With a number of other auction houses increasing their buyer's premium, it is important for auction participants, both buyer and seller to be aware on how buyer's premium affects them. Buyer's premium is a charge some auction houses impose on top of your winning bid. Say you win a coin for $100 and the auction house charges 19.25% buyer's premium; you'll end up paying $119.25 for the coin. If they charge a seller's commission of 15% then the seller gets $100 - 15%; $85, or 71% of the purchase price.
This may seem very deceiving, with auction houses taking a 29% cut despite advertising a commission rate of only 15% and there was a time when this practice was illegal, but due to the campaigning of Bleakley at Sotheby's the practice was became legal under some circumstances.
Buyer's Premium is for Wholesale Auctions
This is an important distinction where buyer's premium is legal - trading in a way where the public may be misled about the price is illegal but exceptions are made when the target market consists of businesses. This means that every auction house which charges buyer's premium is a wholesale auction - for sellers this means lower realisations and for buyers this means no guarantees, no refunds and a multitude of extra charges along the way.
Buyer's Premium was Illegal
There was a period of time when buyer's premium was illegal in NSW but for a different reason altogether. Clause 30, Schedule 22 of Auctioneers and Agents Act 1941 made it illegal for licensed auctioneers to obtain commissions from any party other than the vendor, the reason being that an auctioneer is charged with representing the vendor's interests in ensuring the highest possible price. In charging a buyer's premium, they are therefore providing a service to the buyer and in turn must represent the buyer's best interests too. This conflict of interest was never resolved, but instead the practice was made legal in NSW as the state was losing revenue with auction houses simply hosting their auctions at interstate venues to enable the charging of buyer's premium.
Buyer's Premium when Buying
Once you understand the concept of buyer's premium and you know the commission rate, you can simply reduce your bids by an equivalent amount. For example, if you were intending to bid $100 and the auction house charges 19.25%, then only bid $80 so that you end up paying a net price of under $100. In addition, most auction houses charge extra to pay via credit card so you should factor this in your bid too.
Buyer's Premium when Selling
This practice of reducing bids to accommodate the buyer's premium hurts vendors most in the form of reduced realisations. Not only are the final realisations lower because of the commission, the auction house will typically charge you another lot of commissions in the form of their seller commission. So at the end of the day, you get a wholesale price, minus buyer's premium, minus seller's premium - it doesn't sound very tempting to sell at auction now does it?
Numis Bid doesn't charge Buyer's Premium
Numis Bid is a retail auction with a bidder base consisting almost exclusively of collectors - collectors don't want to be harassed by additional premiums, charges and fees; For that reason we don't charge any buyer's premium whatsoever and we don't charge additional fees for various payment types - because of that we are able to achieve the highest net prices for our clients while at the same time offering good value to our buyers.
Our dream was to create a low margin trading platform where collectors can freely upgrade coins in their collection without being hit by excessive charges at each turn - we believe we have achieved that.