Buyers premium

I have never done any auction buys before but I plan to in the future so I have been looking around at Heritage and several other sites. My question is what exactly is the buyers premium and how do they set it?. Is it standard or good ediquite or fees to the company putting on the auction? Hope this isnt to dumb of a question but i need some info.
Thanks. Chad

 

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In theory, it is what the auction company collects to sell the item. In reality, it is just a way for bidders to lose track of exactly how much they are bidding - especially in the heat of the auction. For firms that charge one, the fee typically ranges from 8%-20%. It's set based on what they think the market will bear. 10% and 15%-18% seem to be the normal fees right now. Most auction firms negotiate with the seller and rebate part of this commission to the seller. I've received as much as 8% of the 15% buyers fee back from the auction company.

 

It seems like most auctions have both a buyers and sellers premium. I have only dealt with a couple sites but both of them were 15% for Buyer and different %'s based on selling price for the seller.

Lets pretend they were both 15%,

If you win an item at auction for $100 you actually have to pay $115, 100 for the item and $15 for the buyers premium.
The seller would actually only get $85 ($15 or 15% goes to the auction house as a sellers premium)

I would probably only use an auction house for hard to find items or buying graded items that are commonly faked. There is normally a minimum fee so even cheaper items can cost a lot after fees are added.

 

Thank you guys. This helps explain it better. I can see where it could get complicated in the heat of the bidding war. The premium will be given upfront and you just have to figure it into what your willing to pay total amount for the coin right?

 

There is no reason at all why a seller would pay the full 15% sellers fee when there is also a 15% buyers fee. The only sellers that would pay this are completely clueless.

Auction firms will typically start out offering a seller somewhere around a 5% sellers fee and with even a small consignment and without any real haggling, they'll go to 0%. Moderate consignments will easily get you 101%-105% of hammer.

 

And don't forget S&H.
15% buyer's fee + S&H increases your bid by close to 20%.
I figure what I believe a coin is worth, then subtract S&H.
Then subtract 15% more.
That's my bid.
Not surprisingly I don't win often on Teletrade or Heritage.

 

I haven't sold anything through an auction house so I don't know what % you could end up with. I did state that sites normally list the sellers premium on a sliding scale.
I also stated that I was just giving an example so that OP could see where the money would come from and end up.
Not real numbers, just an example for someone who seemed interested in the buying end and not selling.

 

A more accurate way to calculate your maximum bid based on the maximum amount you are willing to pay is:

MB = [TOTAL - SH] / 1.15*

where

MB = Maximum Bid
TOTAL = Total amount you are willing to pay
SH = Shipping & Handling
1.15 = 1 + the Buyer's Premium (*if the Buyer's Premium is 20% use 1.20, etc.)

In my formula you divide [TOTAL - SH] by 1.15 instead of subtracting 15%. This is because your total (before S&H) is your bid plus 15% or 115% of your bid (if the Buyer's Premium is 15%).

 

Hey Greg,

What would a moderate consignment be? Isn't the minimum consignment for a Heritage signature sale $5,000? How does being a legacy member of Heritage affect the percentage?

 

You are correct, and I was aware of that. If place and time is not an issue I would use your method.
But my method has the advantage of providing a quick and reasonably accurate answer. Since I don't carry a calculator with me I have to have a method I can do in my head in "away from home" situations.
Also the two methods produce reasonably similar answers for low value items, particularly when you consider having to adjust the answers to whatever bidding increments the auction house has.
Of couse as the value of the item gets larger, my method results in a greater absolute error.
And since "low" and "larger" are subjective terms, people have to decide for themselves which method to use and when.
I'll have to play with some numbers.

 

Back in the 70's I used to go to lots of local auctions and a few big ones.
The auctions house fees were in the 5-10% range and ONLY paid by the seller.
As time went by the auction houses needed/wanted more money so the % started rising.
When it got to about 20% (remember, only the sellers paid) the sellers started to rebel and the auction houses had a hard time getting consignments.
So they split the fees; 10% to the seller; 10% to the buyer.
Now both are generally paying 15% each.
If they change and put the burden of the fees on the buyer, I suspect there will be another rebellion, this time from the buyers.
I believe your "around a 5% sellers fee" only applies to big ticket items (high 5-figure and larger).
But to me it's scary to think a seller would be paying $5K on a single $100K consignment, but a buyer would be paying $15K.
That would be the road to ruin.

 

I agree.
An auction house is a necessity, ergo a fee charged by an auction house is a necessity.
But the discussion Hobo and I were having was how to take that fee into account when deciding how much to bid.
And my subsequent comments never contested the need for fees NOR the size of the fees.
I only stipulated that the fee should be divided equitably (but not necessarily equally) between the buyer and seller.

 

Moderate to most companies would likely be a $15K-$50K consignment. Other factors like the type of coins and whether you will be placing a reserve also factor into the rate they will give you.

Heritage Signature minimum is $5,000. According to Heritage, being a Legacy client offers you a reduced commission, but since most consignments are negotiated based on what is being consigned, I'm not sure there is any real value in this. I doubt they would offer me a better deal just because I am a Legacy client.

 

The initial 5% offer would not be for high value items. It'd be for a much smaller consignment. People who have these high value coins know that the auction houses will lower their commissions. All of them do.

Assuming it's not a lot of lower value coins, on a $100K consignment, the seller would likely get 105%-107% of hammer.

 

If I was either consigning or buying from Heritage, TeleTrade, or any other auction house I would read the Terms and Conditions in effect at that time for that sale. Having done business with several auction houses mentioned in this thread over the course of many years, I still read the T&C's to make darn sure I understand today's rules. If I were to decide that I didn't like that sale's terms I am free to shop elsewhere.

 

Agreed. I think heritage is a good place to get coins - just have to be patient for the right one. Several times I have seen them go straight from Heritage to Ebay get marked up several hundred dollars and get sold again.

 

I bid at auctions nearly every month. I must be on 40 firms' lists, mainly European. I understand the fees perfectly well, but have always wished that they would just incorporate the buyer fees into your bid, meaning if you bid $500 then you are really bidding $425 and the $75 fee. It sure would make it easier for bidders. They never will, though, since they count on many not doing the math and getting caught up and overbidding what they would have normally paid.

Its just marketing people. Just like why are things priced $9.99 versus $10.

 

Great real-world information in this post from Greg!

Newer members should read carefully.

 

If you carry a cell phone you probably have a calculator.