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eBay School: The right price

How to determine the amount to bid.
by Gisle Hannemyr
Published: 2011-04-23.

Being able to determine the right price to pay for an item is very important if you want to get the most out of eBay. Knowing the right price will allow you to bid the required amout to secure the item if it sells for a fair market price, and will protect you against paying too much if fools with auction fever manages to jack up the price beyond this.

In this lesson, I shall show you how to figure out the right amount to bid.

1. Completed listings

Your first stop, when researching prices, should be eBay's Completed listings. This is a listing that you have access to when logged in, and let you search for items that has been listed and either sold or expired during the last two weeks.

To access this mode, first do an ordinary search for the item you are interested in, and when the result appears, scroll down the page. Locate the heading “Show only” in the left sidebar, and tick “Completed listings”.

Unless what you're looking for hasn't been sold on eBay during the last two weeks, you'll see exactly what others paid for similar items.

The green numbers in the listing are the most important ones. These are the amount paid when someone actually bought the item. Many listings have no buyer (listed in red or black), because the asking price (i.e. the Buy It Now-price, the reserve, or the opening bid amount) was too high for the item to sell. These are not as useful as the green numbers, as they usually only reflect an unrealistic hope on part of the seller, but will at least inform you about what not to pay unless you are desperate for the item.

2. Price outside of eBay

In addition to the examining the Completed listings on eBay, you should also try to determine what you have to pay for a similar item elsewhere. Some items that are available from other sources sell for silly prices on eBay, and you don't want to be paying those prices, so use due diligence.

If you still can buy the item new, research what you'd pay at a reputable regular shop. If you are in the USA, or you are buying on eBay from a seller located in the USA, you should at least research the prices at Adorama, Amazon or B&H. These are reputable shops and they usually have very competitive prices. If what you are buying is a lens or a flash, you may also use the DPanswers lens finder or flash finder to research the historic price of items that is no longer current.

Reliable sources for quality used equipment in the USA are Adorama, B&H, and Keh. Check if they have used models for sale of the items you're interested in, and what their prices are.

If you live outside the USA, or you live in a different country than the seller, you should also research local prices for new and used equipment. Shipping of some items may be expensive, and local taxes may apply when equipment crosses borders. What may look as an bargain may not be such a bargain when the cost of shipping and local taxes are added to the bill.

The 70 % rule

As a rule of thumb, I never pay more than 70 % (after shipping and tax) of the new price for a used item, even if it's being offered as “like new in the box”. When you buy a new or used item from a reputable regular store, you get the manufacturer's or the store's warranty. This warranty, having a real store to contact in case the equipment malfunctions, is clearly worth a premium compared to getting the item from some stranger on eBay.

Most eBay sellers will replace defective merchandise when it is returned. If a seller has a policy of not accepting returns, do not do business with him or her. However, standard policy on eBay is that the buyer is responsible for return shipping. This means that you need to be careful when doing bargain-hunting on eBay. If the savings, compared to buying from a regular reputable store, are not significant, the risk of receiving defective merchandise and having to deal with some unknown entity (rather than a shop) for a replacement or a refund may not be worth taking.

3. What to bid?

After you've determined a fair market price, you also need to determine what to place as your maximum bid.

This, of course, depends on a number of subjective factors, such as how rare the item is, how much in a hurry you are, and how much you really want it.

For an item that appear regularly on eBay, or one that sells for less elsewhere, there is no point in paying a premium on eBay unless you are in a hurry. If you just wait long enough, you will probably get it for less than its most common selling price.

On the other hand, to buy a rare item, you may have to pay a premium, or risk that somebody else outbids you. In that case: Ask yourself if you would be disappointed if someone else got the item at some price, and bid that. Or: At what price will you would be relieved if you didn't have to pay it, and at what price you would be happy to purchase the item? The amount to bid is somewhere between those two figures.

For instance, if you think the most likely price the item would sell for on eBay is USD 1000, but you would been disappointed if someone else got it for USD 1250, and you think that anyone who pays USD 1260 is a fool, then USD 1250 as the maximum amount you should bid. However, you need to decide on this figure up-front, before the auction starts, and stick to it. After you've decided what to bid, don't catch auction fever and up your bid to make you a fool.

When you settle on the maximum amount to bid, remember how eBay's automatic bidding process works. Your maximum bid is never actually entered into the auction, unless somebody else bids a similar amount. If you're lucky, you'll end up paying less than your maximum bid.

While deciding what maximum amount to bid is best done early, you must not enter that amount into the auction before very late (literally seconds before the auction closes). Why this is important is explained in another lesson.

Shipping and taxes

Be sure to always figure in shipping charges, local taxes and fees when deciding on your maximum bid. If you've decided that USD 1250 is what you want to spend for an item, and shipping is USD 50 and local taxes and fees is 25 % (USD 350), then USD 1250 - 50 - 350 = USD 850 is what you should enter as your maximum bid.

(If you think the above amounts in the preceding paragraph are excessive, this typically is what residents in Norway has to pay in shipping, taxes and fees when buying from sellers located in another country.)

4. Closing prices

Inexperienced eBay buyers sometimes think that they could have gotten an item by bidding just a small amount over the closing price of an auction. And they kick themselves for not doing so. But this is not how eBay auctions work.

The closing price of an eBay auction is always a small increment over what the second highest bidder was willing to pay. The amount the highest bidder was been willing to pay, may have been a lot higher than this.

This means that you almost never would have won an auction by bidding a small increment over the final price. If you had bid more, chances are that eBays automatic bidding system would have kept the price spiraling upwards until you outbid the other bidder's maximum bid amount, way above the actual closing price.

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