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When a collection brings 100 times estimate...
MrEureka
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Hypothetical scenario, but I've seen similar things happen hundreds of times.
A man inherits a small group of old coins. Brings them to an auctioneer and is told the whole collection is worth about $500. The consignment contract states that the auctioneer will take a 30% commission from the seller, and notes that he will charge another 20% to the buyer.
The coins hammer for $50,000, and are actually well worth it. In fact, the winning bidder immediately flips them for a 10K profit.
The seller nets 35K. The auctioneer makes 25K.
Fair deal?
A man inherits a small group of old coins. Brings them to an auctioneer and is told the whole collection is worth about $500. The consignment contract states that the auctioneer will take a 30% commission from the seller, and notes that he will charge another 20% to the buyer.
The coins hammer for $50,000, and are actually well worth it. In fact, the winning bidder immediately flips them for a 10K profit.
The seller nets 35K. The auctioneer makes 25K.
Fair deal?
Andy Lustig
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
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<< <i>Hypothetical scenario, but I've seen similar things happen hundreds of times.
A man inherits a small group of old coins. Brings them to an auctioneer and is told the whole collection is worth about $500. The consignment contract states that the auctioneer will take a 30% commission from the seller, and notes that he will charge another 20% to the buyer.
The coins hammer for $50,000, and are actually well worth it. In fact, the winning bidder immediately flips them for a 10K profit.
The seller nets 35K. The auctioneer makes 25K.
Fair deal? >>
I'm not an auctioneer so I have no idea what the profit margins are or what is fair. The percentages you've stated do seem a bit on the high side though.
The name is LEE!
The buyer pays a percentage of the sale to the auctioneer so the auctioneer does his job and the buyer comes out ahead.
To win an auction it means that no one else present was willing to pay more.
Since the audience is limited a buyer can get a good deal since a wider audience can pay more for the material.
But the overall lesson is to get multiple opinions if you don't know the value of what you have.
Who gets 50%?
No way it's a fair deal. As a matter of fact, one would be crazy to even believe those percentages could be charged.
Check out some of my 1794 Large Cents on www.coingallery.org
An auction house telling you your items are worth pennies and then they get tremendous multiples (making you think you scored big with them) but in reality they brought fairmarket value but the auction house pockets 55%?
I know a couple of auction houses that do this religiously. I hate when I see it happen but such is the nature of the business
<< <i>Good question. I just saw a show called Strange Inheritance on FBN last night where a fellow discovered a very early map of Texas and had it auctioned by none other than Heritage--from memory, the map sold for around $148,000.00 with the juice. The seller got around $96,000! They must have hit him with a 15-20% seller's fee and also subtracted a 15 to 20% buyer's fee. Doesn't seem right. >>
And there you go....
.
If the estimation isn't fair and auction house did not promote enough to attact 2X to 5X of "so-called" wholesale price, then the consigner pays his/her due to learn.
In today's US coin market, I don't know where to find 100X surprises; nevertheless, I saw on-line Christies auction today on Asian items, I did see a few 400X price of estimation. What does this tell me
Sometimes, it’s better to be LUCKY than good. 🍀 🍺👍
My Full Walker Registry Set (1916-1947):
https://www.ngccoin.com/registry/competitive-sets/16292/
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
While 30% sounds high for a consignment commission, if the seller is OK with it I don't see a problem no matter how well (or poorly) the coins sell.
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Slipping in the buyer's fee is the problem here, especially with a loaded seller's fee at 30%. It doesn't matter what you call the fees, they all end up with the seller. So an approx 41% net fee to this seller is close to robbery. It's all about sleight of hand. And it's the newbie consignors that can conned. For a $50K consignment with any of the larger US coin auction houses, the net to the seller should be around 87-90%....worst case 85-90%. Call the fees whatever you like...but that's what they should be able to walk away with....not 59% as in Mr. Eureka's example. If the auctioneer doesn't know the value of something to within a factor of 100X....they need to find a new profession. They aren't doing anyone any favors....other than their bidders and favorite dealers.
<< <i>30% net overall commission is FAIR. The problem here is adding in another 20% "buyer's fee" suggesting to the unknowing consignor that said buyer actually pays that fee. Well they don't. Both commissions come out of the seller's pockets....assuming bidders back out the buyer's fees.......which >95% of them do. >>
I don't understand, on the buyer's fee. If I bid $100 and win, with 20% buyer's fee, I owe a total of $120 as the buyer. How does the consigner get stuck with that 20% ($20)?
How does a bidder "back out" of a buyer's fee?
......I collect old stuff......
If you figure that the max you want to PAY for a lot is $100, then 'back out' the buyer's fee. If the latter is 17.5%, then don't bid more than $85.
RMR: 'Wer, wenn ich schriee, hörte mich denn aus der Engel Ordnungen?'
CJ: 'No one!' [Ain't no angels in the coin biz]
<< <i>Hypothetical scenario, but I've seen similar things happen hundreds of times.
A man inherits a small group of old coins. Brings them to an auctioneer and is told the whole collection is worth about $500. The consignment contract states that the auctioneer will take a 30% commission from the seller, and notes that he will charge another 20% to the buyer.
The coins hammer for $50,000, and are actually well worth it. In fact, the winning bidder immediately flips them for a 10K profit.
The seller nets 35K. The auctioneer makes 25K.
Fair deal? >>
Were any PNG Code of Ethics violations committed?
<< <i>okracer,
If you figure that the max you want to PAY for a lot is $100, then 'back out' the buyer's fee. If the latter is 17.5%, then don't bid more than $85. >>
Okay, I get that perspective, thanks.
But in essence, I just bought me an $85 coin (not a $100 coin), and I was still assessed an extra $15 that I have to pay. I guess it depends on how you look at it.
But I do get your point.
......I collect old stuff......
<< <i>Not even the top automotive auction houses charge that much for collector vehicles. That's an outrageous percentage in any auction venue. >>
Of course it's hypothetical too.
I am not sure, I need more information and I think the man with the coins would also...
The court jester does not play, but gently pulls the strings…
<< <i>
<< <i>30% net overall commission is FAIR. The problem here is adding in another 20% "buyer's fee" suggesting to the unknowing consignor that said buyer actually pays that fee. Well they don't. Both commissions come out of the seller's pockets....assuming bidders back out the buyer's fees.......which >95% of them do. >>
I don't understand, on the buyer's fee. If I bid $100 and win, with 20% buyer's fee, I owe a total of $120 as the buyer. How does the consigner get stuck with that 20% ($20)?
How does a bidder "back out" of a buyer's fee? >>
He didn't back out of it; he backed it out. If the coin is a $100 coin and you bid $100 and paid $120 you overpaid for the coin by $20.
<< <i>I think the problem with the scenario is that the consignor may be relying on the auctioneer's estimate in deciding if he should agree to the proposed terms. Mostly because a consignor might think in terms of how much he is paying for how much work. Not an unreasonable way to look at things, as far as I'm concerned. >>
Yes, and that's where the deception was in the hypothetical. Auction companies need to recoup costs and make a profit otherwise they won't exist. However, it's likely the "work" associated with selling a lot for $100 is similar to the "work" involved with selling a lot for $10,000. Thus a consignor may think that a $30 fee for the service is fair, but a $3,000 fee for the same service is not acceptable.
See http://www.doubledimes.com for a free online reference for US twenty-cent pieces
Having NOT consigned to a major auction house, I don't know which way it really may lean, but I know that, if I became more aware and didn't just walk away with the money because I just didn't care, then I would be questioning what happened, quite a bit.
To give an estimate of $500 for something that brings $50000......really? Come on now! How incompetent is that????
Only way it really wouldn't be is if it was something really rare, hardly seen, and at least 2 experts spot it. If it is normal stuff, then that is just a very bad experience and someone needs to better their skills when it comes to appraising.
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
Fair is hardly relevant in a hypothetical. But I see 2 people in the chain who get a nice "YOU SUCK"…. forget the coins . I have to use my imagination about what they look like.
bring in the big spenders. Not an auction, but similar numbers to the OP situation.
Of course I come in with the price I need to get and the gallery will say yeah or nay as to weather or not they want the piece taking up space at the price they can get.
As has been said though, coins are a completely different animal.
One thing to consider perhaps....20 of them fit into a little blue box, hundreds of them can be put into a carton and carried from the room by almost anyone, they can be quickly photographed at a desk one after another, etc.
Your not getting off so easy with many types of art works or antiques...pretty easy work for an auction house !
The contract or deal was stipulated from the start and that's the way it should stand.
A lot of people whine about huge profits being unfair.
Maybe so, but that's life in the business world.
After all, isn't this still a capitalist society (read: Profit making society) and not a country of communists.
"“Those who sacrifice liberty for security/safety deserve neither.“(Benjamin Franklin)
"I only golf on days that end in 'Y'" (DE59)
Many years ago when I was a serious player in coins of Honduras a 25 centavo came up on eBay listed as a common date that started at 99 cents. It was actually a different date that used to be listed in Krause as "reported to exist" before being delisted entirely. I bid $4,000 and did not win it.
Longer ago than that there was an auction at a non-numismatic gallery in Chicago that had a coin collection with one lot of "obsolete" Swiss currency, about 70,000 Francs worth, estimated at $50 I think. However, it was still redeemable if you knew how to do it in Switzerland. It opened at the $50 and advanced by $10 increments for a couple of bidsd until Dennis Forgue, who knew what he was doing, jumped the bid to $43,000 or whatever at which level he could still make 10% for his trouble. The guy who was in at $70 whined "But the estimate says $50!" and Dennis yelled back "So bid accordingly!" It was beautiful!
TD
If just 5% of bidders and consignors mess up on this, that's a nice chunk of change into the pockets of the auction house each year. The last time I consigned to a major auction (2011) the buyer's fees were 15%. Seller's fees were typically advertised at 10%. My contract stated I would get hammer + 5%. That works out to be 105/115 or 91.3% net. Therefore, the sellers fee was negotiated down to 0%. The buyer's fee was negotiated down to 10%. I did end up effectively paying the 10% buyer's fee. The winning bidders bid hammer price for those lots. They bid 13% under FMV (100/115), but their invoices had them paying FMV (115/115 = 100% FMV). It's all semantics and math. If you get confused, you lose.
While it would be easier for everyone if there were no buyer's fees and the sellers just negotiated the best deal they could (ie one fee to the seller). But that means no confusion, no forgetting to back out your bids by the buyer's fee and hence no extra money for the auction houses. If you search on line about "buyer's fees" you will find in >90% of the cases that it says the buyer's pay them. While technically true as it shows up on the buyer's invoice....in reality it's not effectively true. Hence, we continue down the road with multiple fees (ie confusion). Confucius says "confusion makes money."
But ripping off people in morally and unethical scenarios, with or without contract is not "just business". I remember when a member or two of PNG and associated with our host used to do such things and then finally got popped for it, only to have it all come to nought as he is going big guns yet again.
Well, just Love coins, period.
Contracts are normally considered "amoral" instruments, that is to say, courts don't look much at the right and wrong of it. All they look for is the elements: Offer, acceptance, consideration, and a legal purpose. As for consideration, there is an old case that says something like "more than a peppercorn is enough" or words to that effect. So, once consideration is satisfied, courts don't look at the private treaty terms. A party to a contract can fulfill the contract as written, or he can breach it. If he breaches it, he must pay damages. Contracts also assume that parties to a contract are dealing at arms length and have equal bargaining position. This is true even with most boilerplate language and even when the bargaining positions are not equal. It is the exceptional case where a court will look at the unfair bargaining positions of the parties. The little old lady and the door to door salesman come to mind and there are also consumer statutes in some states that offer protections to certain parties.
In your scenario, however, there are a few doctrines that would help the consignor: unilateral mistake and mutual mistake. Under a mutual mistake theory, if the consignor can prove that both parties to the contract were mistaken concerning a fundamental or material term of the contract, a court could reform the contract to produce a fairer result. That theory seems appropriate and applicable here. Whether the estimate is a "material term" and what a fair result might be, would be issues in the case. Under unilateral mistake theory, the consignor must prove that he was mistaken as to a material term of the contract and that the other party knew or should have known of the mistake. That theory would be more difficult to prove since one would need to establish what the other party knew or should have known. One other theory, of course, is fraud in the inducement of contract, which is even more difficult to prove since one party must prove the other party's intent.
But if the estimate was in the contract, I would think that a mutual mistake theory would work.
Tom