How does one avoiding losing their shirts with auctions houses?
 

Edit: To make sure it's clear, I am not trying to bash the auction houses. I appreciate the service they provide. I just think I may be missing something here...

I'm somewhat new to this, so any pointers and advice would be greatly appreciated.

Over the last few years I've been buying items through some of the major auction houses. Many of the items I expect to keep for a long time, but recently I consigned a few items that were not central to my collection.

While I was thankfully able to cover the price I paid, this was what it looked like:

This was the numbers when I won the item:

Price $2,500.00
Buyer's Premium $487.50
Tax: 8.375%
Shipping: $22.05
Total $3,259.75

When I sold the item:

Price: $3,750
Buyer's Premium: $938
Tax: ?
Shipping: ?
Total: $4,688

What I netted:
Price: $3,750
Commission: $375 (10%)
Net: $3,375


I have never done this before but it was a little crazy seeing that too basically break even, the seller had to pay over $1400 more than I paid for the item (and that's without knowing if they paid sales tax or if what they paid for shipping.

I'm new at this and assume that there are ways to make this less extreme and was hoping for any pointers that people may have? Did I overpay/Should I have negotiated further with the auction house regarding the commission?

Thanks!

The commission is usually zero, but I do understand some auction houses charge 10%.....some charge more.....but you can choose not to consign with them....

That's tough that it went up that much and you still broke even.

Nothing beats a good old fashioned private sale!

Make up a consignment list. Then allow all the AHs compete for your business. Mention you are a Net54 member and using Net54 advertisers will most likely give you a very good deal. I imagine you have already been contacted privately by some AHs already with this post.

Depending on the amount of consignments, you should not have to pay a consigners fee and if you consign enough stuff, ask for a percentage of the buyers fee paid to you. Plus, AHs will pay for grading many times. It's also good to have them allow you to read the auction description of your consignments before they get posted.

Many other things can be negotiated to like catalog placement, reserves, lot groupings, the size used in the catalog (quarter, half, or full page) and maybe even a cover.

Also, At THiS Point iN Your humble AH Stage...

"You Can Always Hire Mr. Beantown Jay ta do Your Negotiating" ;)
He Obviously Has Done THiS Before...

Looks Like Mr. Jay coulda Saved You iN upwards of $1250,
And Possibly EVeN More!?

"How bout a Sea Story!?"

When i was iN the Submarine Navy,
I was known ta be a "Sea Lawyer"
We were few & far apart...

i Help'd other Sub Sailors Re-Negotiate Their Contracts
Due to Their Career Counselor "Miscounseling" Them.
i help'd many "BubbleHeads" recouped Ovar $300,000 iN about 10 year time frame...

Unfortunately wit Cards & AH's,
There's No Miscounseling...
JuST "Lessons Learned"!

Next Time, i'm Sure the Numbers Will Go Your Way ~

Still have no idea why a house would charge a commission if they charge a buyer's premium. That's double dipping.

I think they charge commission and premium because they can. And because thousands of catalogs and postage aren't cheap. There are some that don't and there are most that won't if you have big enough consignments. I think that's the key. I think it's a fallacy to say that you won't pay commission ever on a $3K consignment. That's a nice chunk of change for most, but about a 'normal' lot in one of the big auction house auctions. As a general rule, the more you consign, the less you pay. If you have huge, high demand items, you may get some of the buyer's premium as well. Like JC said. Make a list, make it a large group, and shop it around. Don't be afraid to play one against the other. It can't hurt. And, as far as the business, there are LOTS of people looking at every lot in every auction. Some to try to buy to make money. Some to try to buy to build their collection. And tons of other reasons. Sometimes, something slips through. But more and more, those are the exceptions. Good luck!

Send emails to auction houses insisting upon hidden reserves and the ability to bid on your own lots. Be told that it's illegal and they won't do it by some of them -- but eventually one will allow you. Pretend you don't know what anyone is talking about when word gets out about it.

Memory Lane does it....and are getting rich!

They all try for commissions, but in this market and with BPs that often exceed 20% of the hammer price there is no need to consign to an AH that will not eliminate it, provided your items are halfway decent.

Your alternative is to retail the items yourself, with the understanding that in addition to the time and effort you will have to put into the endeavor, you will pay about 13% between eBay and PayPal to sell. A private sale is often the best way to avoid transaction costs (especially if you refuse to accept PayPal) provided that you have some idea of what your items are worth and someone wants them at that price point.

The landscape for auction houses have changed. Ten years ago it was the norm to see auction house advertise no reserves. Now, it's more acceptable to have a reserve as long as it's disclosed. Just like it's the norm to report cash payments to the IRS, when you are providing a service or selling a good.

Good luck in finding an auction house to use. I don't think you can go wrong with any Net54 advertisers. Most have the same mailing list and will get your consignments out in front of active bidders.

I send most of my consignments to pwcc. 4688 - 10% would have netted about 4200 in this situation. Also I would never agree to consign a card to an AH that charges a buyer's premium and a commission.

Is PWCC losing some of their luster Jesse? Basically, they are just listing on Ebay, the same as you and I can do. Why not list the item yourself and save the $488?

I would never stick up for PWCC. Saying that I do not understand your post Bobby. PWCC charges 9%. eBay and PayPal fees are around 13% so how could anybody have saved any $? It seems to me the seller would be saving the hassle of listing plus shipping charges plus saving $ on fees.

I believe that max fee for a card on ebay is $250 (please correct me if I'm wrong). Plus 3% for paypal would be 375 or so in fees, or only 100 bucks less than I would get if I could realize the same price as pwcc. I highly doubt I could, and even if it were possible it would be worth the 100 bucks not to have to deal with people, returns, chargebacks, etc.

To each their own....if they didn't wait so long to pay out consignments, they would be perfect. But I totally get what you are saying.

Maximum Seller's Fee at ebay is being raised from $250 to $750. The change may have already taken place.

Yes it has, so unless your item is going to sell for more than 12k, it is cheaper to use a consignor.

I've never had a problem with prompt payouts and just find it easier along with netting more than I could on my own. I have used invest in baseball with cards I did not want to roll the dice on at auction. I've also sold a few cards on net54. I've been pleased with the results each time. Selling on my own is definitely as hassle though.

;)

Isn't this actually allowed is certain states like Texas?

Thanks everyone for the replies.

I have sold cards on eBay myself and through PWCC, but at this point much of my collection is memorabilia and eBay is tricky for items like that. Auctions often don't get the eyeballs and BIN's can sit forever. (I know because I've been able to buy some really nice items on eBay for far below auction house prices...)

When it comes to selling at the auction houses it sounds like the key thing is to negotiate in advance, particularly if an item is in high demand and/or does not require much work (it is already authenticated and is a relatively standard item...)

Can someone explain (or point me in the direction) of what a resale permit is? Is it something that as a collector who also sometimes sells items can reasonably get? If I understood correctly resellers don't pay sales tax. Is that correct?

Thanks

You are probably referring to what is maybe more commonly known as a tax exemption certificate. Pretty much every state in the U.S. has a sales/use tax on their books, which charges a tax based on the selling price of certain items. The sales/use tax is normally only charged to the final buyer/consumer of the product. Like when a car dealership sells a car to a consumer, then and only then is sales tax charged on the final sales price. No sales tax is charged on all the parts the car manufacturer bought to include in the assembly of the car, nor is the dealer selling the car charged sales tax when they originally acquired it from the car manufacturer for resale. Most states require the party selling an item to someone who is exempt from paying sales tax to obtain a signed sales tax exemption certificate from the party purchasing the item to document that they are not liable to pay sales tax on what was purchased because it is part of a manufacturing process or because they are a wholesale re-seller and not the final consumer. If not for this exemption, the cost of items we buy would be ridiculously higher because of all the sales tax being charged on every step in the process of making and re-selling of products. So to answer your question, no, re-sellers normally do not pay sales tax on items they purchase for resale.

BobC

if you get a resale certificate
 

YOU are responsible for the taxes on your sales - which you are supposed to collect on every transaction according to your jurisdiction's rules and subsequently remit same to the state. There are certain exemptions that allow you not to pay tax at the time of YOUR purchase. You need to file at least every quarter whether you had sales or not.

To collectors, it's allowed in every state until they get caught.

Additionally with AHs and PWCC alike you do not have to worry about shipping issues or returns. Any AH who runs a buyers premium over 12% I would not do business with, unless it is just too good of a deal or the item is a one off.

Who runs an auction with a buyer's premium that low? I can't think of any one of the big boys lower than 15%.

And that's why I don't do a lot of business with them unless it's a special item. I can usually buy from smaller ones, get the same items, and get better prices. Just takes some searching.

Brockelman Auctions is 12.5% buyers premium. And it is an AH that upfront states that there is no seller's premium for consignments. And his auctions are big boy enough for me. And the next one starts Monday 5/29.

Brian

That's amazing, I don't know how he keeps the doors open.

Re: Brockelman
 

I can't seem to get into the current auction. Keeps defaulting to the February lots. Anyone else having the same problem?

Probably hasn't opened it yet. IN a little while. He is probably lifting weights somewhere...

To the original question, buy low and sell high....and never, ever pay a seller's commission, no matter how great the AH says they are......

Yes. How you buy is as important as how you sell when trying to make $$$. Some things you can do to minimize purchase cost.

1. Avoid auctions houses with offices in your home state where you have to pay sales tax! Plenty of other auctions to choose from without paying this extra fee. If you must have something in an auction that is going to charge you tax, reduce your max bid by the tax amount so you don't overspend.

2. Take any discounts available by paying with cash / checks. I know you want your items ASAP but I personally would rather have the item AND more cash in my pocket. I'll wait if there is a discount.

3. If you have your own insurance, ask the auction house if they can reduce their shipping & handling and use your insurance if your policy covers shipments to you.

4. Opt out of getting a printed catalog if the AH gives you a small discount for doing so. A few do.

5. Last but most definitely not least ... stick to your price and don't over spend! Most (but not all) items you are after will show up again in the next year or so and may go for even less.

jeff

Thanks for everyone's patience the auction is now open as of 10:00 am EST.

www.brockelmanauctions.com

Good luck and enjoy.

As someone who is in the process of becoming an auctioneer, statements like this are so disheartening. If you listened to everybody's advice in this thread you would never deal with a house that charged a seller's commission or over 12.5% buyer's premium. I'd like you to tell me what other business you know of that is expected to survive on a 12.5% margin? I know when I sell as a dealer I certainly couldn't make those margins work. Any full time guys here want to chime in on trying to make a living on a 12.5% GROSS margin? Trust me, one of the reasons I am getting into the auction game is because I think it can be done better, but man I don't know how you expect someone to make a living let alone run a company on the numbers you all appear to be suggesting.

You picked the lowest percentage to apply my statement to. :)
When I made it was thinking of a 20% (which is fairly standard) BP....and at that, an AH can make a living, probably without a seller's fee. But again, if there is a ton of work to do or some other extraordinary thing, then a sales fee can be warranted. I am pretty sure I have actually paid a small one before too, now that i think about it....

It wasn't all about your statement, like I said if you listened to everyone's advice you'd wind up at 12.5%. It seems like the attitude towards auction houses is very adversarial and that is disheartening. I'm not trying to "beat" my consignors or my buyers and it's sad to think that they're trying to "beat" me.

Also I think people lose sight of the value of the item's impact on the equation also. Obviously if we're talking $5,000 items 20% is dandy (though again in the auction world at large 30% is more customary) but on a $100 item 20% is pretty cheap, and on a $50 item 20% just doesn't cut it. Basically the items cost the same to sell for the auctioneer, but the difference between $1,000
and $10 is obviously an issue.

Maybe everyone in this thread travels in a higher rent district then a lot of buyers, but we do auctions where the AVERAGE price is around $40. At 20% there'd be no way to keep the doors open, but there are a LOT of guys with interest in this type of auction as evidenced by our 30+ year history. When we do sell more expensive items we adjust rates accordingly. It is not unusual for us to handle complete sets from the 50's that go for up to several thousand, but until we start selling items that AVERAGE in that range 20% total margin just isn't feasible. We have a number of Net54 members who are buyers, I'd love to hear their input!

In my opinion, it seems like you're looking at this in the wrong way. If you're the auctioneer, it's not really a 12.5% margin. If you had bought an item for $100 and then sold it for $112.50, then that would be a 12.5% margin.

As an AH, you're just selling other people's stuff that you have no money tied up in. If I give you a Green Cobb to sell and it goes for $5k plus the 12.5% BP, that's $625 you just made without any risk or investment (obviously advertising, salaries, etc, but every business has these things). As long as you can build the business enough to get good consignments and your overhead isn't massive, of course you can make a living with a 12.5% BP. Those are big IFs of course, but the business model itself is pretty easy to understand.

20% is pretty standard these days and I don't think there are too many people who would avoid doing business with an AH that charges 20% as the BP. The BP shouldn't matter at all to buyers (you just factor it into your bid and bid accordingly). If it keeps consignors away, then that is a problem, but it sure seems like the AHs charging 20% are getting some nice stuff lately.

And, if you're doing a live auction, I really don't think anyone would expect you to do it for 12 or 15%. I could be wrong, but I would definitely expect 20% or more because you're offering more of an experience and I would assume you have higher costs.

Their margin is still only the money they bring in that doesn't go out to consignors, so 12.5% is indeed the gross margin. Then out of that comes catalogs, auction platforms (for the online guys) payroll, and all the other expenses. Risk or investment has nothing to do with gross margin.

I think it's a world of difference when the items being sold are $40 as opposed to $400 to $4000 because as you point out, there's not a ton of difference in how much work is being done regardless of the price of the item.

I do have to ask though (and I'm asking out of genuine curiosity), on items in that price range, what is the thought process behind working with an auction house over listing them on eBay (or even using a big consignor on eBay)?

speed and volume I would guess. You get paid within 7 days from end of auction with us, often quicker. we also have a number of consignors who, at our Hershey auction, provide us with well over 100 lots at a time.

Also, thinking more about it, it is items that frankly don't necessarily do great at ebay auction. Lots of raw 50's stars, lots of vintage commons, etc... I would say we do better than ebay on a wide range of low dollar stuff even when taking commission into account. Are buyers definitely appreciate the "luxury" of being able to handle the cards in person before they buy.

Makes sense, thanks for responding.

Dishonesty is the key to making money through consignments, either on ebay or through major AH's. I haven't seen any evidence that this is changing, despite all the prison sentences.

I have seen several items for sale on a seller's website, then sell for a low price at auction, then show up again on the same seller's website. I would say that they should realize that we aren't fools, but apparently some of us are.

A little OT, but does anyone know what the best AH for old sport publications and old baseball books probably is? Uncommon first edition books and ruth magazines from the 20's etc

Hunt did great with a bunch of Baseball Magazines from 1900-1930 not long ago

Restaurants are at 3% to 4% I think. The key is volume. If you have the volume you don't need the margin to survive.

You want to start a business and have a long line of people right from the get go. That is not easy to do. That is why people buy businesses and why some are more profitable than others.

Maybe the net margin, maybe. A gross margin of 3%, is a quick path to bankruptcy.

Buying or Selling? Hunt's 'Baseball Magazine' lots went very, very cheap - overall 1/3 - 1/2 of what REA got on a similar grouping 5-6 years ago. The lots were arranged oddly with some major issues getting lost in larger lots. With sports publications I trust REA, Legendary and Heritage, as their descriptions are generally more detailed and accurate than the others.

When buying, I would ask lots of questions if you are unsure;i.e-are all the photos there? any pages missing? Condition? (if not obvious).