Quote:
Originally Posted by KMayUSA6060
Can someone explain to me why there's a Buyer's Premium? I get that's how the AH gets paid, but why is that "tax/fee" put on the buyer, and not the seller/consignor?
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Simply stated, it's greed, but...
I believe BPs started with high end AHs like Christies, etc but it basically works like this in an overly simplified example.
Auctions houses could make their money on commissions from sellers only. For example you sell an item through an auction house for $1000 at 10% commission, you get $900, the auction house gets $100.
When someone had the bright idea to add a premium to the buyer too, then in theory it works like this: Item sells for $1000, seller gets the same $100 but the AH gets $200!
Now at 10% that's probably not too big of a deal but now some high end artsy fartsy AHs charge the buyer as much as 30% and as everyone who bids and is aware of BPs, the tendency is to stop bidding taking the BP into consideration. This in theory hurts the seller as he doesn't get as high of a hammer price for his item and the AH still gets a huge cut of the take.
These days with high BPs, auction houses can now offer sellers deals like low or zero commissions, and still make a profit on the sale. I mean 20% on a $1000 item and the seller gets full hammer price, everyone is happy. On really high end items AHs might even give the seller a piece of the BP.