Buyer's premium, auction houses and you

[BRoberts]

Who do you think is negatively impacted the most by the buyer's premium an auction house charges?

[Leon]

Number 3 and 4 can be true at the same time.

There are costs to doing business.

I read all of the rules going in.

How is anyone negatively impacted if they read the rules?

Lastly, I have never felt negatively impacted by playing in auctions. Maybe I am an optimist? Maybe I am missing something here?...
.

[gunboat82]

Originally Posted by Leon

Number 3 and 4 can be true at the same time.

There are costs to doing business.

I read all of the rules going in.

How is anyone negatively impacted if they read the rules?

Lastly, I have never felt negatively impacted by playing in auctions. Maybe I am an optimist? Maybe I am missing something here?...
.

I think you might be defining "negatively impacted" to mean "taken advantage of," whereas I understand the question to be "who sacrifices the most value?"

I think most people go into auctions with their eyes open to the costs, so no one is really being swindled in that scenario.

I also think that, for most items, the consignors are the ones losing the most value because buyers factor the premiums into their bids. Maybe the convenience and reach of the auction house are worth it to the consignor, but I still think it's fair to say they're "negatively impacted" if the auction house is taking 22% off the top.

Obviously none of this applies to the high rollers who have one-of-a-kind items and relationships with the auction houses. But for the auctions where we see dozens of lower-grade Mantles, Cobbs, Mays, etc., I think the premium absolutely depresses the take-home for consignors, while not affecting me at all as a buyer (except that some auction houses make me do the math before I bid).

[Leon]

Thanks, Mike.
I was indeed looking at it in the wrong context.

Originally Posted by gunboat82

I think you might be defining "negatively impacted" to mean "taken advantage of," whereas I understand the question to be "who sacrifices the most value?"

I think most people go into auctions with their eyes open to the costs, so no one is really being swindled in that scenario.

I also think that, for most items, the consignors are the ones losing the most value because buyers factor the premiums into their bids. Maybe the convenience and reach of the auction house are worth it to the consignor, but I still think it's fair to say they're "negatively impacted" if the auction house is taking 22% off the top.

Obviously none of this applies to the high rollers who have one-of-a-kind items and relationships with the auction houses. But for the auctions where we see dozens of lower-grade Mantles, Cobbs, Mays, etc., I think the premium absolutely depresses the take-home for consignors, while not affecting me at all as a buyer (except that some auction houses make me do the math before I bid).

[Gorditadogg]

The seller pays the juice in the end. As a buyer, I am going to pay the same amount for T206 Cobb, whether I buy it on HA, Collectors Corner, or on here.

The other side is that the AH gets paid for bringing in eyes, and as a seller, that may be worth the juice.

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[bnorth]

For me it is always the consignor. The buyers premium is just a way of giving the consignor less of the REAL selling price.

[Schlesinj]

Originally Posted by bnorth

For me it is always the consignor. The buyers premium is just a way of giving the consignor less of the REAL selling price.

I view it that I am paying for the access to the market that the auction house can provide. With more eyes and buyers the more value I get for my card. I think certain auction houses have different niches to, so as a buyer I know where to go when I am a buyer and a seller.

[rats60]

It is both. I see two classes of items. The rarest and most popular stuff and that which is not.

With rare or expensive items, the consignor is going to ask for more of the premium and not be effected by the final price. Sellers are going to pay what it takes to win and when the premium is added, they will pay more. Collectors say they only pay X including the premium, but not all buyers are like that.

With things that are easy to find and have a known value, collectors will only pay so much, auction houses won't give the consignor any of the premium or just a small amount. In this case, the buyer gets less of the known value.

[BioCRN]

I'm not sure about the ultra-high end auction market (5+ figure stuff), but I can tell you for sure the handling of how auctions actually end balancing East Coast vs West Coast time zones is leaving some real money on the table from East Coast people bailing on the ones that can linger deep into the night...especially the "all lots open until auction ends" stuff.

I'm sure the action houses have done their internal math and can "actually..." a financial benefit, but I've talked to many fellow East Coasters who can't afford to win everything they're bidding on, but can't stick around until the middle of the night to see what's left in range...and they end up getting not much or not anything at all

As far as BP, it seems the plus/minus depends on how well you can negotiate with a given auction house and/or play ac's against each other for the biggest cut. That's a very dynamic thing even if most of what we see at auction don't have that kind of leverage for a huge cut in the negotiation...plus some cosigners may give up some of that possible cut for more publicity for their lot(s)...

[gunboat82]

Originally Posted by BioCRN

I'm not sure about the ultra-high end auction market (5+ figure stuff), but I can tell you for sure the handling of how auctions actually end balancing East Coast vs West Coast time zones is leaving some real money on the table from East Coast people bailing on the ones that can linger deep into the night...especially the "all lots open until auction ends" stuff.

I'm sure the action houses have done their internal math and can "actually..." a financial benefit, but I've talked to many fellow East Coasters who can't afford to win everything they're bidding on, but can't stick around until the middle of the night to see what's left in range...and they end up getting not much or not anything at all

As far as BP, it seems the plus/minus depends on how well you can negotiate with a given auction house and/or play ac's against each other for the biggest cut. That's a very dynamic thing even if most of what we see at auction don't have that kind of leverage for a huge cut in the negotiation...plus some cosigners may give up some of that possible cut for more publicity for their lot(s)...

I'm not sure how representative I am, but I'm definitely in this group. There was a point when I was splashing a decent amount of money around on numerous low- to mid-range lots, and I'm impulsive enough to overbid in realtime when the FOMO strikes. I've generally stopped bidding in auctions that don't close until the wee hours of the morning EST. Sometimes I'll put in a low placeholder bid just in case, but I rarely come back for extending bidding.

[BRoberts]

Originally Posted by gunboat82

I'm not sure how representative I am, but I'm definitely in this group. There was a point when I was splashing a decent amount of money around on numerous low- to mid-range lots, and I'm impulsive enough to overbid in realtime when the FOMO strikes. I've generally stopped bidding in auctions that don't close until the wee hours of the morning EST. Sometimes I'll put in a low placeholder bid just in case, but I rarely come back for extending bidding.

Very well said.

[Aquarian Sports Cards]

I think I've shared this before, but the story behind BP is an interesting one.

Christie's and Sotheby's (two small auction houses nobody has heard of) were always competing for the best fine art. Of course with their respective reputations about the only way to compete was to lower commissions, which of course lowered profits. One day Christie's comes up with the brilliant idea of passing along some of the commission to the buyer's end of the transaction so that they could tell sellers "Hey we'll only charge you 20% instead of 40%" (and yes those were standard fine art numbers from those two companies back in the day) Sotheby's was trying to figure out what was going on and eventually heard from a previously loyal consignor what was going on. Knowing there's no way Christie's was suddenly halving their commissions they found out about this new-fangled "buyer's premium" and instantly instituted one themselves re-leveling the playing field.

It was done 100% to get consignments, no other reason. It might have had the side benefit in early days of some surprised bidders, but when you're talking million dollar art, I'm pretty sure the buyers are fairly savvy.

I'd love to charge no BP but I'd have to do a LOT of fast explaining to a potential consignor as to why I want 30 - 40% commission but the other guys only want 10 -15% and I would lose a TON of consignments that I now get.

Once a niche market accepts the practice it becomes very hard to buck the trend

[bnorth]

Originally Posted by Aquarian Sports Cards

I think I've shared this before, but the story behind BP is an interesting one.

Christie's and Sotheby's (two small auction houses nobody has heard of) were always competing for the best fine art. Of course with their respective reputations about the only way to compete was to lower commissions, which of course lowered profits. One day Christie's comes up with the brilliant idea of passing along some of the commission to the buyer's end of the transaction so that they could tell sellers "Hey we'll only charge you 20% instead of 40%" (and yes those were standard fine art numbers from those two companies back in the day) Sotheby's was trying to figure out what was going on and eventually heard from a previously loyal consignor what was going on. Knowing there's no way Christie's was suddenly halving their commissions they found out about this new-fangled "buyer's premium" and instantly instituted one themselves re-leveling the playing field.

It was done 100% to get consignments, no other reason. It might have had the side benefit in early days of some surprised bidders, but when you're talking million dollar art, I'm pretty sure the buyers are fairly savvy.

I'd love to charge no BP but I'd have to do a LOT of fast explaining to a potential consignor as to why I want 30 - 40% commission but the other guys only want 10 -15% and I would lose a TON of consignments that I now get.

Once a niche market accepts the practice it becomes very hard to buck the trend

I find it sad and hilarious many that regularly consign have no idea how the service actually works.

A 20%(example) buyers premium means the seller actually gets ZERO percent of 20% of the actual sale price. The buyer isn't actually paying a penny more by paying a buyers premium, it is just shorting the consignor. LOL

Not saying an AH should get any less cash than they do now. Just find it sad how they structure the fees to make it hard for many to understand how they work.

[raulus]

Complexity is the order of the day.

Take a look at your phone bill or hotel bill or rental car bill or the list of stuff that you get to pay when you buy a car from a dealership.

It’s a great marketing approach to say you’re charging one amount, and then actually have someone pay a lot more.

And even in my profession as a CPA, it’s not uncommon for my competitors to bid low to get the work, and then sneak in a lot of upcharges so that in the end they cost as much or more than I do.