Lelands Does the Right Thing with Buyer's Premium

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Posted By: <b>David Davis</b><p>The rate itself aside, most people I would think accept the fact that there is a buyer's premium associated with auction houses. <br /><br />It was pleasing to see that Leland's new Foto archive auctions has no buyer's premium indicated. This makes sense since they own all of the material, and are making their money on the sale of the item, rather than just a consignor's fee.<br /><br />This also could lead to a separate discussion on whether auction houses should charge a BP on items they own.

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Posted By: <b>barrysloate</b><p>David- while that's a fair point, it would get complicated as lots would have to be offered in the same auction with two different sets of terms. And there would be a huge incentive not to admit a lot is owned by the house, wouldn't there?

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Posted By: <b>Jay</b><p>Makes no difference to the buyer. At the end of the day you bid what you are willing to pay, including all costs. If you are willing to pay $1200 for a lot you bid $1200 if there is no buyers premium or $1000 if there is a 20% buyers premium. That is why higher buyers premiums hurt consignors and, everything else held equal, consignors should consign their material to the auction house with the lowest buyers premium.

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Posted By: <b>Matt</b><p>Jay - while in a perfect world, you're correct, usually with auctions the buyer's premium is hidden or written in smaller font and while the buyer knows there's going to be "juice" added, he may underestimate what it ends up being; thereby spending more then he wanted to.

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Posted By: <b>Brian</b><p>A fool and his money are soon parted.<br /><br />I am quiet sure that bidders in Mastro et al can do the math.

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Posted By: <b>Jay</b><p>Matt--There is an old quote: "a fool and his money are soon seperated." Only a fool would not know the conditions that he was bidding under.

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Posted By: <b>Jay</b><p>Wow! Brian that's scarey.

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Posted By: <b>Brian</b><p><img src="/images/happy.gif" height=14 width=14>

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Posted By: <b>Matt</b><p>Again, I didn't say he was unaware of the buyer's premium, but he may do a rough calculation in his head that's short. And again, in an ideal world, you're correct, but practically speaking, I think it's an issue.

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Posted By: <b>T206Collector</b><p>The people that don't factor in the juice, but know it is coming, are simply willing to pay more for the item, even if they haven't figured out exactly what they're bidding.<br /><br />The way I look at it is this -- the reason I do the math carefully is because I have pre-ordained total expenditure limits; the bidders who don't do the math just have higher limits than I do. <br /><br />

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Posted By: <b>Brian</b><p>I am fairly certain that anyone successful enough to buy cards at auction falls into one of the following three categories:<br /><br />1. might be capable of using a calculator or spreadsheet<br />2. might be good enough at math to figure 20% of a number<br />3. might have so much scratch that a rounding error will not change their lifestyle<br /><br />If someone can't do at least one of the three preceding steps, that person has greater issues in his life than overpaying an auction house by a point or two on the vig. They likely struggle telling time, replacing light bulbs, paying taxes, or buying things at the store.

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Posted By: <b>barrysloate</b><p>Brian- couldn't have said it better myself. If the 20% is meaningful, you darn well better figure it out. And if money is no object, then just keep bidding until you win it.

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Posted By: <b>JimCrandell</b><p>Do the math--it doesn't matter if you are a buyer.<br /><br />Everyone I know factors it in--why wouldn't you?

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Posted By: <b>Alan</b><p>For some bidders with very deep pockets, they couldn't care if the buyers fee is 0% or 80% - they will just bid higher than anyone else for the lot they want.