Understanding (non-eBay) Auctions

[DC Dawg]

After reading Mark Feld's post about auction fees I realized that I do not understand how the auction houses work, their fees, etc. So let me take a stab at what I think I know and let youse guys help me on the rest:

 

I decide I want to sell some coins and I bring it to auction house Z. Z agrees to sell my coins charging me a fixed fee plus a percentage of the hammer price for the privileged. When Z sells the coin, they are charging the buyer a percentage of that hammer price, with a minimum, as a "buyers premium" which Z keeps and not used in the calculation of the seller's fee. Based on the discussions, the seller's fee and the percentage can be negotiated.

 

Did I miss something? THANKS!

 

Scott

[TomB]

I have consigned to Heritage and they simply take the coins and auction them. I have received the full hammer price and Heritage has received the 15% BP.

[wayneherndon]

Scott,

 

Close. Most of the terms are negotiable but it typically goes something like this:

 

Seller's fees: The auction house keeps a percent of the hammer as a selling fee. If the seller wants to set reserves on the lots, there is often a buy back fee. For small consignors, this might be 10% sellers fee and a 2% buy back fee. So if the coin sells, the auction house gets 10% from the seller and if it doesn't, it get's 2%. If the seller has a large consignment or is willing to not set reserves, the seller's fee may be smaller. Buyback fees may only apply if a certain sell-through rate is not reached. For exceptionally large consignments (large collections or dealer consignments), there may actually be a negative seller's fee. In this case the seller gets a portion of the buyer's fee. For example, if the coin hammers for $100, the buyer pays $115 and the consignor gets $105. The seller's fees are the ones that are negotiable and can range from as much as 15% for small one-time deals to -8% or so in the case of long term mutually beneficial relationships. Most deals are some where in between. Collectors can often obtain a better financial arrangement working with a dealer with a relationship with the auction house rather than try it on their own.

 

Buyer's Fees: Typically 15% on the major live auctions. I'm not aware of any situation where this fee is negotiable even for major buyers.

 

WH

[gmarguli]

Buyer's Fees: Typically 15% on the major live auctions. I'm not aware of any situation where this fee is negotiable even for major buyers.

 

Some non-US auctions have buyer fees that are negotiable.

[Keleum]

Awesome thread!!! thanks!

 

What are the standard seller fees for Heritage, and for Teletrade? When do you use one over the other?

[MarkFeld]

After reading Mark Feld's post about auction fees I realized that I do not understand how the auction houses work, their fees, etc. So let me take a stab at what I think I know and let youse guys help me on the rest:

 

I decide I want to sell some coins and I bring it to auction house Z. Z agrees to sell my coins charging me a fixed fee plus a percentage of the hammer price for the privileged. When Z sells the coin, they are charging the buyer a percentage of that hammer price, with a minimum, as a "buyers premium" which Z keeps and not used in the calculation of the seller's fee. Based on the discussions, the seller's fee and the percentage can be negotiated.

 

Did I miss something? THANKS!

 

Scott

Scott, my apologies if I caused any confusion with my examples in the other thread. I was trying to illustrate that in most cases, the so-called "buyer's commission" actually ends up coming out of the seller's pocket in the forum of lower hammer prices upon which he is paid.

 

Today, most auction houses charge a standard 15% "buyer's premium", which is NOT negotiable and which constitutes the bulk of their earned fee for selling the material.

 

In addition to the "buyer's premium", the other major fee to consider is the "seller's commission". If an auction house is negotiating with a seller who doesn't know better and can get away with it, they might charge anywhere between a 5% and 10% "seller's commission", which, when added to the 15% "buyer's premium", means they are making between 20% and 25% for selling the material.

 

However, if the consignor knows how to negotiate and has the right material, he might receive the benefit of a 0% "seller's commission" or in certain cases, even better than that. By "better than that", I mean that if the consignment warrants it/is especially valuable, an auction house might give the consignor between 101% of hammer and (in extreme cases of a high 6 figure or a 7 figure consignment) up to approximately 108% of hammer. Once the auction house gives the consignor more than 100% of hammer, that means they are making less than the 15% "buyer's premium" they are charging to sell the coins. For example, if they charge a 15% "buyer's premium", but pay the consignor 105% of hammer, they are making 10% net.

 

The other factor to consider is reserves and what the consignor has to pay if he sets reserves which are not met. It makes no sense for an auction house to allow a consignor to set unrealistically high reserves on his material and not charge him something for their efforts if the coins don't sell. On the other hand, if the (buyback) fee is too high, it will discourage some sellers from consigning their coins.

 

Auction houses are often flexible in negotiations in this area. For example, sometimes a sliding scale is used, under which the higher the dollar volume of sold coins, the lower the buyback fee (and maybe even no charge) for the ones that don't sell. Also, if a consignor is willing to consign coins at no reserve (something I usually don't recommend), he might receive the benefit of a lower commission rate than he would otherwise get.

 

If you or anyone else have any more questions on this subject, please feel free to post them here or contact me privately.

[James_OldeTowne]

To augment a few of Mark's excellent comments, I suggest playing hardball with auction houses. Provided your consignment is reasonable (at least $5000 overall, and not a bunch of low-value items), demand 100% of the seller's commission, and you can also demand 0% buyback fees. There is intense competition between auction companies right now for rare coins, so if they say they won't play, take your coins somewhere else.

 

Also, don't fall for all that fluff about how one auction house gets such higher prices than the other, or any of that hype. They'll try to use these to entice you to go to them, but coins can and do bring top dollar at all of them. The real key is not to settle for any "seller's commision".

[MarkFeld]

Provided your consignment is reasonable (at least $5000 overall, and not a bunch of low-value items), demand 100% of the seller's commission, and you can also demand 0% buyback fees. There is intense competition between auction companies right now for rare coins, so if they say they won't play, take your coins somewhere else.

While it might not hurt to ask, I'd be shocked if an auction house allowed 0% buyback fees on a four figure consignment or even a low five figure one - I think they can find enough consignments without having to do that.

 

And frankly, I think a consignors should have to pay something if their reserves aren't met. Otherwise, they will tend to set aggressive or unrealistically high reserves, many items won't sell and bidders will get discouraged. That could lead to less enthusiastic/motivated bidders, which, in turn could result in lower prices for consignors and eventually fewer consignments for the auction house. As long as they do their job, an auction house deserves to be compensated for their efforts.

[wayneherndon]

Awesome thread!!! thanks!

 

What are the standard seller fees for Heritage, and for Teletrade? When do you use one over the other?

 

Mark has pretty well covered the Heritage fees above. I will just add that unless a consignor has a really large collection, they can probably get a better arrangement with any auction firm by working with their dealer instead of the auction house directly. Dealers know where auction houses are willing to negotiate and the other deals they're cutting. Dealers also consign larger volumes and are frequently regular consignors.

 

Teletrade's standard fees are a 12% buyer's fee and a sellers fee ranging from 4% to 8%. The seller's fee varies per coin based on the price realized for that coin. There is also a 5% buyback fee ($100 max) if the coin doesn't sell due to a consignor's reserve. So, based on the standard published fee scale, Teletrade takes 16% to 20% of the total. The buyer's fee is not negotiable but large volume dealer consignors are accorded better selling terms, especially with respect to buybacks, that typically make it advantageous for collectors to submit Teletrade consignments through a dealer as well (provided it is dealer who is a regular consignor and has negotiated on-going terms).

 

Teletrade takes a larger bite but has the advantage of being much quicker due primarily to the fact that there is no printed catalog. Traditional auction houses have a consignment deadline of around 45 days in advance of the auction. Payments come 45 days after the auction. With Teletrade, a consigned coin can be run through three auctions and back to the consignor (or the consignor paid) in a 45 day time frame.

 

Teletrade is better on smaller value coins where the impact of the larger fees is less important. Teletrade seems to be more successful with 20th century coins, especially the last half of the 20th century. These types of coins are widely collected by internet buyers who are comfortable with the Teletrade approach. Higher end pieces, classic rarities, entire collections and the like tend to sell better with full color catalogs, lot viewing, live auctions, etc, offered in the traditional auction house approach.

 

WH

[DC Dawg]

This has been very good and very educational. THANKS everyone!!

 

Scott

[RUSS BEGA]

Good thread guys!

[Keleum]

You GUYS ROCK!!!!

[rbrown4]

Very good information here in this post, thanks.

 

 

Of the major Auction Venues that most of us have heard of or may some day run into, which ones tend to be more cooperative regarding negotiations with the seller on consignment fees and buyback fees. Or is it truly more or less on a case by case basis depending on the lot. Just curious.

 

Rey

[MarkFeld]

Very good information here in this post, thanks.

 

 

Of the major Auction Venues that most of us have heard of or may some day run into, which ones tend to be more cooperative regarding negotiations with the seller on consignment fees and buyback fees. Or is it truly more or less on a case by case basis depending on the lot. Just curious.

 

Rey

Rey, you might get different answers from others, but generally it's a combination of the consignment itself, along with the knowledge (regarding what to shoot for) on the part of the submitter that dictates how cooperative the auction house is. If you have unexciting/low value material, you don't have any leverage, but if you have a great consignment you can make the best of "auction house friends" in a hurry. So, while it's too late for a short answer, mine would be it's usually a case by case basis.

[James_OldeTowne]

Provided your consignment is reasonable (at least $5000 overall, and not a bunch of low-value items), demand 100% of the seller's commission, and you can also demand 0% buyback fees. There is intense competition between auction companies right now for rare coins, so if they say they won't play, take your coins somewhere else.

While it might not hurt to ask, I'd be shocked if an auction house allowed 0% buyback fees on a four figure consignment or even a low five figure one - I think they can find enough consignments without having to do that.

For the record, I have a consignment in right now, am getting 103% and have a zero percent buyback. My consignment is valued at only $25,000 +/-.

 

It definitely never hurts to ask, and you CAN negotiate! It's like buying a car - do not be afraid to tell them you're shopping for the best deal!!

 

Auction houses definitely do deserve to be fairly compensated, but based on how they are doing right now, I think the Heritages of the world are being more than fairly compensated.