“5th Grade Math” and Why the 20% Buyers Fee Is Bad for Collectors
BillJones
Posts: 34,575 ✭✭✭✭✭
Recently we have had debates about the recent Stacks’ announcement that they will raise their buyers’ fee from 17.5 to 20%. There is a group who says that it makes no difference because people will simply break back their “hammer bids” by 20%, and the final price will end up in the same place. This point of view fails to take into the account the positions of collectors versus dealers.
When a dealer participates in an auction, they are open to buying anything, within their business model, from which they can make money. If the silver dollars are going for strong prices, but the half eagles are not, they can forego the dollars in the sale and buy the gold. There is plenty of room to do some “5th grade math” and break back their bids to the prices that work for them.
Collectors are not as flexible. Quite often a collector goes to auction looking for a list of items. If I am typical, some of those items have been on that collector’s want list for a long time. Some items are not often available in the grades desired or not available at all.
Once the bidding begins, the buyers’ fee takes on more importance for the collector. Sure, I sit there with my calculator and break back my bids for total I want to pay to amount I can bid, but that is only one consideration. The other thought is, “when will this item be available again?” When that thought enters you mind, the buyers’ part of the mix, but perhaps not the final degerminator.
The buyer’s fee often does is take air out of the amount of money I have in my check book. The 20% buyers fee reduces my $10,000 to $8,333.33, which gets rounded up to $8,500. It also reduces the amount the collector gets when he or she sells a coin at auction.
Heritage now as a program where you get a certificate that entitles you to resell an item you bought from them and get 100% of the hammer price. Higher buyers’ fees lower hammer prices. I freely admit that, which means that auction certificate is now worth less.
Dealers are much better able to handle higher buyers’ fees than collectors. That is just a fact.
Comments
I no longer participate in auctions (stopped some time ago) due to these fees.... I find them to be onerous and, in my case, unacceptable. I am already paying for an item (by the way, I am talking about all auctions, not just coins, that impose these fees), why should I pay again for the privilege of buying the item. If I go to a coin shop, (or any retail establishment) I pay the price as listed (or negotiated). The seller does not then add on another fee because I was nice enough to patronize his/her establishment. I will NOT pay these fees. Cheers, RickO
The seller should pay to sell . Other than name recognition that's bringing items in and gathering them in one convenient venue what auction houses do a monkey could do .
I think the real problem is there are too many auction house. The auction houses have to do what they need to do in order to get consignors. They lower consignment fees to entice sellers to consign to them. Some times no fees and some time negative fees depending on the consignor and the material. Who is left to pay the expenses the buyer. Some auctions are worse than others, some require a fee to get a bidder number and a catalog.
5th Grade Math and the Problems Some Collectors Have Sometimes
And if you're doing this on the fly via calculator, as opposed to having been able to work this out by approximation in 5th Grade, you have little aptitude for math. No shame intended, but a limitation. Others have gifts I do not, but this is not algebra, just simple arithmetic.
Everyone is definitively screwed by (at most) 2 1/2%.
So they should be like eBay right?
When I bid live online, it tells me what I will be paying with the fees as I bid. Forget the 5th graders, even us forum members can figure that out!
I am in rare disagreement with you, Bill. Dealers have to buy coins to survive. The spread is extremely thin as anyone in the business of higher value coins knows. As a collector you can stretch for a coin that you want or just say the hell with it, grab a slice of buffet pizza and head home to the family.
That sound you hear is the sucking of millions and millions of dollars out of the coin market. Between auction houses, the US Mint, and TPGs there is no wonder why the overall market has been in a funk for years.
Joseph J. Singleton - First Superintendent of the U.S. Branch Mint in Dahlonega Georgia
Findley Ridge Collection
About Findley Ridge
The reason this "breaking back the bid" to allow for the increase not to put the item over market value is that not all bidders do that. And if you are up against them....you will lose every time.
"Who Moved The Cheese?"
Everyone pile in on Great Collections. Only a 10% seller's fee. I hope they can handle the $MILL of dollars of fresh material and the accompanying bidders that is sure to follow.
Let's see if the other guys move it up to 20%....and if Morphy-Legend bumps to 117.5%. If it's true that keeping a lower rate is actually better for the auction houses and their customers, then those other guys won't follow......
I agree with @roadrunner! Great Collections seems awfully more appealing now days. It seems like Heritage is able to auction off the rarer coins though,
Everything is online now. Paying for print catalogs and all that back in the day when auctions were big events made sense because you needed the auction houses to get the exposure. Give a 5 year old an iphone and he can take decent coin pics to post on line. The cost of doing business has gone down but the fees are going up . Pay more for less is the business model
When I ask dealer folks frequently on these boards and elsewhere how they price their coins I often get the answer of "auction prices" or "Ebay" The argument that as auction houses raise their buyers fees that this raises the value of the coin is false.. If a coin is priced to high becasue of buyer fees it probably won't attract a lot of bidders or will not sell.
I agree with everything you wrote. Dealers have to buy coins to have something to sell. All I said is that dealers can very often be far more flexible concerning lots upon which they bid. They can lay off the stuff that is selling to much when the bid plus the buyers’ fee pushes the prices beyond feasible.
Collectors can bid more because they are not looking to resell the item immediately. At the same time that makes them more vulnerable to the high buyers’ fees. The dealers who claim that collectors can break back their bids and avoid the increase in the buyers’ fees all together are simply not looking at this from the collectors’ point of view.
Auctions were already becoming unattractive sources for coins. The stepped up buyers’ fees make that situation worse for collectors.
I agree with the sentiment that in theory, all market participants will adjust their bids downward and prices (hammer+juice) will remain constant. However, I think Bill may be onto something in that human behavior is not always as economically rational as we would model it out to be. So maybe there is a modest (1%-ish) upward pressure on prices realized in aggregate.
To me, the bigger issue is that this represents a increase in the transactional "tax" on the ever-shrinking collecting middle class. I think everyone agrees that if you are a dealer consigning six or seven figure amounts of material on a annual basis, your net will remain unchanged.
However, if you are a collector or estate with a 50k collection to sell (small time by auction house standards), you are at the mercy of a one round negotiation, and you likely just lost ground from 100% of hammer with 17.5%bp to 100% of hammer with a 20%bp (I'm assuming a hard fought negotiation to waive the seller's commission).
The margin expansion is at the level of the collector who actually buys the coins in the $500 to $10k range; and it does represent yet another ding that makes the hobby less fun for the group that the hobby can least afford to lose.
I no longer participate in auctions (stopped some time ago) due to these fees.... I find them to be onerous and, in my case, unacceptable.
That may work for some folks but what do you do if you focus on a collecting area where the only "good stuff" appears at auction? While I did make a major private purchase recently, I have gone through periods of almost two years where all my acquisitions were via the auction route because either a) dealers had nothing I wanted or b) their prices were far beyond "moon money". I don't like buyers' fees either but, if auctions are the only game in town, I'm not going to cut off my nose to spite my face.
Member ANA, SPMC, SCNA, FUN, CONECA
The quality of the coins that are offered on the national bourse circuit has really gone done over the past year and a half. The dealers just don't have much anymore.
The proof of this is evident when you look at a specialist boutique dealer like Doug Winter. His prices are strong, but his inventory turnover rate is phenomenal. If you don’t get to his site right after he posts something, it’s usually gone in a matter of hours if not minutes. In addition I’m sure that he sells some material that never appears on his website that goes directly to want list clients. I bought an 1838-C half eagle from him that never appeared on his website.
The auctions have sadly become the only game in town for some collectors, and that’s the reason why auction companies keep raising the buyers’ fees. They know they can get away with it. The trouble is, if they keep it up, they are going to lose a lot of collectors who will say that this hobby just isn’t worth it any more.
Many of the DWN coins are reserved before ever making the site which adds to the frustration of playing the game.
Latin American Collection
Who's hiding the bread?
Now that's a good point worth thinking about, all the money flowing to salaries and profits for those in "the industry" of coin production, packaging, appraising, auctioning, dealing, and delivery is Not money spent by collectors on the coins themselves, but instead paid to "the system" that gets the coins into and out of their (the collectors') hands whether they're buying or selling them, They get you both ways, and most of that money leaves coins and pays the coin business people's personal expenses.
It's why eBay was so nice, at first. There was a great selection, the vigorish was minimal, and with auction, you paid your price and got your coin, or you sold your coin and got almost all the money, and it seemed mostly collector to collector.
Liberty: Parent of Science & Industry
For those that don't understand what the Colonel has said, you ought to read the book "Who Moved my Cheese?" by Spencer Johnson. A classic book about how to deal with change in both your life and at work.
I read it over a decade ago. It worth far more than the ten buck purchase price and has helped me through some potentially difficult stages in my career.
An aside to the Colonel - thanks for injecting this into the conversation.
“In matters of style, swim with the current; in matters of principle, stand like a rock." - Thomas Jefferson
My digital cameo album 1950-64 Cameos - take a look!
This hurts both buyers and sellers, but small sellers get shafted the most.
On the buying end, it's not always possible to factor this added fee into lower bids. If a coin is reserved at $1000, if you want the coin, you're paying the extra fee as it goes from 17.5% to 20%. There's no figuring bids downward with a reserve. And if an internet bidder has already bid the coin up to X, in the live auction you're also paying the extra buyer's fee if you go up 1 increment to get the coin. In some situations, your choices are 1) pay the extra 2.5%, or 2) forgo the coin.
On the selling end, most lower-volume sellers are not able to negotiate a better seller's fee. A $25k or $50k auction submission will still get 100%, while the auction house now gets 120%. These people don't have any chance of renegotiating 107% of hammer up to 109% like bigger players. When I was selling a lot of coins, I used to get at least 105% at S-B when the buyers fee was 15%. No way I'd get anything over 100% now.
A collector submitting their coins to auction today would do best piggy-backing on their favorite dealer's submission.
For 3- or 4- figure coins, Great Collections is looking better and better.
Thanks , now I had to google it as I have never read the book.
After reading a synopsis, I realized I was reading the story of my life ...
The sucking millions conversation here is actually quite interesting ...
The 10%-20% juice thing is all a game and very sliding, I'm sure most of you know.
Sellers who consign with a big name player can get most of that 20% back...buyers will break back. Coins that go for moon money do so because they are PQ (usually) and many bidders want them, probably rarely because they were oblivious to the juice.
But, the rather impressive number of dealers on the circuit and the many, many other Coin Industry professionals who are "doing alright"...the collectors are indeed lining their pockets.
Nothing wrong with that! And nothing new I'm sure, just something to think about...
There are levels at which this game works just fine as a hobby. And levels where you really need to have your shirt together if you plan to play...:)
I think he was being facetious
m
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
Except those who are further penalized by residing in a state with which the auction company has nexus, and that 2.5% impacts the additional state sales tax that is already crippling, especially for high stakes material.
"Everything is on its way to somewhere. Everything." - George Malley, Phenomenon
http://www.american-legacy-coins.com
Twenty percent is unacceptable to me. I'm out. Great coins can be easily located for less.
Correct answer in the 1st paragraph......forgo the coin. That's what evaluating the bidding process is all about. If the reserve IS set too high for the bid+ buyer's fee you need to pay to win it.....PASS. No coin is a must have unless you name is Pogue, Simpson, Eliasberg, etc.
How can someone who was netting 91% min (105/115) in the past.....not expect to be even able to get 83% (100/120) today? Makes no sense to me. Are saying that with a $20K-$50K consignment to S/B you could not get 106% of hammer again (106/120) or 88%? That seems like the worst you could do without trying hard. Or by all means piggy back with someone who is getting 108-110% of hammer.
How to know when buyer's fees are just too high? Colonel Jessup, Mr. Eureka, Legend, NJCC, CNN, and others stop attending major auctions.
Maybe SB computers can only do 4th grade math. They said one of the reasons was to make all of their auctions have the same fee structure.
As a collector only bidding on a few lots in any given auction, it's pretty easy to figure out what I want to pay and back out the 20% to come up with my bid limit. Maybe a dealer bidding on the fly would have more trouble, but now with a 20% fee the math should be easier than the old 17.5%.
As far as people not taking the fee into account when bidding, there really can't be that many stupid people bidding in auctions. And if there are, I guess they win a lot of the lots they are bidding on
You limit your bid to max price including the juice, say $10,000 , and reducing bid for the juice .. almost all of the time someone will come and bid more .... ending up ,you losing the coin
Like I told a big auction house salesman ,, I don't care what your expenses are ..what are going to do about the consignment juice ? he wouldn't bend ..... 6 figure dollars of coins went to GC
To win, you may need to bid your max total price as the hammer and then stretch for the juice.
Auction houses are not comparible with eBay or for that matter dealers. When a seller consigns to an auction house, the house needs to publish a catalog to a wide variety of potential buyers. They will sell your coins, but the seller will essentially pay the differential. I think the seller costs are minimum 17.5% to 25%.
eBay will limit seller costs of sale to about 10%, but the seller will have to produce their own "catalog" material, which is less expensive on line.
But equities likes stocks can have transactional fees as low as 1% or less. You can probably sell your house for 4% or less (or more). Auction houses skimming 20% off the top is not a good omen for our hobby. When collectors wake up and only bid 60-70% of market value, then the sellers will wake up and realize the auctions houses are 30% partners in their collection equity.
There will come a program where you can sell ytour coins for 5-6%. When there is imagination on the sales agent side, and that could well be the existing dealer network.
OINK
Great Collections is fine. But anyone that thinks they are better than Heritage makes me do a double take. Maybe for an ultra small consignment....but heritage is still the big dog
Maybe "ultra small" has a different meaning in your world, but they seem to be attracting more and more higher value coins.
A pair of PanPac $50 were sold recently at GC.
I don't get all this "stretching for juice" and "passing the Grey Poupon." You either pay what the coin is worth to you or you don't. It has nothing to do with fees and commissions. You either pay what it takes to win the lot, which you must be ok with, or you don't. I never had a problem winning some of the lots I went after in major auctions. I realized I would be bidding against Legend, Jessup, crack out artists, up-graders, coin doctors, and top collectors as well. You don't win them all. The very few times I stood with my hand up like the statue of Liberty to win the lot, I usually got my butt kicked. And each time I was "uncomfortable" having to stretch and stretch. There weren't even buyer's fees in existence yet on some of those early stretches....lol.
Not all auction houses don't "skim 20% off the top" for consignments of $20K or more....and not the 2 major ones that I have dealt with. Since I first started doing $20K consignments back in 1988 (the min. that B&M would generally accept at that time for a decent rate) I've never once netted out less than 87-88%. In more recent times it was 90-92%. If your consignment is well under $20K it probably doesn't need major auction exposure and can be sold a number of other ways and still net 83-87%. Or as mentioned before, piggy-back it to a major wholesaler who routinely puts $50K-$100K in most major auctions. I shake my head in disbelief when I see common date MS64-MS66 Saints going to auction when the wholesale margins on those coins tend to be 5% or so. I fully expect to net 88-92% of my next venture into a major auction consignment. Undoubtedly, GC loves this kind of thread. "Don't sell your coins to big auction house X who takes 20-30% off the top....consign with us as we only take 10%."
Cool. What were the prices realized?
1915-S Panama-Pacific Exposition Gold $50, Round PCGS MS-64 CAC (125K all in)
greatcollections.com/Coin/471894/1915-S-Panama-Pacific-Exposition-Gold-50-Round-PCGS-MS-64-CAC
1915-S Panama-Pacific Exposition Gold $50, Octagonal PCGS MS-64 CAC (117K all in)
greatcollections.com/Coin/471895/1915-S-Panama-Pacific-Exposition-Gold-50-Octagonal-PCGS-MS-64-CAC
CAC coins bring great prices!
That Pan PAC went cheap IMO. I'm looking for one and didn't even see it
mark
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
3+3=12
5+5=14
7+7=16
9+9=18
No matter how you add it up, just figure you are totally screwed for 2 1/2%.
I'm sure I'm feeling unduly wealthy on everyone's behalf today, but If I had bids on 20 lots in an auction and bought every single one at 3% over my limit, I'd walk away with a tremendous smile
. And if I went broke after the first 3, I'd walk away with a tremendous smile 
But...but...the 10% fee overrides any lack of exposure. You gotta get with the game, Mark
It's true. I suck
m
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
Sorry, but those cannot be self-awarded
Man am I having a bad night. I need another dinner with you to snap out of this malaise
m
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
The highest ever auction price for both the round and the octagonal in 64 is 129K.
So unless these two were the absolute best 64's out of all of the 64's, I think the consignor did ok.
Nice ones like that trade higher private treaty net wise
The consigner did ok
m
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
Then you should probably get registered at GC and get in on the all of the great deals
They actually have had a lot of very nice 4 and 5 figure coins listed recently.
Not in HA's league, but they seem to be getting a following.