Nonprofit Live Auction Problems, Buyer Beware

The addition of a live auction element to a nonprofit fundraiser can generate important money to fund the nonprofit’s mission. But when you have a dissatisfied winning bidder on a live auction item coupled with an intransigent auction fulfillment company, unwanted headaches are generated for the nonprofit volunteers. The fine print and loopholes conferred in handshake agreements create a buyer beware scenario on auction items.

The Sacramento Historical Society (SHS) was planning an awards banquet and they knew the price of the event tickets would not cover all the costs of the banquet and awards presentation. Three elements were added to the event to generate additional funds: sponsorships for the event, a silent auction, and a live auction.

Live Auctions Problems For Nonprofits

For the live auction portion of the event SHS contracted with David Sobon Auctions in Sacramento. For $2,500 David Sobon Auctions provided consultation on how to maximize the revenue from a live auction and he would be the actual live auctioneer for the event. SHS went to work creating auction item packages. These were donated packages such as a special tour of the historic Southern Pacific Railroad shops with lunch, a tour of the historic Sacramento Cemetery with dinner, and a Willie Nelson package with signed guitar, music, and tickets to a Willie Nelson concert.

SHS developed 11 live auction packages. While we knew they would not command big dollars, as long as the bids were high enough to cover David Sobon’s fee of $2,500, the rest of the money could go to covering the expenses of the awards banquet to honor so many deserving people for their historical and preservation work over the years. SHS knew that David Sobon had other live auction packages that he had access to. He along with SHS volunteers working on the live auction selected 3 vacation packages to offer at the event. The vacation packages were to the Anderson Valley, Cabo San Lucas, and Italy. They were offered by two different auction item vendors that SHS had no contract with.

Italian Vacations And Buyer Beware

One of our guests at the event purchased the 18^th Century Italian Farmhouse vacation package for $6,500 which included an 8 day stay for up to 12 people, air fare not included. This vacation package was offered by Pacific Auction House (PAH) in Davis, Ca. At the time of our auction Pacific Auction House actually had two 18^th century Italian house vacation packages. One was for a farmhouse and one was a manor house. Both the properties were featured on the PAH website and look similar.

The guest who bought the package contends what she purchased was different from what was displayed at the event. It’s entirely conceivable that the SHS volunteers grabbed the wrong image from the PAH website. In addition, the description of the farmhouse package combined descriptions from both the farmhouse and the manor house. When the couple received additional information from PAH about the vacation package it was clear that the images and description were for the farm house, not the manor house package that was displayed at the event and they thought they were purchasing.

When the purchaser was communicating with PAH about dates for their vacation package they were each talking about two different vacation homes. David Sobon had arranged to offer the 18^th Century Italian Farm House Vacation, but SHS displayed text and images of the 18^th Century Manor House Vacation. After numerous emails and phone calls, the purchaser lost faith in the company supplying the Italian vacation home. She just wanted her money back.

A refund seemed like a simple enough request. But Steve Godfryd of PAH said they had a strict policy of no refunds. He did offer to allow the purchaser make arrangements for the manor house instead of the farm house. Unfortunately, the purchaser is no longer interested. They don’t want any other surprises.

Why Is A Refund A Problem?

This is not a physical item the guest wanted to return. It’s not like she purchased a car, drove it for a couple months and then wanted to return it for a full refund. She had not booked a vacation date for the Italian farm house which would have prevented another family from renting the vacation house. There is no injury to PAH for the termination of the purchase of the vacation package. The big loser is SHS since that nonprofit organization, who paid PAH for the vacation package, has to refund the guest’s $6,500 and lose out on the funds generated to cover the cost of the event.

It is usual and customary for airlines, hotels, and vacation homes to charge a cancellation fee. A consumer who books a date prevents the business from selling the service for that time period. Hence, a cancellation fee in the fine print of the agreement. I looked at the PAH certificate for the Italian farmhouse package and there is no mention that it is a nonrefundable purchase or that any cancellation fee might be imposed.

I became involved with this live auction item dispute because I was one of the volunteers who helped coordinate the event. The unhappy consumer called me to iron out the differences and confusion. I wasn’t involved with arranging the live auction items or promotional pictures displayed at the event. If the images were of the Italian manor house and not the farm house, I can’t fault either the auctioneer David Sobon or the volunteers because they look so similar, with similar names, and other similar countryside pictures.

I completely understand that PAH is trying to fulfill their Italian farm house vacation package offered by David Sobon. SHS goofed by displaying the wrong images. Because of the errors, the transaction should be cancelled, if the consumer is not interested in an alternative.

Nonprofits events are about building goodwill between their members and the community they serve. Negative experiences color the perception of the donor and may result in a lack of future donations or involvement. Regardless of the outcome of the dispute, all the effected parties will have a diminished opinion of live auction events, their fulfillment and the nonprofit itself.

Customer Service And Donor Relations

In my business of health insurance I have to break really bad news to people all the time. Most of the consumer issues center around the fine print of enrollment conditions or the health plan contract. Essentially, my business is customer service. The more education I can provide to the family or small business, the fewer problems they encounter. But I also avoid working with some health plans that just create customer service nightmares for consumers. Or, at the very least, I alert consumers to the issues some health plans have had in certain areas such as billing problems.

From my perspective it is just easier to refund the purchase price of the Italian vacation package to the consumer than to try and force them to swallow it. In this instance, it cost virtually nothing to make the consumer happy. The biggest loser is the nonprofit from the loss of the donation. The risk for the nonprofit is alienating a member and donor.

Live Auction Considerations

Every nonprofit that is considering including a live auction element to a fundraiser needs to carefully consider their audience, the live auction items, and third party offerings. Here are a few lessons learned.

1. The best auction items are the ones donated from the nonprofits’ members and community. They may not bring in the most amount of money, but they are usually more relevant to the audience in attendance.
2. People do like inclusive packages that create an experience coupled with a meal and possibly wine. A package that includes lunch or dinner is more unique than just a straight tour or private meeting with a personality or presentation.
3. If you are hiring an auctioneer, talk with other nonprofits that have used his or her services. Were they satisfied with the results? How did they handle disputes? Were there any surprises?
4. Have good communication between the auctioneer and the committee organizing the live auction. What services is the auctioneer providing and what is expected of the volunteers? The more engaged the auctioneer is with the mechanics of the live auction – from the types of items, marketing, bids, paying for items, and disputes – the fewer problems the nonprofit is apt to experience.
5. If the live auction will be offering vacation packages or other items from a third party vendor, research that company. What is the fine print for the purchase of the services or items? Can they be cancelled or returned if the purchaser is not satisfied and are there cancellation or return fees?

Live auctions are a lot fun and they are a lot of work for volunteers. You must anticipate that there will be a certain number of problems with the fulfilment of the auction items. This includes arguments of who was actually the high bidder on the night of the event. In general live auctions are a positive event element that can help generate money to cover the cost of the event and fund other missions for the nonprofit.

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