Do your Due Diligence

First of all, research what you are buying. Just because it is on an auction site does NOT mean it is the best price. Just like the Miracles used to sing, "You better shop around." First of all, what you are buying is not necessarily new just because it says new in box. Many retailers have taken to selling last years models online as "New." It may never have been used, but buying last years flat screen T.V. is like buying a 1985 Chevette as a new car today. This is especially true for all technology items. Something from two years ago may be horribly out of date or style. Ask for the MODEL number if it is not listed and do a Google search. What are other people selling the same product for? Is it available locally for a similar price? In my opinion, it is not worth waiting a month for shipping, hanging out at home waiting for the UPS guy to come by for a couple days, and having to worry about the chance of mailing back an item because it doesn't work or has problems just to save five bucks. Remember your time value of money. (Read my other articles if that doesn't ring a bell)

Know your Enemy

I don't mean that every person online is purposely out to hurt you. BUT, they sure are trying to take your money, so they are definitely on the other side of the fence from you, so again, be careful. Ask a ton of questions about the product. I have seen cars advertised for sale online with only a couple pictures and a single paragraph for a description, and this is for a 20 year old car. I guarantee, there is more than a paragraph wrong with that heap. If the pictures and description don't tell you everything (and they almost never do), ask specific questions about everything about the item. Look out for items that say "Sold as is," or "No returns accepted." Why is that? Also be wary of a one pound item that costs $50 to ship or that won't be delivered until NEXT Christmas.

Most of the time, sellers' ratings can help you pick the good apples from the bad. But again, look at the previous auctions. If the seller previously had 20 auctions that ended for under a dollar, and now he is trying to sell a Ferrari, those ratings have to be taken with a grain of salt. Mainly though, be wary of negative, low, or no feedback, or someone that hasn't sold anything in five years. If it is a large purchase, get the sellers personal information, name, address, and phone number and again do some Google research to see if anything negative turns up or the info is bogus. Also, be very careful with international transactions. Even if that person says you can return the item no questions asked if you don't like it, what are the chances of you getting on a plane and traveling to Lapland to dispute a $20 purchase? Some countries have different laws, and that may be the only recourse you have, and that ain't going to happen. If the seller wants your personal info, that is cool, just the same info you wanted from him, name, address, and phone number. This isn't a Geneva convention thing, so your rank and serial number should be kept to yourself. (in other words, never give your social security or bank account numbers etc. to anyone online)

Decide what you are willing to pay

I know this sounds like common sense, but I have been to enough physical auctions to know a good auctioneer can make otherwise smart people look like goofballs by running up the bid on them and making them pay new prices for old junk. And if you think online auction sites are run by stupid people who don't know the same thing, think again. It is so tempting to just say, well, just one more bid and then I will stop. No, you will get your pants taken down before you know your belt is loose. If you plan to pay only $15, don't bid a penny more.

Once the auction is over

Make sure you bookmark the page or better yet print the item description etc. out just in case the auction site closes down tomorrow or looses your info. Keep all the information until after you get the item and time has passed to make sure it works properly. I suggest to pay as soon as the auction ends. This way, the seller can't say you didn't pay in time or have a reason to back out of the sale. When you decide on shipping, look for someone that will insure your shipment, if the seller says they don't offer insurance, I probably wouldn't bid in the first place. Basically, you just don't want to give the seller any excuse to say the item was damaged in shipping.

Paying for your item

Unfortunately, most online auction sites only allow you to use payment methods that are favorable to them. Paypal for instance is owned by Ebay and if you use a credit card with this service, you give up your chargeback rights and have to deal directly with Ebay at that point. If they don't want to give your money back, you are stuck. On a $20 purchase, this may not matter to you, but if you are buying a car or house (these will be big in the future), you should seriously consider a reputable escrow service. An escrow service holds the funds until you receive the goods, and only then the money is given to the seller. Again, do you research because not all escrow companies are created equal. Even with the downside, a credit card is still the best payment to use with one of these services, never send cash or money orders, or in my opinion, a check. Remember, all your banking account information is on every check, and I have seen a few with even social security numbers on them, crazy.

If you are selling

If you are one of the many sellers, you still have to be cautious. Never send the item before a payment is given. Take payment only through a service that will mediate for you if something goes wrong such as Paypal. Don't take direct credit card payments unless you are a merchant and familiar with how to handle chargebacks, they are not for the faint of heart. Finally, make sure you do describe your items thoroughly and precisely so the seller can't complain later on.

If problems arise

Even with every precaution, things happen. First, try to contact the other party and see if you can work things out. If that doesn't work, contact the auction site and your credit card company for dispute information. If you don't get satisfaction from either, contact the Internet Fraud Complaint Center, the Federal Trade Commission, and maybe in extreme cases, even your congressman. It is still a lot easier to prevent problems than to clean them up later. Just because an auction for that shiny new butt scratcher you always wanted ends in five seconds, don't just skip everything I just told you, there will be other auctions, so take your time and do it right to avoid hassles in the future.