The first thing I ever bought at an auction was not property or a car. Nor was it jewellry, watches, or artwork. It was two giant bags of clothing that weighed at least 5kg each. But this spontaneous purchase, as it turned out, was one of the smartest buys and lessons in arbitrage.

In economics and finance, arbitrage is the practice of taking advantage of a price difference between two or more markets. An example is reselling a sold-out concert ticket for a much higher price than you bought it for. Usually, the arbitrageur adds very little or no value to the item itself. 

There are many examples of this in everyday life. In fact, this is basically how middlemen make money. Sometimes, the spread/profit of obtaining and reselling might not be worth the time and trouble. But for my first experience, it was certainty worth it.  And it taught me a great lesson as well.

 

Two Giant Bags of Clothing – Sold to the Lady in Blue

I was only 18 years old, and was about to start my first day at uni (in the States). Being so far away from home, at a time before smartphones, the only thing I thought I needed was a bike to get around the sprawling campus. That’s when I heard about the university’s annual bike auction, which took place the weekend before the start of the first semester.

Though it was called a bike auction, there was much more than just bikes. The auction was a collection of all the found or confiscated items by the campus police. The smaller items, such as clothing, umbrellas, jewellry, cameras, and textbooks, were lost or abandoned items. Some of the bikes were also in this category. But most of bikes were seized because of expired licenses (you needed a license to ride at this uni) or unpaid parking tickets.

The 300+ bikes were the main attraction of the auction. Each bike was given a lot number, while many of the smaller items were bundled together into one lot.

In the crowd, there were bike dealers, hobbiests, and students all waiting for the auctioneer to call out their particular lot number. The bikes went up for auction first. After 3 hours of rapid rhythmic chanting, the bikes were all gone and the crowd dwindled by more than 70%. 

Why didn’t I bid on a bike (which was my sole purpose in attending)? To be honest, I was scared. It was my first auction and I was in a very unfamiliar place, far from home. The auction was too fast paced for me, and buying something by raising your hand just seemed so unnatural.

But then I was overcome by the sunk cost fallacy. I felt I had already invested so much of my day, just to walk away empty-handed. So when the auctioneer called out a lot number for a giant bag of clothing, I rose my hand for the starting bid of $5. Then I did it again for the second (and final) bag of clothing.

Then I thought, “Oh dear, I just spent $10 buying who knows what”.

 

What Was in The Bag & How Valuable Was It?

When I got back to my room, I found about 15 pieces of outerwear in each bag. I thought, “Of course, it had to be outerwear. I mean, who loses pants or shirts?” Many of these were winter coats, and nearly all of them were branded – Nike, The North Face, Patagonia, Columbia, Timberland, etc. 

Upon inspection, I found that most of them were in very good condition, with no stains or tears. Then I found that inside one of the pockets of a Columbia jacket was a cheque book with a couple’s name on it. There was also a phone number on the cheque book.

I called the number and found out that the coat belonged to the couple’s son, and within 10 minutes, the son called me. He soon biked over to my place, and I returned his coat. He then thanked me profusely and grabbed a $10 note from his pocket and handed it to me. It was a surprise gesture.

The two bags had only been in my possession for about an hour, and already, it had paid for itself. 

There were no identifying details on the rest of the loot, so I washed them and stored them in my closet. It was a scorching 34°C in September, and no one was thinking about winter wear. So I waited until December to begin listing them on Ebay.

One by one, the coats sold for $10 to $65. How ironic that I bought something at auction to sell at another auction. And I used just a small fraction of the profits to eventually buy my bike.

 

Arbitrage Opportunities and Precautions

The next year, I bought two boxes of lost textbooks. These I also held on to and sold at the right time (before the start of a semester). The textbook profits were even more lucrative than the clothes.

Since then, I’ve been to all sorts of auctions for distressed, lost, repossessed, and confiscated items. As mentioned in a previous article, I’ve also been to many property auctions and estate sales. 

A former colleague of mine (from the States) used to buy cars at auction. Around the Hollywood area, there are opportunities to buy cars used on movie sets and cars once belonging to dealers and criminals. She would fix the car up and sell it. If the car was not functional, she’d tow it home and scrap it for parts, then sell the parts. This was her primary source of income.

But not all items at auctions are star buys. Like most instances, you still have to be smart with your purchases. I’ve been to some auctions where I didn’t bid on a single item. I’ve been to others where there were so many bids, that the spread (i.e., the difference between the auction price and the market price) was not very favourable.

Most auctions have a viewing period where you can try out or inspect the items for bid. You don’t want to end up buying a fake, a non-functioning, or a hot (stolen) item. And for properties, you’ll want to see what’s inside before you buy. 

 

Auction Houses in Singapore

Here are some auctions in Singapore. These do not include the high-end auctions that sell antiques, collectibles, and other private sales/consignment items. They also do not include Ebay, which  today, is less of an auction house, and more of a retail shop.

 

Auction House Items for Auction

The monthly property auction is a mix of distressed sales and owner (private individual or developer) sales.

This International Auction House handles the Singapore Police Auctions. These include items found or seized by the Singapore Police.

JLL Logo

The monthly property auction is a mix of distressed sales and owner (private individual or developer) sales. 

The monthly property auction is a mix of distressed sales and owner (private individual or developer) sales. 

LTA and Singapore Customs uses this online platform to auction off about 140 to 220 vehicles every quarter. There are also cars that are auctioned by individual sellers.

 Seized by a Writ of Distress, these items can be in 3 categories- movable, immovable and admiralty (yes, you can buy a vessel at auction)

 

Online Auctions

In addition to Ebay, there are also online auctions where you can buy items, particularly machinery and property. But, you must be cautious because there are a lot of scams. For me, I always want to at least see the item before bidding on it.

So have I ever participated in online auctions (other than Ebay)? Yes, for tax-defaulted property (while I was living in the States), but I visited and inspected every property before bidding. Currently, the only online auction portal in Singapore (besides Ebay) is sgCarMart. Though I imagine there will be more in the near future.

 

An Upcoming Police Auction

Here is an upcoming auction by DoveBid, on 28 Feb 2018. This is an auction similar to my very first auction, only with much fewer bikes. The details are here.

 

 

3 comments on “My First Lesson in Arbitrage: Police Auctions & What You’ll Find”

  1. Hi! Great blog as well as blog post! never knew anything about this in singapore until now. Where do you get updates from when SPF is hosting their auctions and can I be informed of it as well?

    • Hi Sherman, SPF uses DoveBid to auction off their items. You can sign up for DoveBid email alerts, but to do that, you’ll have to create an account. If you don’t want to create an account, you can periodically search through their Event Calendar: http://www.go-dove.com/en/events (scroll down to “Filter by Event Region”. The SPF auctions don’t happen that often, maybe once or twice a year.

      • Thank you so much!! Appreciate it! Keep up the goodjob w all the posts! Will definitely recommend friends to view your blog 🙂

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