Without being cynical, can we dive into the reason for higher buyer premiums?
renomedphys
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And can somebody please tell me what’s the difference? I mean, if we had a zero percent BP hammer prices would rise accordingly, and the auction houses could just go back to giving sellers whatever percent of hammer they negotiate. Less smoke and mirrors, more transparency. Is it really just a money grab from those bad at math?
Apologies in advance, as I’ll bet responses will trigger a thread closing.
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I think that the buyer's preimiums given the auction houses some flexibility. There are important collectors out there who can negociate deals where they get more than the hammer price. That would not be possible if there were no buyers' premiums.
The auction houses also end up with more money, because there are a few "yahoos" who ignore the buyers' premum. I am not rich enough to do that.
I'm with you. I hate buyer's preimums, and the higher they go, the more I hate them.
There are those who say they make no difference because you simply cut back your bids to reflect them. That's great if you are a dealer who is open to buying a wide variety of material in the auctions. BUT if you are a collector who has an interest in only one or two pieces, running into a "yahoo" can ruin your whole day, or auction.
As you have indirectly suggested, buyers’ premiums are actually paid by sellers. Why not just flip things around? Perhaps it’s simply tradition and to change now would cause confusion.
Edited to add: the bad-at-math angle is real based on past comments on this forum.
Smitten with DBLCs.
There are auction houses that have no buyers' premiums. They tend to get more of my business.
The 20% from heritage is just usury at this level. It effects my bid for sure.
It appears the main reason is to capture the extra funds from those that don’t do the math. Enough buyers don’t take the fee into account and some sellers “feel” better getting over 100% of hammer rather than under 100% even if it’s the same net dollar amount.
Straight and to the point: Greed.
My sense is that BP’s are the norm generally, but I’m unsure. Art?
It’s a figure with enough padding to allow flexibility, and the nomenclature is probably a psychological marketing effect thats better for attracting consignments.
Whatever one wants to call it, it’s the venue’s fee/commission charged to the consignor or seller. They could do what’s suggested in the OP, but it might be a net negative if it deters consignments. 6 of one, half dozen of the other.
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How would it be more transparent to have an unknown, nonstandardized amount charged to individual sellers?
My potential confusion comment was made with specific auction houses in mind. I.e. If HA were to introduce a new structure overnight.
As to preference, I don’t care one way or the other. If there’s a BP, I back that out of my max bid. Again, it’s the seller ultimately paying either way.
Smitten with DBLCs.
Greed
In what way does it affect your bid?
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Please tell me how you know that the “yahoo” hasn’t taken into account the BP or if he just bid more than you because he values the coin more highly.
You decide what you are willing to pay for the item and divide by 1.2. it lowers your bid. If you are going up against of person who don't care about the buyers' fee, it means that you are behind the 8 ball by 20%. In that case it's time to shop elsewhere.
It's my perception. If you don't like it, it's okay.
When there is a not so rare item, and there are recent historic auction results which well below the yahoo's bid, including the buyers' fee, you might assume that they don't care what they pay.
No it doesn’t. You pay the same regardless. There’s no one who “doesn’t care” about the buyer’s fee. No one pays 20% more for a coin just because an auction house is selling it.
They aren’t charities. For those who claim greed, what profit margin is acceptable to you? How does that margin compare to what their actuals margins are?
Latin American Collection
If someone were willing to pay 20% more for a coin just because an auction house was selling it, then they would bid 20% more anyway if the buyer’s premium was 0%.
I don’t understand why every time buyer’s premium is mentioned on this forum, someone makes this argument.
There’s no such thing as a “person who doesn’t care about the buyers fee”. Someone with deep pockets didn’t get to that point by being stupid, everyone you’re bidding against adjusts their bid accordingly just like you.
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I have run into to people who have the same view as I do. But you are entitled to your opinion.
At a recent political items auctions, where the buyers' fee is 25%, a collector, who specializes in a particular candidate, told me that he had passed on the same item at $12,500 at show which sold at auction for $40,000. This collector is also a dealer who has had many years of of experience.
Sometimes people go crazy at auctons. You could plop the same item in front of them at a show, and they won't buy it for less. It's the "If someone else is bidding, it must be good," concept.
One way or another auction houses are going to maximize their profit margin. Sellers and buyers simply need to shop for the best deal for them. Doesn’t make any difference how the fees are distributed between the two, only the amount realized or paid. As with all things, the lazy and ignorant come out the worst.
You are a dealer. You are in the tank for other dealers. I get it.
It is useless to debate you. I'm done with this topic. Good bye.
I buy a coin for $10K. The buyer’s fee is 15%…so another $1,500 is tacked on to what I pay. How is the seller paying this? 🤔 At least when I’m buying a house I can negotiate the commission….
Because you and every other thinking bidder reduced your max bid by the 15% buyer's fee.
Smitten with DBLCs.
In real property sales it is the seller who historically has paid a commission (5 or 6% for residential property and 10% for land) that is shared by the realtors representing both the seller and the buyer [though there are situations where a buyer agrees to pay a commission].
In coin auctions it is the buyer who historically has paid a buyer's fee (a percentage of the sale price is added and paid by the buyer, with the added percentage being taken by the auction house [with a part of same maybe also being paid to the seller]).
Interesting how that works.
How does this play out in car auctions, art auctions, rare book auctions, etc.?
Not sure how representative they are, but take a look at the whole spectrum that HA deals with.
You paid $11,500 total to acquire the coin, correct? The seller nets 10k, auction house makes 1500.
If the "buyers fee" was 0%, and there was a 15% "sellers fee" instead, the amount you're willing to pay is the same, no?
In this scenario, the seller would nets 10k, and the auction house makes 1500.
It's all psychology, it doesn't matter what you call it. The fact remains that someone was willing to pay $11,500 and the seller realized 10k. Try to put yourself in the consignor position and think about it from that angle.
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Greed and lack of competition, essentially an oligopoly.
Greed…
The Heritage US Coin BP raised to 20% in August 2017 I believe. Since that time CPI is up 29%, yet BP holds.
Anyone with a halfway decent consignment is getting 105% of hammer, so a 15% gross margin for HA. After paying overhead and taxes the net profit margin must be single digits.
Where is the greed?
Latin American Collection
I calculate my OTD price. I have say $10K that I would pay for the coin. I am going to spend that in total. If the fee is 20% the bid goes lower.
This. They use the money to pay for better consignments.
I don't know why people care. It's a disclosed fee. If you buy from a BM, there might be a 300% "buyer's premium" but it's just hidden.
Nonsense. Your local coin store may have a higher gross margin. It's just not disclosed.
Maybe he hasn't figured that out yet ...
Math is hard... apparently even when the auction house does it for you before you bid.
Whenever this thread b pops up, I'm not convinced that there aren't a lot of ignorant people out there who don't figure the BP into their bid. Otherwise, why would they care?
I'll say what I always say: I've never paid one cent extra for a BP and never will. I don't care if they make the BP 200%.
Depends on what you call a "halfway decent consignment." The standard opening seller's commission is 20% at Heritage and Stack's. Many do not know it's negotiable and it's not an easy negotiation.
The end buyer actually pays the premium. It happens all the time in your local dealers display case. If the coin is what the value says it is, I have no problem paying up for a coin that fits my collection.
20% is not unusual for an auction house in any marketplace.
And $1k or more in tax on top of your $11.5k. 🙃
More than once, I happily placed my bid and realized that I forgot to account for the BP. That’s the result of being in such a good mood prior to engaging in a rare coins auction.
Unless you are in a state that doesn't tax coins... or have a resale certificate..
Selling through auction houses such as HA and Stacks you get a tremendous amount of brain capital and experience potentially. The last thing buyers want is undependability or unforeseen issues, that's why material often sells high with the top auction companies.
Like most corporate fee schedules, it's because they can. They, for the most part, sell a better quality of coins than ebay, and feel that entitles them to a higher profit. As long as their profits remain acceptable or better, why not charge a higher fee? Corporations usually do not care to cater to customer wants until it creates an issue. Not to say customer needs, as that tends to drive most markets. I've worked in many corporate management positions to include John Deere, Navistar, Gulf Oil, Union 76 and Commonwealth Coal which formulated this opinion.
Jim
When a man who is honestly mistaken hears the truth, he will either quit being mistaken or cease to be honest....Abraham Lincoln
Patriotism is supporting your country all the time, and your government when it deserves it.....Mark Twain
Prices for coins fluctuate up and down with no guarantee of what anything will sell for. Operating costs for the "house" continually rise so premiums keep going up to cover that rise.
In procurement bidding at an auction house I drop my bid accordingly to offset the house juice. That’s how I roll. If somebody bids it up pass. Just looking buy them right so room for good retail. Some them Auc houses it takes savvy picking off in final seconds. What I don’t want is a bid war with some rich collector.
The value of the Dollar is declining.
The buying power of the proletariat has gone down.
in addition to the padding to negotiate, I think high BP is rooted in game theory. Just like Bill says, you get some nonzero percentage of bidders who don't factor it into their bids, or don't calculate it accurately, when bidding, and that drives up average prices realized a little. The auction houses must have data to support their decisions. I also like auctions with little or no BP, but there's rarely any bargains.
So heritage’s BP policy should automatically increase with inflation?
If the prices of the stuff they’re auctioning off kept up with the cost of inflation, their profits would increase incrementally as well keeping the same BP.
My take on the auction house VIG is the house is hoping more than one person chases an item gets caught up in the game forgetting about the VIG.
For those claiming greed, wouldn't you expect behaviors that would take a bigger share of the pie (profit margins), not just the same sized slice of an increasing pie?
Latin American Collection