What is the point of the "Buyer's Premium"?
 

So I get it, you have to think about the Buyer's Premium and take it into account and bid accordingly. But what is the actual point? The only possible motive I can come up with is that's a psychological tactic by the auction house to make you feel like you're paying less than you actually are, or even worse, hoping for ignorance on the part of the buyer.

Sorry if this has been discussed.

It has been discussed countless times over the years. The AH has to make money somehow, no?

That’s exactly what it is, and why it’s kept separate by most of them. Otherwise it would just be your bid and they take X% as their commission as arranged with the seller. It’s not hard to calculate in and lower your bid accordingly, but surely many people don’t and they’ve learned more money is made this way than the other, straightforward way.

That's why I prefer..., gulp, eBay auctions overall. I like to just bid and not worry about calculating the BP. I know it is "easy to calculate" but on higher priced items particularly when the bid increment jumps , it can really add up quick if you don't do your diligence .

From a consignor prospective, would you rather pay 0% of the sale price or 20% of the sale price? Which do you think is going to convince someone to consign an item. AH's still need money to eat either way you slice it.

I think you hit the nail on the head. It is sort of a psychological selling trick to make buyers feel like they aren't paying as much as they really are, so they bid a little higher in the heat of the moment. Exact same concept when you go into stores and see items priced at $1.99, $4.95, or $9.99. Why don't they simply round the prices up $0.01 or so to an even dollar amount? They do it so the buyer feels like they are somehow paying less, even though you can see what it costs right on the price tag.

And they say we humans are supposed to be smarter than all the other creatures on Earth. Really makes you wonder some times. LOL

Personally I really do not care what the house charges me as a buyer or what they are getting, if anything from the consignor. When I am bidding I always consider my bid plus the buyer's premium and sales tax as the cost to me.

Not sure why this is so hard for so many people to grasp.

It's an accounting device. It isn't fooling anyone.

It's a moneymaker, no doubt about it. Actually, kinda shocked it hasn't gone up more for major auction houses.

It is just a subterfuge but it works because your average American does not do arithmetic very well.

https://photos.imageevent.com/exhibi...k%20Stupid.gif

Not a Buyer's Premium, but a Shipper's Premium
 

One well-respected auction house used to have a default shipping charge that wasn't changed to the actual shipping charge until hours after the auction closed. Invoices were available for review before the shipping charges were changed.

The default shipping charge for all items was $1000.00. Yikes. That will open your eyes in the middle of the night at 4AM when the auction closed.

My only experience with this practice involved two slabbed cards. The shipping charges were reduced later the same day from $1000.00 to $20.00.:):)

So to be clear, some of you guys are accusing Board members like Scott B, Scott R, Al C and Lee B of trying to deceive buyers into overpaying?

I just multiply my top bid by 1.3 to see the true cost, or close to it. Accounts for BP, tax and shipping usually doing that.

My bigger issue is eBay has almost nothing I need most days.

I think the accusation is that AHs are savvy business operators.

For those who cannot seem to keep the BP in mind when bidding, Heritage does the work for you. Each bid you place shows what you pay or will pay with the BP included.

It was referred to as a trick.

No, the accusation is that many people are clods who cannot do math and as a result there are some who do not factor in the BP when bidding. The information is right there, they are just incapable of using it. Which is why many sites show the BP number alongside the bid number. Heritage has long done this. You click on a bid there and you see the precise total cost of the bid plus BP. More to the point, the question is why engage in a cumbersome method when a single price WYSIWYG would be cleaner and easier? The answer can only be that it grants the AH some sort of small edge to do it that way, like a casino adding another 0 space to a roulette wheel.

For those who don't understand the BP.... How do you propose the auction house earn any income and have the ability to keep running? They aren't trying to "fool" anyone. The rules are clearly posted, and anyone with the ability to process information should be able to understand them.

The AH's ability to hire staff, pay internet fees and print catalogs is all contingent on the Buyers Premium. Perhaps those of you who are perplexed know of a better way for the AH to generate income and stay in business?

I guess this topic is destined to resurface at least once per year. :rolleyes:

And therein lies the rub. Math.

Certainly the AH could take it out of the consignor instead of taking it from the buyer. Our good friends at eBay do just that, and they seem to be staying in business in a reasonably successful fashion.

Tip = BP
 

When I go out to eat, I have to add 20% for the tip at the end. I don't feel like I'm being deceived in any way, I just know that's how the waitstaff makes their money. Same with the AH, it's just part of the "night out." I think I'm going to start calling it a "Buyer's Premium" when I go out for dinner, instead of a "tip."

And ebay final bids don't include tax, do they?

I guess part of the question might also be how you feel about it when the airlines do it? Do you like buying at one price, and then having to pay to carry on your bag, select your seat, or check your bag?

How about when you go to the hotel nowhere close to a resort, and they charge you resort fees?

Certainly most of the time, these business practices drive people mad. I suspect that the psychological effect here is similar.

They do for those of us that live in Oregon.

But for most one still has to do a calculation before bidding to know the true price.

Agreed.

I think the big difference is that's common commercial practice. Most every vendor at every site quotes their prices before tax. You go to Walmart, Burger King, or Shoe Barn, and their prices are all before sales tax.

In the case of eBay, with eBay buyers theoretically being located just about anywhere in the world, quoting the complete price would be a challenge.

Straight money grab- nothing more, nothing less. If you explain it as anything else you probably own an auction house.

Most AH charge 0% to consignors and in fact many give part of the BP to the consignors in an effort to bring collectors great material. That has become the hobby standard.

The AH needs to make money. They charge a fee at the end which is paid by buyers. Factor it in. If that concept is too hard for some to figure out maybe they should not be bidding. Nobody is paying more or being hoodwinked because of the fee.

If one compares the offerings on eBay auctions to those offered in a catalog type auction, there is no comparison. Fewer sellers are even doing the auction format. Since PWCC is gone there is next to nothing that gets listed in the auction format. So ya get what ya pay for. If ya like eBay better because the price you bid is essentially the price ya pay then shop there.

I must be consigning to the wrong auction houses. Or maybe they don't like my stuff. Because the offers I have gotten are inferior to this. I pay a listing fee, and they keep the BP.

I am accusing people who run auction houses of, generally, figuring out the obvious. That a lightly hidden fee tends to produce more money from people who are lazy or dumb or forget they have to tack on an extra 15, 17.5, 20% or whatever. It is a psychological tactic to make it look like less, and if someone forgets about the fee, I doubt there’s a single auctioneer who will turn down the profit. It clearly produces more revenue that telling bidders their bid is their bid, and they can raise their bids 15-20% because there is no buyers fee. If this offends people, they may be offended.

Not sure who you are consigning with or what type of material you are consigning but the profit to the house, when they are not selling their own material, is heavily weighted by what we pay as buyers.

The buyer's premium does seem like a psychological "trick", but it is based more on enabling more clear cut record keeping of actual sale price of an item regardless of auction house and its fees. Historical auction records are relied on for appraisals and insurance.

So it doesn't fool you, but you're sure it fools others?

Those are some interesting concepts that I hadn't considered.

I figured it was as much about tradition as anything.

These people should not be making bids in an AH format.

I think it's less about being bad at math, and more about the psychological effect. For whatever reason, my suspicion is that bidders feel better about bidding $100 (plus 20%) than bidding $120, even though they're exactly the same thing.

Does it seem likely to you that nobody ever forgets about it? Does it seem rational to you that this complication would be added (a system is easier when there are fewer variables) if it did not produce a better result for the house?

Would you be happier if I posited instead that auctioneers are too stupid to figure out why their business model is what it is?

This isn't much to get offended over in the idea that people running businesses tend to structure them to their benefit when possible. A Buyers Premium structure, with a separate fee to tack onto the bid, is not designed to the benefit of the buyer. This seems like common sense. If you would like to take this as a personal slight on your aforementioned list for some reason, go ahead.

There's been some great collections built on good whiskey and poor decisions on auction night...

And countless other factors that all cost significant $$$. By the way, BP is pretty much universal and it tends to be much lesser than overseas. I participate in English record auctions and 30-35% is pretty much standard.

I'm not presuming I'm smarter or more careful than other people. My guess is if it happens it's very very infrequent after 20 years of this model.

I guess we should count our blessings to only get to pay 20%!

I never said anything about myself; that was a line you went down and I ignored. I rarely participate in auction house bidding for reasons other than the BP structure.

I am certain you would not be fooled.

Why are you all presuming what other people think?

It's a suspicion, not a presumption.

Fine, what's your basis for suspecting what other people think, if you yourself don't think that way?

Never said I didn't think that way. I suspect that I myself at times feel better about bidding $100 (plus 20%) than bidding $120, even though they're the same thing.

But if you know it's the same thing, why on earth would you feel better about it, I really don't follow you.

It's all in the psychology of being a human. Smaller numbers feel less expensive than bigger numbers, even though they're the same amount in the end.

As mentioned by others earlier, it's no different than why retailers charge $0.99 instead of a dollar. It feels like it's less psychologically, even though we all know that it's really just $1.00.

And no different than why the gas station adds $0.009 to the price of your gas by sneaking it in there at the end of the price with a small 9 that is 3 decimal places out, rather than just rounding up to a full penny.

It's also okay to admit that as humans, we're sometimes irrational. I know it's uncomfortable to admit to it, but it's a feature, not a bug.

OK. I guess for whatever reason I just don't think that way, to me a bid is just a number that generates another number.

It is easer, mentally, to divide a separate fee as 'the cost of doing business' and not really calculate it as part of the cost you are paying for X item. Basically every functioning business knows this. There is a reason my LCS does not raise their price 10.25% on every item, and then put a sign on the door that sales tax is included in the listed price. Separating it as much as possible makes it easier for people to not have to think about, or if they do, to account it differently, even if it's not really rational to do so. I would imagine, though do not know how to prove, this effect is magnified when you've got a minute or two to decide whether to go another bid up. I also suspect, based on the surprisingly large number of jokes in the hobby about drunk bidding, that many are not exactly thinking clearly while inputting their bids on auction night :D.

Sometimes, I wish man lived to the Aristotelian. For good and for bad, we simply do not. While I don't have a whole lot of personal sympathy for people who don't read the T&C's they signed up for, it does not change what the auction house is doing and why this complication exists in the form that it does. It's a psychological tactic to make a larger number of buyers mentally divorce the fee from their bid, and also to their consignors to not seem like they are giving up X% of the bid, by adding this additional layer. There is a reason this is the norm, and it isn't random chance.

1 in 6 people have an IQ below 85. That is a significant handicap when it comes to processing even simple information such as this. I don't think the AH's are intentionally on a mission to "target" those less capable, but they are certainly targeting those less capable. It is a deceptive tactic that results in hidden fees and hammer prices that were higher than expected for some, whether intentional or not. However, it allows them to operate above board (and to justify it to themselves) because they can just point to their fee structure as it is plainly spelled out for everyone to see. For most buyers, it's not much of an issue.

I think one could make an argument that it's not actually a deceptive tactic if they indeed charged 20% of the hammer price for sold items. But that's not actually the case. Nobody charges 20%. It's usually between 10 to 15% and the consignor gets some portion of the BP back. It's pretty difficult to argue that it is not intended to deceive with that being the case.

It's no secret (and no "trick") that they are charging a buyer's commission. Having said that, I like the AHs that remind you at the time of bidding very clearly that you are bidding X, but the cost including commission will be Y. A nice reminder in the heat of battle.

As someone said above, for me it's about a 30% bump for commission, taxes and shipping usually.

I could be wrong, but I suspect the practice of an auction house adding a buyer's charge onto the hammer prices of an auction is probably about 2000 years old.

625 AD: Yes, you just bought two lambs for six bushels of hay . . . and now please give something to the auctioneer for making the sale happen.

Peter, I have little doubt that a small but significant minority of bidders forget about the BP, taxes, and gouge-level shipping (excepting from the latter the AHS who have adopted flat-rate shipping), especially when making that last bid in the dead of night. I made a late bid in REA the other night and won the card, and I knew but did not really appreciate that my $160 bid became a $202 bill. Had the bid shown as $192 instead of $160 it might have given me pause.

I find it interesting that some people were so quick to run to the defense of auction houses, perceiving some sort of accusation on the part of the OP which in fact wasn't there at all. The OP simply asked a logical question that many of us have asked ourselves, and even posited the rationale for it.

I agree the practice seems to be more on the psychological side than anything. Many will not factor the buyer's premium into the price we pay, then accept it if we are the high bidder. Doesn't make it ideal, but we accept it. And since most auction houses charge it, no one is going to drop it. Plus they make more money that way.

Hypothetically asking "how would AH's make money otherwise" is missing the point. Most charge consignment fees so they already make money there. They could up the consignment fees to offset dropping the buyer's premium but that would be bad for business.

I see a parallel to Las Vegas hotels charging an additional $50 a night in "resort fees" (on top of the room rate) for use of wifi and the gym that nobody uses - smart shoppers include this in the cost of a night's stay, while others that didn't check the fine print are upset at the extra charges upon checkout.

It is what it is. An established business practice designed the make the business more money, simple as that.

I also appreciate eBay's policy of not charging a BP (but if I was made CEO tomorrow you can bet I'd implement it and watch the stock price rise).

The history of BP is that it was started by Sotheby's and Christie's to give them a competitive edge in obtaining consignments. They could tell the consignor "look Auction A is charging you 40% but we're only charging you 25%" of course neglecting to explain BP.

Since it has become industry standard we're basically forced into charging it or trying to explain (and losing a lot of consignments) to consignors that paying 30% commission is no different than paying 10% with a 20% BP. It's a shell game, plain and simple, but one that you're basically stuck playing at this point.

If we were all perfect decision makers the world would look a lot different. No car accidents . . . no malpractice claims. . . . nobody would spend more money that they have . . . . nobody would marry a creepy loser . . . . the federal reserve wouldn't need to raise by another .75 basis points . . .

But, then how are card collectors supposed to have families?

Again, it worked because Americans suck at algebra.

Thanks for being willing to admit it, even if others seem less convinced on this point.

It's literally just moving the money we collect from one party to another. Doesn't seem any rational way to deny it.

.

In the heat of competition many bidders, the majority of whom are intelligent and successful people, lose a sense of boundaries and proportion.

guilty!

The OP called it a psychological trick by AHs hoping to get more from an ignorant buyer. That's not an accusation?

Exactly!

For those who aren’t fans, I think the bigger issue is that we want to pay less for our items. And the premium means that we’re paying more, not less. It’s less about the premium and more just complaining that we have to pay so much period, and the premium happens to be a convenient scapegoat.

And I guess those who defend it want to think the best of their fellow men, their motives and approach to conducting business. And I certainly applaud their approach.

My own feeling is I’ve given up caring. It’s there, and it’s there for a reason, some of which are benign, some less so, and the only way around it is to opt out of bidding in these auctions altogether. Since all of the nicest stuff ends up in these auctions, that’s a fairly poor option. I’m not convinced that ascribing pejorative motives to the auction houses helps me to feel any better about it, although maybe there’s some cathartic effect to expressing a disdain for it in general.

I've noticed over the years that card shows are becoming less and less filled with Nrmt or Better Cards. Those all go to auction houses. If they are at shows they're asking auction house prices those of which do not sell at the shows. Several dealer friends of mine told me last year that tried selling their higher-end stuff at shows to no avail. Sent to a major auction house, REA, and did better than 25% over their asking price at shows, it's a big divergence. Big money and big egos show up at MA's !!

Well, i just shopped around to sell some minor art pieces (mom cleaning out our old house) and it’s a whole different game there…27.5% buyers premium and 10% sellers commission (this can be reduced with some negotiation AND a big enough amount of material which isn’t small). So, the card AHs seem cheap now!

100% Truth!

Psychology for both buyer and seller....
 

I can't recount for you how many people I have spoken to at shows who were considering selling their cards and ended up consigning them because the auction house employee(s) explained that "the seller isn't paying anything" to have the auction house sell their card - "all the fees are paid by the bidders - they (the seller) will receive 100% of the hammer price". What isn't said is that Hammer price DOES NOT equal fair market value (most of the time - see many comments above about bidders backing out the BP in their bidding calculations and the bidders who are "fooled" by the BP). The irony and frustration for me is for the right higher-end cards, I will pay 80% of fair market value on the spot!
I have said it many times before, it makes no sense to me why so many cards with easily and readily established market values are given to auction houses. The cards that make the most sense to me for auction are cards where demand is super strong and supply is not (think super high end (or low pop) cards of guys like Ruth, Cobb, Mantle, Mays, Robinson, Gehrig, Wagner, etc.)

In fact there is a very real risk involved in selling cards with easily established market values. A recent case in point - I was communicating with a guy looking to sell a 1952 Topps PSA 3.5 Mantle. I offered to take it on private consignment, estimating a selling price of $110K and asking for a 7.5% commission upon the sale of the card. He explained he had that much into it, thought it was worth a lot more and touted what he believed was a certainty that he would at least recoup his investment going to a very well respected, well known auction house. The card happened to sell at auction for $87K less than 3 weeks after we spoke. He negotiated a piece of the BP back, but will still see less than $80K from the sale. I believe his card sold under market. Why? There happened to be another Mantle a grade apart in the same auction? Maybe a few guys missed the auction who would have been potential buyers? Maybe the market is softening just a bit? A bunch of other maybe's? What isn't advertised alongside the all too familiar "get record prices auction ads" is that MOST cards that are auctioned do not sell for record prices!

I have said it ad nauseum - An auction house is more times than not - NOT the best place to sell a card.

You don't even want to look at general estate rates. often 40% plus 15% AND they sock you with assorted fees, labor, transportation, photography, advertising etc... Even when I was in auction school I couldn't figure out why you would have to add fees on top of your rates. Again it's a shell game.

Would seem to beg the question why didn't you pick said Mantle up at auction? If we're giving away cards at rates you can profit on, take advantage of us!

Anyone else want to see this included as a testimonial for an auction house!!??

“It depends on what the meaning of the word ‘is’ is."

And the buyers premium is to pay the AH for their services.
.
.

Whenever I bid I think of the total number, with tax and shipping, I am paying. In most of the big auctions I just multiply by 1. 28.5 and I get my item cost if I win. I never only think of my actual bid as what I am paying :)... I might have done that decades ago, erroneously, but not anymore...
.

Sorry I'm late with this thread's card . I nodded off. :
 

Yeah, they “waived” the $50/piece photography and listing fees and other fees. I did tell them i did a lot of sports memorabilia auctions and getting 40% of the value seemed awfully high to me.

As explained on the board a gazillion times, most AHs will waive a sellers commission for a decent piece. So they have to make their nut somewhere. And that’s called the buyers commission. I know a bunch of good dudes who run AHs, and none of them are running not for profit charities.

Allowing the AH to get a piece of the selling price also serves a smart economic function of incentivizing them to promote. If it was just “hey, pay me $200 if I sell your item, we’ll that wouldn’t get the juices flowing from the promotional side of things.