Buyer's Premiums... How do they work, exactly?

[Monster_A_GoGo]

Okay... Yes, I am a newbie with a dumb question.

I understand the concept of a "Buyer's Premium" (the amount the seller gets above and beyond the auction price, right?), but I'm not sure how they work. Do the premiums keep escalating with the bid prices? That seems to be how I understand it. If there is an item out there at, say $25, with a buyer's premium of $40...If I bid $30 the BP will go to $48. Is that right?  So,in reality, you are bidding $78 instead of $30. 

How do you keep the total costs (with the BP) straight in your head and not totally outbid your budget? Jeepers!

Thanks!

[Harry Caul]

Most buyer's premiums are stated as a percentage -- usually between 10%-25%.  So to answer your question, yes, as your bid increases so does your BP.  A few places have a minimum BP.  I think Heritage's is around $20.  So pretty much anything under $100 and you are paying $20 regardless, after that it increases as percentage. 

EDIT: Never be afraid to ask questions around here!

[CSM]

Also keep in mind the consignor does not get any of the buyer's premium - it all goes to the auction house

[MoviePosterBid.com]

Heritage BP is 19.5% in their poster auctions with a $14.00 minimum on any item.
how much you can bid and keep under the $14.00 cap? the answer is $72x .195=$14.04

to figure the BP on any item with Heritage, whatever your bid is x .195

or the easy way just do .20%

[Harry Caul]

Thanks Rich, $14 min not $20. 

[Monster_A_GoGo]

Also keep in mind the consignor does not get any of the buyer's premium - it all goes to the auction house

Wait... so the BP goes to the auction house? What does the consignor get? Hmm. The BPs seem to be higher than the item cost. I'm confused. (But that's not unusual).

Thanks for all of the help gang...

[CSM]

Wait... so the BP goes to the auction house? What does the consignor get? Hmm. The BPs seem to be higher than the item cost. I'm confused. (But that's not unusual).

Thanks for all of the help gang...

The consignor gets a portion of the actual sale price of the item (before considering the BP).  Depending on what the item sells for or what agreement is made with the auction house prior to the auction this could range anywhere from 25-80% of the actual sale price (with the higher 'kept' % on really high ticket items).

[Filmlobbycards]

At heritage and other venues the term is "hammer price"... the consignor actually takes home 25% less than the hammer price if it's below $50,000....20% between that and $1 million...so in reality there is a 45% swing from the price the buyer pays compared to what the consignor gets for the vast majority of material...Heritage also uses a very clever way to keep material in their orbit...you can reconsign past purchases over $1,000 from them for only 10% commission...it's a brilliant strategy actually

I edited this post to be accurate...

[MoviePosterBid.com]

you're welcome Matt

as to what the consignor gets..

Heritage gets an est 25% of hammer price and all of the BP

obviously selling low priced items is not the way to go with Heritage (or anyone realistically)
but when you consign an item and they get 50-100% more than other sellers (say a $5000 item) you can be winning more in the end. That's why you use Heritage to sell those items.
I almost had a Maltese Falcon insert and I don't get BP, but ultimately the item went to Heritage and after sale and doing math against what I believed the expectation would have been on my site, my friend did do better with Heritage.

[Filmlobbycards]

Rich do you know how much heritage charges for in house restoration, linenbacking etc.?...Do they still use Jaime or do they use someone else? And is it fairly common for Heritage to renegotiate consignor fees? Or is it just the premier pieces?

[Filmlobbycards]

This is an older blog but it's interesting

https://artadvisor.wordpress.com/2013/04/30/auction-houses-the-changing-market/

[jayn_j]

So, to put it all together.  Heritage sells an item for $1000, charges 19.5% buyers premium and keeps 75% of hammer price in commission.  Breaks down as:

Buyer pays $1000 * 1.195 = $1195
Seller gets $1000 * .75 = $750
Heritage keeps Buyers premium + commission = $195 + $250 = $445

[Harry Caul]

Before we re-hash this topic too much, here are some sold threads to brush up on...

Buyer's Premium.. if you know math, isn't it just another part of the process?
Auction House Practices

[Monster_A_GoGo]

Oh...So what you actually pay is the BP price/  I think my earlier example was a $25 item and the BP price is $40....so you pay the $40 which is the item price plus the BP.   (And, I guess for the items with BPs, $25 and $40 are too LOW to even quibble with... but you get the idea of what I was going with.)

Thank you all for the clarifications and links. MOST helpful and informative.

But that makes me wonder, down the road a bit, who would you entrust your items too for auction?

CHEERS!

[jayn_j]

Oh...So what you actually pay is the BP price/  I think my earlier example was a $25 item and the BP price is $40....so you pay the $40 which is the item price plus the BP.   (And, I guess for the items with BPs, $25 and $40 are too LOW to even quibble with... but you get the idea of what I was going with.)

Thank you all for the clarifications and links. MOST helpful and informative.

But that makes me wonder, down the road a bit, who would you entrust your items too for auction?

CHEERS!

I don't sell, but if I did...
The first thing I would do would be to sort through and eliminate the 80% of my collection that is junk.  Nobody wants to deal with it.  Bruce charges a very high commission on inexpensive stuff and most other houses will flat refuse it.  Toss it in the trash, offer it to this group for shipping cost, or if you must, bunch it up and sell it on ebay in bulk lots.

mid priced stuff is a problem.  By mid priced, I mean material that sells for $30-100.  A year ago, I would have sent it to Rich, but he seems to be in a state of transition and I am not sure he is ready to handle it.  I'd ask first, since I consider Rich a friend.

I'd tend to send the > $100 stuff to Bruce.  At that point his commission is manageable and he achieves a better price than Rich.

I'd reserve heritage for >$1k stuff and even then I'd think hard and long.  I trust Bruce and haven't done m8uch business with heritage.  MIght not be worth it for just a couple of items.  I know Bruce pays fair and quickly.

[MoviePosterBid.com]

Rich do you know how much heritage charges for in house restoration, linenbacking etc.?...Do they still use Jaime or do they use someone else? And is it fairly common for Heritage to renegotiate consignor fees? Or is it just the premier pieces?

I don't know about restorations.

consignor fees negotiated? Sure.. If you have a Frankenstein 3 sh and it will hammer at $300k, they will sometimes give the consignor full hammer price and keep the BP.
One of my dear friends (now gone, sadly and I miss he and his brother, also just as much friend) sold a Detective #27 (the high grade copy that sold for mucho) and he negotiated even getting a piece of the BP. Now that was comics and he sold million$ through them before he died so he had an advantage.
If Grey would agree to the same terms can only be answered by Grey.

[MoviePosterBid.com]

So, to put it all together.  Heritage sells an item for $1000, charges 19.5% buyers premium and keeps 75% of hammer price in commission.  Breaks down as:

keeps 25% or so. Though you mistated it here, you did have the correct math below

[MoviePosterBid.com]

thanks Jay. Yes MPB is in transition and I won't be doing any regular auctions I don't believe though I will be doing something once I am finished with my current projects.

honestly, I'm enjoying waking up late, working a little less and not be in a constant state of "Oh my.. I have to get an auction pulled. I have to sort the auctions. I have to shoot photos, list auctions, upload pics & send emails. I have get orders ready. I have to pack and ship. I have to order supplies. I have to I have to I have to."
doing auctions weekly was the first time in the last 35 years I had to worry about chasing deadlines and devoting 110% of my life to just that and nothing else.
Not that I don't work plenty right now, but there's a difference when you have "deadlines" and they can be reasonably stressful.

Back on point, my collection, if not handled before I die, will def be sold by Heritage and I'm going to be sure this is in my will. As Jay said, the lower values will be sold otherwise, no doubt direct to buyers unless I go too soon and if it needs to be sold low.. That's life. I choose Heritage for a variety of reasons with only the fact that Heritage does indeed get the best prices as an overall equation.

Chance are my Raymond Chandler collection will be donated to an institution with the proviso there must be a regular and continuing exhibit.
My gambling collection will be sold as a collection, hopefully to someone who will exhibit it.
My ex-wife will get any monies, though I will also make provision for charities that provide education to single parents and their children as well as other needs they may require.