AUCTION FEES posted by Eagles-R-it

[CSJournals-migration]

BUYERS PREMIUM??

 

Where does this buyers premium come from? Here, in the upper Midwest when there is an auction, doesn't matter what kind, such as farm, business, estate whatever. The seller, yes the seller pays. It is a percentage of the total sale. Now it's between 7 and 10%. There is no fee to get a bidding number or anything like that. So is this buyers fees for buying something a reward for good bidding? Or is it a punishment to the seller for not getting their fair share? I don't know, just asking. I am sure I will hear all about it. I hope so anyway. Maybe it's an East Coast, West Coast thing. Or maybe it is something new some Joe Schmoe thought up just to be different.

Any how, let me hear it good friends of the NGC family. I want to know. Well maybe I don't need to know.

 

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[coinsbygary]

Here's the deal. Whenever I place a bid on a lot in an auction I always factor the buyers premium into my final bid. Thus you can rest assured that if I do this, then so do others. Here's the kicker though, if my final bid is lower and the seller still pays a sellers premium, does not the seller also pay the buyers fee indirectly. This especially since the seller only gets a percentage of the final hammer before the buyers premium is added to the buyers invoice based on that same final hammer. Technically speaking then, the seller also has his take home proceeds reduced by the industry standard %17.5 buyers premium. Add this to what is likely a sellers fee of 10% and the seller has to deal with a 25% cut (rounded) taken from the auction proceeds: final hammer - ((.10 * final hammer) + (.175 * final hammer)).

 

Now a seller CAN make money auctioning their collection IF their coins have appreciated significantly in value AND/OR their coins are condition rarities or have a great deal of eye appeal. If these two factors are met, then the seller can maximize their final hammer proceeds by consigning them with a highly respected auction house.

 

I know this doesn't quite answer your question, but my model does represent the world-wide numismatic market as it exists today. Love it or hate it, it is the world we live in.

Gary

[jpcienkus]

I really don't concern myself with the who's, why's and what's of the BP at the online auction houses.

 

I make sure I know what it is and factor that into my bids.

 

If you want to buy coins at auction houses like Heritage, Legend, Stack's, Great Collections or Scotsmans, you have to pay a BP. If you object to paying BP's at auction, then simply don't participate in the auctions.

[Conder101]

The buyers fee in coins has been around for a long time.

 

Back when I started collecting in 72 there was no buyers premium and the sellers premium was typically 5%, Later the sellers premium rose to 10%. Eventually the auction hoses decided they needed another increase but they were concerned that charging the sellers 15% up front would drive off consignments. So the buyers fee was created. Sellers were charged 10% and buyers 5%. The next time they raised the rates they made it an even split of 10% each.

 

Currently the industry standard is 17.5% premium for buyers with the rate for sellers being somewhat flexible depending on the size and value of their consignment.

 

The buyers premium in coins is now a worldwide standard and it is cheaper here than overseas. I participate on some auction in the UK and the buyers premium runs 20 to 21.5%.

 

And gherrmann is correct to at least some extent in that the higher buyers premiums are indirectly paid by the seller through lower bids.

 

[jackson64]

Gary, you nailed it. Ultimately the seller is lighter in the pocket for both the buyer and seller "premium" fees.

 

Everyone I know factors in the buyer's "premium" ( actually a condescending/insulting term since we all know it is a fee- so call it a fee) when bidding.

 

EXAMPLE: If I am not willing to pay more than $700 for a certain coin, then I know that my bid should be appx $600. That will be $600 for the coin, $90 buyers fee for the auction house and the other $10 or so for shipping/handling.

 

The seller then gets charged 10% of that $600 bid --so he is given $540 from the auction house and they made $160 on the sale, ( for buyer and seller fees) or around 30% total transaction fees for their efforts.

 

As Gary pointed out, the seller loses on both ends as the buyer hedges his bids down knowing that there is the fee and then the seller is charged again a hammer fee

 

I should have opened an auction company--middle man on transactions is quite lucrative ( just ask the banksters who charge on both ends of credit card transactions)...

 

 

[Six Mile Rick]

Buyers premium --- Auctioneer due balance of sale.

Why would someone send in coins to a auction house for bidding if auctioneer was charging 33% YES---1/3 of sales to seller. Coin auctions are quick cash for auction houses and pay better than any other type auctions do. To make it look better to the seller so to get coins submitted the largest percent of payment lands in the buyers pocket. This actually lowers the final bid as most collectors figure in buyers fees and shipping if listed.

[Raisethis2]

I think the input from everyone is pretty spot on. I would add however that even when the seller (indirectly or directly) pays the whole freight, there is some ability to negotiate with some auction companies.

 

I buy mostly widgets that don't cost much. Accordingly, I can usually get average coins below bid, really premium coins I'd pay more for anyway so that's that. As a seller, you can shop your coins around and often get a better deal from one house over another. You just need to be willing to get up and leave.

 

Some states charge taxes on coin purchases. Selling in one of those places is begging to lose money.

[Six Mile Rick]

What a lucrative business!!

 

A coin submitted to auction house worth FMV of $1200 bids at 68% with buyers fees = $816 = bidders cost

 

10% sellers fees and 20% buyers fees = $244.50 to auction house.

 

Seller gets $571.50 (minus shipping and insurance to get it there)

Close to 90 day wait for cash!!

NOW add fees for a coin or 2 that had reserves too high (that didn't sell) +shipping return and you are slowly giving your coins away.

 

But Wait!! You can lower the reserves on coins that didn't sell and run them again for MORE FEES!!

The auctioneer is laughing all the way to the bank!

[CBC]

The way I look at it, FMV (fair market value) for a particular coin is the price the same coin in the same grade has actually sold for in the recent past. If a coin is said to have a FMV of $1200 but all of the recent sales (including fees) are in the $800 range, then the true FMV is around $800. Your example assumes a hammer price of $700 plus 17.5% buyers fee.

 

Yes, the auction house makes a tidy profit on the sellers and buyers fees, but look at the alternatives. Take your coins to your local dealer, and you'll get offers of 50% to 75% of graysheet bid. This $1200 FMV coin would probably be valued under $700 bid on the graysheet, so you'd get maybe $500 from a dealer on a good day. List it on ebay, and you pay listing fees, final value fees and Paypal fees.

 

if you're looking for a good deal for both buyer and seller, the Money Marketplace thread on the chat boards here at CS is the best deal going. I have bought and sold several times there, hassle-free and no fees. I try to set prices below recent ebay and Heritage sales (not ebay listings - many of those are way overpriced) but it can be a slow process.

[RWB]

Nice, clear explanation, Conder101 !

[Six Mile Rick]

 

if you're looking for a good deal for both buyer and seller, the Money Marketplace thread on the chat boards here at CS is the best deal going. I have bought and sold several times there, hassle-free and no fees. I try to set prices below recent ebay and Heritage sales (not ebay listings - many of those are way overpriced) but it can be a slow process.

 

My thoughts exactly!!! (thumbs u

[CaptBrian]

Your question was: Where does the buyers premium come from.

 

I hope this helps. All of the others gave their take on it and how to work it into your price, but here's the history on it.

 

In auctions, the buyer's premium is a percentage additional charge on the hammer price (winning bid at auction) of the lot that must be paid by the winner. It is charged by the auctioneer to cover administrative expenses. The buyer's premium goes directly to the auction house and not to the seller.

 

Major auction houses have made this charge for some time, particularly in the fine arts sector, with premiums in the region of 10%-25%. In the real estate sector in many European countries, the premium, if charged at all, is much less (2%-2.5%). However, more recently, in the UK foreclosure properties have been offered without fee to the seller, but with a substantial buyer's premium of 10%.

 

The buyer's premium is considered to be either a necessary contribution to the costs of the administrative process or an unreasonable extra charge by the auction community. Auction houses may now market themselves as "not charging a premium" to gain favor with customers. Regardless, such premiums are now commonplace and continue to grow.

 

The amount of the buyer's premium will normally be stated in the auction house terms and conditions or, in the case of UK properties, it would be listed in the RICS (Royal Institute of Chartered Surveyors) Common Auction Conditions or in the special conditions for the lot.

 

In Europe, the buyer's premium will also be subject to VAT (value added tax), while in the United States, some states require the premium to be included in the sales tax base.

 

And a little history or background:

 

The buyer's premium was a feature in Roman auctions during the reign of Augustus, when buyers were required to pay a two percent tax on purchases. The modern buyer's premium was introduced at 10% by Christie's and Sotheby's in London in September 1975.

 

Fees varied widely. Christie's charged 14% in the Netherlands and Belgium. Sotheby's charged 16% in Switzerland (10% to foreigners), 11% in Monaco and 16% in the Netherlands. There was no fee at Christie's sales in Australia and Sotheby Parke Bernet auctions in South Africa. Christie's also charged no fees to buyers at its South Kensington house in London and at Edmiston in Glasgow. Christie's introduced a 10% fee to buyers in the United States when it opened at Park Avenue and 59th Street in May 1977. Sotheby's followed in January 1979.

 

Beginning on 1 January 1993, Sotheby's charged buyers 15% on goods sold for $100,000 or less. Amounts above that were charged at 10%. Christie's introduced the same price regime on 1 March 1993.

 

On 24 January 2003, Christie's raised commissions charged to buyers in New York, London and Geneva to 12% on amounts above $100,000, effective 1 March 2003. The premium charged to buyers on the first $100,000 was held at 19.5 percent. Sotheby's had raised its premium for sales above $100,000 to 12% two weeks earlier, and increased its commission on the first $100,000 to 20% from 19.5%. In London that meant 20% on the first £70,000 and 12% on any amount above that.

 

Christie's announced on 15 February 2013 that it would raise buyer's premium effective 11 March 2013. The new premiums were 25% for the first $75,000; 20% on the next $75,001 to $1.5 million and 12% on the rest. Sotheby's followed suit on 28 February, announcing raised premiums effective 15 March 2013. Buyers in London, New York and France are charged 25% on the first $100,000 (Pounds 50,000; Euros 30,000); 20% from $100,000 up to and including $2 million (Pounds 50,000 to 1,000,000; Euros 30,000 to 1,200,000) and 12% on the remainder.

 

Christie's later announced an amendment to their premium increase effective 30 September 2013. This amendment applied 25% premium up to $100,000; 20% to the amount $100,001 to $2,000,000 and 12.0% to the remainder.

 

There is a ream of info on Buyers Premiums, as with other subjects. But I'm afraid someone awakened a dragon, and it ain't goin' away.

 

Enjoy, and don't forget to figure in all the fees in your bidding.

 

Capt. Brian

[JoeF]

in order for the auction house to make money, they charge a buyers premium. not all auction houses have the same %, nor do all charge a buyers premium. I've been to auctions in PA, IN, GA, MI; done 'em online and in person. have paid everything from 0% to 20%. just part of the cost in acquiring coins.

[okbustchaser]

Sneaky name to increase the SELLER'S fee since bidders simply reduce their top bids by whatever percentage is being charged.

 

Easy example: The auction company charges a 15 percent "buyers fee". You would be willing to pay 115.00 for an item. Instead of bidding up to 115.00 dollars you set your highest bid to 100.00. If you win at your max bid you still pay the 115.00 that you would have been willing to pay. The SELLER, however, receives a smaller payout than he would have if you had bid 115 dollars with no buyers fee.

 

Edit to add: Sorry to repeat everyone else's responses...for some reason when I read the OP no answers were showing.

[Abuelo's Collection]

Amen...

 

That said, I think that is why eBay has an edge. Yes there are fees involved but depending on how you sell they are about 10% of final price, and PayPal eats other 4-5% So if you sell a 100 coin, you get 85. Better than any of the big houses. That said, to be honest, a typical Heritage, Stack's, etc auction has very good stuff not found on eBay, with nice description/photography, promotion, and usually a guarantee. All that cost money. But at the end of the day, yes that is their business and they are here to make money, not charity.