REA consignments

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Posted By: Corey R. Shanus

Jay's second point is well-taken (though it does refute his first point about it being a shell game, which it is not).

Suppose the total gross of an auction house is $5 million. That means that for the totality of its catalog offerings, its buyers as a group have spent $5 million. If the SP and BP are each 10%, then the collective hammer prices would total $4,545,455 and the take of the auction house would be $909,090, half coming from the sellers and half from the buyers. If instead the BP is 20% and the SP 0%, then the collective hammer prices total $4,166,667 and the auction house's take is $833,333. This is a reduction of 8.3%, which flows directly into the pockets of the consignors.

So clearly the consignor benefits as the trend goes from equal SPs and BPs to zero (or even negative) SPs. Auction houses no doubt felt the need to drastically cut or even eliminate the SP due to the intense competition to get quality consignments. However, I wouldn't shed too many tears for the auction houses. Whatever they've lost they have much more than made up by the explosive increase in the price of collectibles over the years.