Understand how the auction works. Many online auctions simply list items that people want to sell. They don't verify that the merchandise actually exists or is described accurately, and they can't guarantee that auction participants will keep their promises.

Check out the seller before you bid. See if there is a feedback section on the auction site with comments about the seller based on previous transactions. Keep in mind that glowing reports might be "planted" by the seller and negative comments could be from a competitor. Other sources of information are the state or local consumer protection agencies and Better Business Bureaus where the seller is located (your local agencies and BBBs can give you that contact information.) A track record of unresolved complaints is a good warning sign, but a clean complaint record doesn't always ensure that your transaction will go smoothly.

Be careful if the seller is a private individual. Many consumer protection laws and government agencies that enforce them don't deal with private sales, others will only if there is criminal fraud involved, so if you have a problem it could be difficult to resolve.

Be especially cautious when dealing with buyers or sellers in other countries. If you have a problem with an auction transaction, the physical distance, difference in legal systems, and other factors could make resolving it even more difficult.

Get the name and contact information of the company or individual. The name, physical street address, and email address or phone number are helpful in checking someone out and following up if there is a problem. Don't do business with anyone who refuses to provide that information.

Buyers, be wary of claims about expensive collectibles. Since you can't examine the item or have it appraised until after the sale, don't assume that claims about its condition or value are true or that photographs are accurate. Print out and save the description and any photos of the item to document the claims that were made about it. 

Ask about delivery, returns, warranties, and service before you pay. Get a definite delivery time and insist that the shipment is insured. Ask about the return policy. If you're buying electronic goods or appliances, find out if there is a warranty and how to get service.

Avoid cash payments. For the buyer, a seller requesting cash can be a danger sign of fraud. For sellers, accepting cash makes it difficult to prove how much was paid if there is a dispute later.

Payment by credit card can protect both buyer and seller. Credit card payment protects the buyer because you can dispute the charges if the goods are misrepresented or never delivered. For sellers, payment by credit card is quicker than waiting for a check or money order in the mail and avoids the problem of bad checks.

Consider using an escrow service. Escrow services are another good payment option. For a small fee, an escrow service holds the buyer’s payment and forwards it to the seller upon the buyer’s receipt and approval of the item within an agreed upon inspection period For buyers, escrow services can help ensure that they get what they pay for. Sellers may find escrow services less expensive than participating in the credit card payment system, especially if the buyer pays the fee, and they avoid the problems of bad checks or stolen credit cards. Escrow services may also help both parties by "refereeing" disputes. Ask if the service is licensed and bonded and how you can confirm that with the appropriate agency.

Look for information on the auction site about insurance for buyers. Some auction sites provide insurance that will cover buyers up to a certain amount if something goes wrong. Others may have links to third-party programs that offer insurance for a fee. Read the terms of insurance carefully. There are often specific limitations or requirements to meet, and there is usually a deductible.

Let the auction site know if you have a problem. Some sites investigate problems like "shills" being used to bid prices up or other abuses of the auction system. They may also want to know about sellers who don't deliver or misrepresent their wares and buyers who act in bad faith. Complaints may result in users being barred from the site.

Try mediation to resolve disputes. Not all problems are due to fraud; buyers or sellers may simply fail to hold up their parts of the bargain in a timely manner, or there may be a legitimate disagreement about something. Some auction sites provide links to third-party mediation services that will help people resolve disputes. There may be a small fee that is usually paid by the party who requests the mediation.

Buyers should report suspected fraud to law enforcement agencies. Click here to fill out IFW’s online complaint form. We’ll forward it to the appropriate law enforcement agencies. Often investigations are triggered by patterns of complaints against the same individual seller or company, so it's worthwhile for buyers to let law enforcement agencies know about problems.