Psychology of the Buyer's Premium

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Posted By: barrysloate

A short article in this morning's New York Times reports that due to first quarter losses, Christie's will be raising its buyer's premium to 25% for the first $50,000; 20% up to $1,000,000; and 12% for everything over $1,000,000. Christie's states another reason for the increase is that consignors now demand the hammer plus a percentage of the final sale price.

It's the latter reason that interests me. What is the psychology behind raising the BP every time consignors demand a higher take? Soon we will see a 40% BP because consignors want hammer plus 20%. Wouldn't the same thing be accomplished by doing away with the BP and giving consignors say 80-85% of the hammer?

The BP made more sense when the buyer paid 10% and the consignor got 90% of hammer. In that example, the fees were equally split between buyer and seller. Now they are so skewed they seem a bit comical. It's a constant tug of war between consignor and auction house.

Anyone else feel it's time to reconsider this commission scale?