A Free Trade System
A look at alley trading at horse auctions.
By Brian Bendele | May 26, 2013
The American Quarter Horse Journal
You’ve hauled your good broodmare and her weanling colt to the sale. You’ve checked in with the sales company and received your order numbers. You spend the rest of your time getting the horses shined to perfection.
As the day goes by, prospective buyers stop to look at your horses and several ask to see them outside of their stall in the alley. When one of them suddenly asks, “What would you take for the mare now?” you think, “Huh? What about the sale ring? What’s the sales company going to think?” And more importantly, “When am I going to get the most money for my horses, now or in the sale ring?”
“Alley trading is when someone approaches a person about their horse outside of the ring, and they agree on the price,” says Bret Stossel of the Triangle Sales Company Inc. in Shawnee, Oklahoma.
Alley trading a horse before it enters the ring at an auction occurs often. However, some auction companies allow alley trading and others do not, mainly because many sellers do not understand the process. Triangle Sales Company, one of the largest registered Quarter Horse and Paint horse consignment sales in the nation, allows alley trading. Since 1980, alley trading has been a big part of the sale and is something the company will continue to do, although it is not necessarily encouraged, Bret says.
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There can be advantages and disadvantages to selling your horse through an alley trade, and you have to decide what’s in your best interest. You have a bona fide offer in hand that you can accept in the alley. Your horse might not bring as much through the sale ring, and you’re the beneficiary of having hedged your horses like many people do a commodities contract. But you take the risk that your horse will bring more through the sale ring, just as if you owned a stock that sailed past your “must-sell” price on the stock trade. It all depends on how much risk you want to take.
Making the Deal
What happens after you accept the alley offer? Once you and the buyer agree on the price, you go to the secretary’s office at the sale and fill out an alley trade agreement.
“One (ticket) is just a clerk’s ticket with a price on it, and the buyer signs it,” Bret says. “The other one is a ticket signed by the buyer and the seller that explains the sale terms and conditions of the alley agreement.”
The paperwork helps prevent any confusion between the two parties and the sale company. However, even though the horse immediately changes owners, it cannot leave the sale barn immediately.
“The horse must still go through the ring,” Bret says.
The Triangle Sales Company sends out a sale catalog listing each of its horses nationally. Because the sale is so large, the company thinks the public should get to bid on each horse.
“There could be someone that has traveled 500 miles to see and bid on this horse; we must allow them the opportunity,” Bret says.
This is where alley trading gets touchy, and people’s feelings can get hurt. If the new owner wants to keep the horse, he can set a price for the horse. If that price isn’t met, the horse is pulled out of the auction.
If the horse is pulled, then the price set between the buyer and the first owner remains the same. Depending on the auction company, 5 percent to 8 percent commission is charged.
Triangle Sales Company provides a 48-hour guarantee on all horses passing through the ring. If a horse is guaranteed for soundness and broke to ride, then proved otherwise within the time limit, Triangle Sale Company will solve the problem.
The lack of guarantee is a risk for a trader or any buyer purchasing a horse in the alley. Because the horse has been sold in the alley, the guarantee is voided, and Triangle Sales Company has no responsibility for the animal.
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The trader also has the option of reselling the horse at auction. If the horse brings more than the price set between the two parties, the trader makes an immediate profit, a risk the original owner takes by selling in the alley.
This profit leaves many original owners upset and confused, even though they willingly sold their horses to the trader.
“Most of the time, if you explain how the trade works, you have minimal hard feelings,” says Tommy Hill, a horse trader from Ohatchee, Alabama.
Tommy has been trading horses for more than 30 years. He travels to sales across the country and buys the majority of his horses in the alley.
“The first time you mislead or distort the truth, it leads to trouble and causes problems,” Tommy says. “You want to make as few enemies as possible, and you want to make the process as plain as possible so there is no misunderstanding.
“I tell them that if no one bids on the horse, I will take it home, but if someone bids an amount that I have set for that horse, then I have the option to sell it,” Tommy says.
No Alley Trades!
Misunderstanding and paperwork have spurred several horse auctions to not allow alley trading.
“It creates too many hard feelings,” says Gary Lawman of the Mountain View Horse Sale, in Mountain View, Oklahoma. “If you have someone that isn’t auction-savvy, and they sell their horse to someone in the alley and turn around to see it sold for $500 to a $1,000 more than what they got for it, they can get upset.”
Monthly to weekly auctions such as Mountain View do not produce a catalog with each horse listed to be sold. Horses are tagged and signed in the day of the sale, so when alley trading is allowed at these auctions, many times the horses do not have to run through the ring.
“If a first-timer comes to an auction and walks through the alley and sees a horse he likes and waits all night to bid on it, and it doesn’t come through the sale ring, he can get mad,” Gary says.
Gary says generally the only reason a trader wants to buy a horse in the alley is price. Traders know they can buy the horse cheaper and sell it for more money in the ring or privately.
“A lot of horses are sold in the alley for more than they would bring in the ring,” Tommy counters. Sometimes he is willing to pay more for a horse that fits his plans than for one that doesn’t.
“I will buy any horse that I feel I can make money on, but I am a better customer if I feel the horse will fit my program,” Tommy says.
Sales companies have the right to do whatever they want on alley trading, Tommy says, but he finds it hard to accept the fact that he can’t sell his horse outside when someone comes up to him offering the right price.
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“The way I look at it that, I can’t tell a grown man he can or cannot sell his own horse,” says Jim Freeman of Freeman Horse Auction in Sulfur, Oklahoma. “If I don’t allow them to trade, they will go down the road and do it, and I have lost the commission.”
Trading in the alley is a gamble. However, knowing the rules of the game places the odds in your favor.
If you're interested in learning more about the buying process, watch this short video to make your first auction experience less stressful.