Why break out the buyer's fee?
Zoins
Posts: 34,401 ✭✭✭✭✭
There are numerous posts here on buyers fees which seem to only go in one direction. I've seen these as high as 28%.
On the other hand, people say it shouldn't matter since it's the net price that matters: bid + bf. The exception of course, is that some buyers don't bother to do the calculation and bid as if they were bidding net price.
My question is why do auction companies even bother to break out the buyer's fee during bidding? What benefit is there from managing bids this way?
On the other hand, people say it shouldn't matter since it's the net price that matters: bid + bf. The exception of course, is that some buyers don't bother to do the calculation and bid as if they were bidding net price.
My question is why do auction companies even bother to break out the buyer's fee during bidding? What benefit is there from managing bids this way?
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Not everyone thinks rationally and breaks out the fee. Some will be "surprised" by the fee when the auction ends.
For instance, some will view a coin as worth $1000 but won't back out the BP fee and will bid ~$1000. Then the fee gets added on.
Most WILL back out the fee, but not all.
If it was rolled in, then they wouldn't get these "wins"
I've been told I tolerate fools poorly...that may explain things if I have a problem with you. Current ebay items - Nothing at the moment
Indian Head $10 Gold Date Set Album
Simple. Money.
Not everyone thinks rationally and breaks out the fee. Some will be "surprised" by the fee when the auction ends.
For instance, some will view a coin as worth $1000 but won't back out the BP fee and will bid ~$1000. Then the fee gets added on.
Most WILL back out the fee, but not all.
If it was rolled in, then they wouldn't get these "wins"
Very few bidders CAN'T do the arithmetic, though some here seemingly refuse to.
The buyers fee is a device to set a hammer price and then allow naïve consignors (whose advisors have done little due diligence) to negotiate upwards, if at all.
It's purely irrelevant to bidders.
Want to pay $1,000 for a coin?
At 15% , bid $850. Total cost to bidder: $977.50
at 17.5%, bid $825. Total cost to bidder: $969.38
Buyers.... are you smarter than a 5th grader?
- David Lawrence goes the one price method....no buyers fee. (But I get the impression that the majority of lots are really house-owned coins anyway).
- Heritage prominently shows both the bid, AND the bid+BP. So even the lazy should have a reasonable idea what they are spending, (taxes not included).
- Great Collections shows only the bid, with little mention of BP.
And all three have different BP percentages, and tax applicability (for me).
Those are the only three I deal with....so others may have their own twist.
In the end, being an infrequent bidder, and generally careful, it probably doesn't matter to me WHICH method they go with....but it would be nice if they was some consistency within the hobby.
The same reason stores don't include taxes in the advertised price. That doesn't make it right, but that's why.
I was going to say the same thing....but realized that SOME bidders are subject to tax, while others are not. So I understand not including taxes in the posted bids....
Winning Max Bids: $21,100 ($24,792.50)
Winning Bids: $7,141 ($8,453.50)
Losing Bids: $24,500 ($28,787.50)
Your Total Bids: $45,600 ($53,580.00)
100% buyer's fee? On a coin worth $100 to me, I'd bid $50. Easy peasy.
For those that are math deficient I'd suggest using a 20% buyer's fee in the your bidding estimates. This was you get an extra bit in your favor if you win. Figure out 10% of what you'd want to pay. Then double that amount and subtract the nearest round number from your bid.
I ran into the issue of buyer's fees at auto auctions and found that those guys are far more clueless than us coin collectors. I'd say as a rule the vast majority of them felt that the buyers actually paid a fee to enter an auction (5-15%). Many of the dealers even said they didn't even bother to adjust their bids as they considered the BF as just a cost of doing business. I couldn't believe it. Search on line for "buyer's fee," and you will invariably find (more than 90% of the time) that the BUYER pays those fees. The auction industry has done a great job of dumbing down the populace. And this allows them to post lower consignor fees (ie seller fees) and receive more consignments. You will find it nearly impossible to find a discussion (other than right here) that suggests BUYER's don't pay extra out of their pockets to bid at auction. It's amazing. I continue to support that notion that Buyer's Fees be renamed to Seller's Fee #2.
Are there any members here who have bid at auction and did not do the math when hefty buyer's fees of 10-25% were involved? In the art world BF's were up to 25% last I looked. Those "buyer's" must be really complaining....
Auction companies deal with both consignors and buyers & need to have an easy way to negotiate with both.
Have you negotiated with an auction house as a "buyer" where your subsequent invoice was marked at less than "hammer + buyer's fee"? I know I haven't. But, maybe I'm missing something. There may be some super whales out there spending money willy-nilly where the house just might give them a small % rebate if they spend $500K, $1 MILL or more at a sale or bid on a certain number of lots to the very end. I've never heard any one mention such a thing though. But back room deals certainly do exist that are not seen on the "terms and conditions."
what the buyer pays and the seller nets would seem huge.
Seller pays a fee also. Without the current system, the spread between
what the buyer pays and the seller nets would seem huge.
How so? My last major consignment at auction was in 2011 with a 15% buyer's fee in play, a $50K deal or so. My deal with the auction company was hammer + 5% (summer ANA prime time sale). I netted around 91% of what the coins actually sold for to the buyers. The difference was 9%. How is that a "huge" spread? Buyer's didn't pay any extra. I didn't pay any extra to the house. Everyone was happy.
Without the "current" system (ie a 0% BF), I'd have still netted 91% of my $50K consignment...and bidders would have bid $50K for my coins, rather than $43,478 (15% less on their bid sheets). Smoke and mirrors. Nothing changes except the math. And if I'm getting 91%, that means the house is getting revenues of 9%, of which expenses come out of that. They might end up with 3-6% net profit. If the same coins can keep on coming back to them, that's a multiplicative effect over many years. Some of the auction houses couldn't survive on such small premiums. They either combined their operations with others or disappeared. If anything, the auction houses seem to be getting squeezed as buyer's fees have increased. That's one of the ways they've been able to get a little more profit out of each auction....from both bidders and seller's who can't do math.
Had a 17.5% buyer's fee been in effect at that time, I'd have negotiated for hammer + 7%, still netting 91% of FMV for what the coins sold for based on buyer's final invoices. I thought Colonel Jessup explained this all pretty well earlier in the thread. The fees are irrelevant. It comes down to what you can negotiate, and what is typical for the kind of consignment you have. If you pay a lot more, that's because you didn't perform the necessary due diligence.
Fwiw, the seller pays the only fees. Leave the buyers/bidders out of it. They are mere bystanders. No one gets charged extra money for the privilege to buy on the auction floor or the bourse floor. My head is getting sore.
Interesting though that in just about every other country, the taxes are included in the price. The taxes are also included in gasoline prices here in the US, just nothing else. I thought that there was some rule about not being able to include the tax in the price - else vendors would happily sell items at $2.00 and $3.00 tax included instead of $1.94 (or whatever you need to get the price to an even $2 in your area) or an amount that leads to pennies being needed for change if you pay cash.
Easiest way to get rid of the penny would be to include taxes in the prices, IMO. Then just put prices on everything as even nickels. The only time you would run into trouble is if you were buying something by weight, e.g. in the grocery store. If bananas are 1.00 per pound and you buy 0.67 pounds, it will be an odd amount.
Successful BST (me as buyer) with: Collectorcoins, PipestonePete, JasonRiffeRareCoins