What is the "real" commission that sellers are paying at auction?

291fifth

Over the past 25 years or so we have seen the emergence of so-called "buyer's fees" at auction. I have always considered the "buyer's fee" to be nothing more than a "smoke and mirrors" effort on the part of the auction houses to make consignors think they are paying low or no commissions.

If you combine the current buyer's and seller's fees for the typical current auction, what percentage does it amount to? I consider the combined total to be the true commission since savvy buyers will reduce their bids to allow for the buyer's fees.

ER

The seller is really paying the buyer's fee, as far as I'm concerned.

291fifth

<< <i>The seller is really paying the buyer's fee, as far as I'm concerned. >>



That's my point.

BAJJERFAN

Too bad there isn't a way to sell the same coin at the same auction both ways. I expect that for the really hot stuff that the juice doesn't matter all that much.

777

The real commission totals 20-25% of the realized prices, TOO MUCH

matteproof

Though I've heard the logic, I just don't see how it can be said that the Seller is paying the buyers commission. When I bid on a coin, I'm paying the price (winning bid) - PLUS the juice. That juice is real money out of my pocket, not the sellers. Am I missing something in the math? Thanks. matteproof

ziggy29

<< <i>Though I've heard the logic, I just don't see how it can be said that the Seller is paying the buyers commission. When I bid on a coin, I'm paying the price (winning bid) - PLUS the juice. That juice is real money out of my pocket, not the sellers. Am I missing something in the math? Thanks. matteproof >>

Well, it all depends.

If you're willing to pay $1000 for a coin, do you still bid $1000 knowing the juice can take it to $1150? Or do you bid between $850 and $900 to compensate for the juice taking it to around $1000?

If the latter, that's what's meant by "sellers paying the buyers fee." If the former, you're the type of bidder the auction houses love.

IrishMike

Here's the quandry, at national auctions you usually end up over paying unless you see the coin and can make a determination. With the quality of the pictures at most auction companies is a crap shoot. I saw a coin go for $4100 in the Heritage Long Beach auction that was toned but dark and dull looking from their photo. Now it is for sale on a dealer's site for $6100 and is a moose. Had I known what it really looked like I would have bid on it. No way I am paying another vig that large to a dealer.

MFH

It wasn't that many years ago that the seller paid 20% of the hammer as commissions; consignments started falling off; then it was a 10% / 10% split with the sellers and the buyers; consignments started falling off again and now its 5% to the sellers and 15% to the buyers.

Astute sellers realize that they can get a better deal - its all in who you know - and many can get hammer or a small percentage over hammer.

Before you know what hit you, the sellers won't be charged any commission, and the buyers will be soaked the 20%. Its only a matter of time.

matteproof

<< <i>

<< <i>Though I've heard the logic, I just don't see how it can be said that the Seller is paying the buyers commission. When I bid on a coin, I'm paying the price (winning bid) - PLUS the juice. That juice is real money out of my pocket, not the sellers. Am I missing something in the math? Thanks. matteproof >>

Well, it all depends.

If you're willing to pay $1000 for a coin, do you still bid $1000 knowing the juice can take it to $1150? Or do you bid between $850 and $900 to compensate for the juice taking it to around $1000?

If the latter, that's what's meant by "sellers paying the buyers fee." If the former, you're the type of bidder the auction houses love. >>




Hey Ziggy. Thank you for your thoughts. I think I'm one of those guys that the auction houses must love. I almost always bid what I think the coin is worth at the bid level (sometimes even more). Of course, I have the "juice" factored in at some level in my mind - but I have never won an auction lot bidding with the juice factored into the actual bid amount. I do all that I can to stop myself from overbidding at the bid level amount. Thankfully, I have truly mastered that skill. matteproof

keets

with a buyers fee often at 15% and an unnegotiated sellers fee at 5%-7%, it's not unrealistic to expect the broker to realize a 20%-25% commission. the houses love the up-market and it really doesn't matter if buyers "adjust" their bids to take the 15% amount into consideration. with fancy gloss-color catalogs and all that goes with an auction, the costs are dwarfed when the total realized prices reach $10 million ++, even at the 15% amount.

BillJones

<< <i>The seller is really paying the buyer's fee, as far as I'm concerned. >>



The way some of these people bid in auctions, it almost looks like the bidders treat the buyers' fee as a "throw away." I wish my customers would view an extra 15% on top of the base a throw away.

I've heard of some very important consignors who owned important collections getting a negative seller's fee. In other words they get a piece of the 15% or 17.5% that the auction house is getting.

Coxe

Depends on the consignment. The comments made so far are relevant to average consignments, not subject to negotiations. Important consignments shouldn't pay seller fees. I know my PL dollar set isn't going out the door without that and reasonable reserves negotiated.

Weiss

To compare apples to apples, you really need to calculate all of the expenses of selling on your own, including writing the auction descriptions, taking and editing the photos, paying the fees, corresponding with the buyers, processing the payments, picking, packing, shipping, and most importantly, the possibility of lower realized prices. Those all add up to the true cost of selling on your own.

So if the auction houses can do all or most of that for you, and realize higher sales prices, regardless of the juice, then what's the gripe? It seems unlikely that most of the collectors who consign their coins to the big houses are stupid or unfamiliar with the market. If they're willing to do it, then the "real commissions" are probably less than or equal to the "real cost" of selling on their own. The big auction houses wouldn't exist if their business model wasn't successful for everyone involved. There's just too much competition out there to dismiss the value they provide.

topstuf

What we need to try is a brick and mortar shop with a ticket booth out front.

CaptHenway

<< <i>Though I've heard the logic, I just don't see how it can be said that the Seller is paying the buyers commission. When I bid on a coin, I'm paying the price (winning bid) - PLUS the juice. That juice is real money out of my pocket, not the sellers. Am I missing something in the math? Thanks. matteproof >>



Let's say you want to pay $10,000 for something that is selling for hammer price plus 15% Buyer's fee. You say to yourself "Self, I don't want to pay $11,500 for that coin, so I will bit $8,700 for it. That way if I get it, it costs me $10,005, and I can afford the extra $5."

Let's say the seller thinks he is paying a 10% commission. He gets 90% of 8700, or $7830. Thus he has received $2,175 less than you paid for your $10,000 coin, which means he actually paid a 21.75% commission. If he thinks he is paying a 15% commission, he gets $7,395 for your $10,000 coin, which means that he has paid a 26%+ commission.

Tom D.

matteproof

<< <i>

<< <i>Though I've heard the logic, I just don't see how it can be said that the Seller is paying the buyers commission. When I bid on a coin, I'm paying the price (winning bid) - PLUS the juice. That juice is real money out of my pocket, not the sellers. Am I missing something in the math? Thanks. matteproof >>



Let's say you want to pay $10,000 for something that is selling for hammer price plus 15% Buyer's fee. You say to yourself "Self, I don't want to pay $11,500 for that coin, so I will bit $8,700 for it. That way if I get it, it costs me $10,005, and I can afford the extra $5."

Let's say the seller thinks he is paying a 10% commission. He gets 90% of 8700, or $7830. Thus he has received $2,175 less than you paid for your $10,000 coin, which means he actually paid a 21.75% commission. If he thinks he is paying a 15% commission, he gets $7,395 for your $10,000 coin, which means that he has paid a 26%+ commission.

Tom D. >>





Thanks CaptHenway. I appreciate your thoughts. I'm beginning to see how this adds up now. It seems to be a model that is based upon a bidder always bidding 15% less than what he would have otherwise bid - or 15% less than the "market" price. As a seperate thought, doesn't this just mean that even if we win at the discounted bid amount, that we have "paid" the commission because we have surrendered the discount? (because the discounted bid amount must still pay the 15% buyers fee thus increasing the cost of the coin).

Regardless, in my experience, I have found that every time I have bid 15% less than what I thought a coin was worth, in an attempt to compensate for the juice, I was outbid (sometimes considerably so). At the end of the day, no matter how much I bid, whether at the market or 15% below it, the juice is still coming out of my pocket in cash as a cost that I'm literally paying. The good new is that sometimes I get a nice coin at an auction regardless of these dynamics. Other times, I just pay too much (sadly). Thanks again for the thoughts Capt. matteproof

roadrunner

The only fee a buyer really pays is the travel, food, and lodging to attend the show. Seller's pay all other commissions. While it is true that wholesale bid doesn't win great coins at auction, it will win very average to doggy coins quite often. The price guides often underestimate nice coins. But if a coin brings "X" dollars at auction, then the bid of 0.85X is typically what the winning bidder had as a pre-sale price to bid to. While it may be over "sheet," it is more often than not what current top dealers are willing to pay for that coin....on that day.

Good luck to you if you give up 15% to the auction house/consignor.
Let me know when you'll be attending the next major sale so I can consign some coins.

roadrunner

CalGold

The seller pays whatever he can negotiate. For an important featured collection sellers can get more than 100% of hammer. If the seller negotiates 100% of hammer then the 15% "buyer's" commision goes to the house and, as has been said here, is really the commision that the seller pays. If the house tags on an additional seller's commission and/or insurance, that just adds to the seller's costs.

CG

BlindedByEgo

<< <i>The seller is really paying the buyer's fee, as far as I'm concerned. >>



I agree; just like FICA on your paycheck.

mozin

<< <i>The seller is really paying the buyer's fee, as far as I'm concerned. >>



BillJones said he knew of some major collections where the consignor's fees were zero, AND the consignor also shared in the 15% buyers fee. I wonder what arrangements were made between HRC and the Reiver family. Anyone know?

roadrunner

Getting part of the buyer's fee back as a consignor is standard fare for major collections....Reiver certainly should have qualified. If you start with a 15% buyer's fee and get 100% of hammer, your net after sale, is 87%. If you start biting into the 15% "buyer's" fee then you can get into the 90% net range. I would imagine very large collections of $1 MILL or more could net at least 5% of the buyer's fee, possibly 7-8%, such that the consignor is netting 105-108% of the total 115% available. The numbers being > 100% are certainly there to confuse the seller and buyers.

roadrunner