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What You Need To Know About Online Auction Scams

Updated on June 8, 2012
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Online auction sites have practically become a way of life, so that everytime we need to buy or sell something, one of the options that we would consider is an online auction. As it is with all things in life, where there is money changing hands, there will be people running scams hoping to get their grubby paws on some of that money.

Typically, there are a few types of scams that you need to know about if you are buying or selling at an online auction. I have divided the scams into those that you need to be aware when you are a buyer, and those for when you are a seller.


Scams To Be Aware Of When You Are A Buyer

Shilling Or Artificially Inflating Bids
The seller of the item will get bidders to artificially run up the price. The bidders have no interest in the item and are bidding on instructions from the seller. Sometimes the seller might be able to open a few fake accounts and bid from there. As a buyer, you might be involved in a bidding war with one of the fake bidders and end up paying more than you should.

Misrepresents Merchandise
The condition, value or function of the merchandise is grossly misrepresented, and I’m talking about cases in which there is no doubt that the misrepresentation is intentional. A good way you can avoid scams like this is to only buy from merchants who has an excellent auction record with very little negative feedback.

Does Not Ship Merchandise
After you win the auction, and pays for the merchandise, the merchandise is never shipped to you. The seller either wants your money, or is after your credit card information.

Ships Pirated Or Stolen Merchandise
After you won the auction, and paid for the item, the item you received is either pirated, counterfeit or stolen.

Buys Merchandise Using Stolen Credit Card
After you win the auction, and pay up, the seller will order the item and ship it to your address. The catch is that the seller will pay using a stolen credit card, and you just might have some official visitors soon after delivery.


Scams To Be Aware Of When You Are A Seller

Bounces Check Or Uses Stolen Credit Card
The buyer would send you a check or money order that will bounce after you ship the merchandise. Or, he would use a stolen credit card to pay. You should be especially careful if your item can easily be resold like computers or consumer goods.

Ships Back Defective Merchandise And Claims Refund
After the buyer has received the merchandise shipped to him, he will ship back a similar but damaged or defective item and claim a refund.

Fake High Bid
The buyer gets a bidder to bid a high price to scare away other genuine bidders while he places a much lower bid. Before the auction ends, the high bidder will withdraw his bid and the buyer will get your merchandise at a discounted price.


Tips To Avoid Being Scammed
Whether as a buyer or a seller, the following tips should help you to avoid most of the scams out there.

  • Unless it is a trusted buyer, a check or money order is not payment until the money appears in your bank account, and don’t ship any goods until it clears.
  • Be especially careful if you are paid more than the required amount for whatever reason, and asked to refund the surplus to a third party. The money order or check can be stolen or forged, and the money already credited to your account can be reversed. This kind of scam is called a criminal cashback.1
  • Be careful when offered a deal that seems too good to be true - it probably is.
  • If you are the buyer, make sure you completely understand what is being offered. If you have any doubt, clarify it with the seller before bidding.
  • Deal as much as possible with those that have a good history and reputation.


References

1. Criminal Cashback

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    • wandererh profile image
      Author

      David Lim 6 years ago from Singapore

      Thanks Ulf Wolf. I missed out on this point when talking about how to avoid being scammed. You are definitely right. Escrow is a great way to avoid being scammed and while not 100% foolproof, it does remove the incentive to scam as there are easier "marks" out there.

    • profile image

      Ulf Wolf 6 years ago

      Excellent post, and sage advice. Thank you.

      Perhaps I can just add to this that the best way I know to guard against being ripped off by online sales or auctions of any kind, Craigslist and eBay included—and whether seller or buyer—is to use a *bona fide* online escrow company. Especially for pricier items like antiques, jewelry and autos. Although it does add some cost, it takes the uncertainty out of the transaction, and that’s a small price to pay for peace of mind.

      For my money, the best bona fide online escrow (and there seems to be ten fraudulent escrow sites for every bona fide one) is probably Escrow.com (http://escrow.com). In fact, it’s the only one that eBay recommends, and is the only online escrow company that is licensed to provide escrow services all across the United States.

      Take care,

      Ulf Wolf

    • wandererh profile image
      Author

      David Lim 6 years ago from Singapore

      Thanks sid_candid! :)

    • sid_candid profile image

      sid_candid 6 years ago

      Nice and informative hub on an important topic.

    • wandererh profile image
      Author

      David Lim 6 years ago from Singapore

      Thanks, Hello, hello,. :)

    • Hello, hello, profile image

      Hello, hello, 6 years ago from London, UK

      Thank you for your very helpful hub.