Monday, October 22, 2012

Cut Your Losses


Taking a hit on a piece you over paid for. Many dealers refuse to do it. Losing money is never an easy thing to do but sometimes you have to.

Maybe you were at an antique auction eyeing that unusual side table you thought might be a scarce Herter Brothers piece possibly commissioned for some millionaire in the 1870's. It was so beautiful surrounded by all the other junk at the sale. It looked like it was out of place. You had to have it.

It was a country sale with rows of trashy box lots lining blue tarps on the floor, low end china, chipped crocks, pine tables and rocking chairs. There's a good chance your piece is the sleeper of the sale. You thought you could pick up for two or three hundred bucks. Patiently you wait for your lot to come across the block just hoping no one else would notice it. Finally, the auctioneer gets to the table... He calls it a
"Nice nice fancy fancy ol table"

You fire off the first 25.00 bid. A few other bids quickly drive it up to 125.00 where it stalls on your bid of 125. You almost have it in your grasp...

"One twenty five, one twenny five, do I have one fifty...One fiddy... One fiddy... One fiddy? Last call...."

"YEP! *cough" A raspy voice cries out from the crowd.

You look to your left and it's an unlikely bidder sitting 4 seats down from you. The local woman Bertha Lubbs. Owner of Bertha's Burlap Boutique. Maker of fine hand made jackets, hats, dresses and undergarments fashioned from old burlap sacks.

"Why is SHE bidding on MY table!??  ...She doesn't even know the meaning of the word antique" you reassure yourself in disgust.

"I can't let that know nothing burlap peddling hack out bid ME!" You raise the bid to $200,

"I have two hunner, two hunner, now.... two fiddy, two fiddy, two fiddy" chants auctioneer.

"YEP! *cough *cough" barks the burlap queen.

"Ugh!....GAME ON!" You thought to yourself..."THREE HUNDRED!!" You yelled out glaring back at Burlap bag lady.

"Tree fiddy, tree fiddy, tree fiddy"

"YEP!! *cough "$400, "YEP!!" $450, "YEP! *cough *cough" $500, "YEP!!" $550!! YEP!!

"Six hundred?,,,,Six hunnerr? Anyone at six huuuunnnner....?" The auctioneer calls....
 Slamming the hammer down at $550 plus your 10 percent buyer's premium you just paid $605. for a table you were only going to pay $300 for. But "So what" you thought "At least bag lady didn't get it."

Bertha could only shake her head in disappointment as she stepped outside to mow down another Marlboro "*cough * cough."

You reveled in your win... That is until you loaded the beast into your van and realized it was made from an old bar stool, piano legs and vintage lamp parts as it fell apart in your hands every time you moved it.

Maybe the Burlap queen doesn't exist, but over paying for pretty junk at auctions and sales is not uncommon. I've seen similar scenarios. It's easy to get carried away if you don't preview the sale and bid out of spite or from the heart.

It only gets worse when you get it home and notice how out of proportion and down right gaudy and ugly it is.

So now what? You just over paid for a bench made pig worth about two hundred bucks.

Do you try to get your money back? Probably won't happen soon. Could take years for that.

Do you offer it to Bertha? Of course not. Pride prevents you from doing that and she bought the following table lot for 75 bucks to display her burlap on.

Do you keep in your house telling everyone that inquires about it that
"Oh I just liked it and had a spot for it"?

 Safe, but, then that damn table would remind you every day what a donkey you were at that auction.   
Ultimately you have to accept the fact you have 600 bucks tied up in it. By keeping the table in the flip business, it will only cost you more money the longer you have it.

From a flip business perspective, the best thing to do is cut your losses. Dump it at a loss after you've tried selling it a couple times. Sell it for what ever someone is willing to offer and don't look back. (I have taken 50 percent losses on some pieces within days of buying a mistake just to keep the money working.) Reinvest the money you made and keep tuning it over. You'll make your money back in a few flips.

Another less painful way to sell it is by auctioning it again. Lumping it together with other dogs and dead inventory that are not moving will distribute the loss out evenly and could be profitable as an overall price. (When you add up the cost of everything you're giving to the auction to sell for you, including the ugly table, there can be a profit at the end if you bought most of it right. Even after commission.)

The trick is to not keep your cash tied up. Keep buying and selling. If you paid too much for a lamp, table or painting, unload it, learn from it and move on to the next buy.

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