations and incorrect grading – Watch out for fakes in every type of merchandise – coins, art, toys, watches, clothing, autographs, etc. The most common frauds you’ll see are reproductions being sold as the real thing, altered merchandise, and incorrectly graded collectibles. For example, a rare coin that is reported to be an MS-70 grade when it is actually an MS-65 can be overvalued by hundreds of dollars. Fortunately in coin collecting you can get a definitive answer as to a coin’s true grade from a professional grading organization (PCGS: Professional Coin Grading Service). However, since grading is usually subjective, dishonest sellers will tend to inflate the value of their merchandise by over grading it. Always look for some reliable source that can help you prove that what you’re purchasing is real. If you have no proof, then you must base your belief on the honesty of the seller (and he may have been duped earlier into believing the item is real.) If possible, arrange for an independent opinion of the authenticity of the item before finalizing the deal. The best defense against this problem is to know your seller, pay attention to her feedback, and get a second opinion about the grade of the item.

3. A Wolf in Sheep’s Clothing – The picture looked good and the ad was appealing but when your merchandise arrives it’s not what you thought it would be. Some unscrupulous sellers will put a picture of a brand new item in their auction ad when the item they are actually selling is used. These sellers realize that most people will not bother to return merchandise even if they’re dissatisfied with it. However, if you feel that you’ve been sent fraudulent merchandise you should contact the seller for a refund. If he will not cooperate, you should report the incident to your auction’s security and consider leaving negative feedback for the seller.

2. Vaporware Products – In this scheme the seller never really has possession of the item he’s advertising for sale. Typically he’ll be holding an auction for some very popular item such as a rare Ty Beanie baby or the latest and hottest Christmas toy. Bidders are too excited about getting the product to notice that the seller has no track record. You send your money and get nothing in return. When you try to contact the seller you find that he has a very low or negative feedback score, he’s no longer at his stated location, and he’s left no forwarding address. Kiss your money goodbye.

1. Creative Shipping Charges – Before you bid on any auction, pay close attention to shipping and handling charges. Sometimes these charges can be greater than the value of the merchandise itself. Honest sellers will quote a flat price for delivery or at least a price range. If the seller doesn’t specify shipping charges, you may wind up being billed for postage, box, packing materials, ad insertion fee, labor, and so on. If you think you’re being overcharged for postage and handling, try to negotiate shipping charges to postage only. In the vast majority of cases, charges beyond postage should never be over a dollar unless the buyer asks for special services, such as COD or insurance.

If you’re concerned about a seller, you should check him out thoroughly. Look at his feedback. Send him an e-mail and ask about his product. Does he have proof of its authenticity? Is there any additional damage not shown in the pictures? If he’s a serious seller then he should answer promptly. If he doesn’t answer at all then pass up the item. If he does answer, evaluate what he says. Is he being honest and straightforward or is he dancing around your questions? If you feel uncomfortable about the seller then avoid his auctions. If you end up purchasing a valuable item from a buyer you don’t fully trust, you can protect yourself by paying for the item through an Escrow Service.

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This tutorial material comes from the book Getting Started in Internet Auctions by Alan C. Elliott.

Click here to learn more about this book.

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