What’s Wrong With The Buyer’s Premium ?
Introducing The Buyer’s Premium
About 25 years ago, the major auction houses started charging a buyer’s premium. The amount was a hefty 10 %. Generally, the seller was also charged a 10 % premium. In other words, the auction house customarily made 20 % on each sale.
We Won’t Pay
Prospective buyers were outraged. They protested. They threatened to boycott. But in the end little came of this anger.
Would You Like To Pay 20 %
The auction houses eventually concluded that if buyers paid 10 %, maybe they’d pay even more. Consequently, the premium for buyers now hovers at or close to 20 %. And, we now know that certain principals at a couple of "reputable" houses conspired to willfully violate U.S. law in fixing those astronomical premiums.
We Don’t Do Anything To Earn It, But Pay Us Anyway
In charging this premium, the auctioneer is taking money out of the buyer’s pocket and putting it in his pocket. In exchange, he performs no service for the buyer. He gives nothing, free of charge, to the buyer. He simply takes the money and, as a result, arbitrarily inflates the amount paid by the successful bidder. Would you tip the cashier at a gas station after pumping your own gas? You already have if you bought at auction.
UPDATE: Another Increase in Buyer’s Premium
A recent article in the New York Times reported that the auction house, Christie’s, increased its buyer’s premium once again. The buyer’s premium is what you, the buyer, pay the auction house for doing absolutely nothing for you as the buyer. Christie’s increase now puts that premium at 25%.
Typically, Sotheby’s and many other houses will follow Christie’s lead. A couple of things are certain. In the near future, the buyer’s premium shall continue to increase. And, secondly, the auction shall continue to do nothing of consequence for the auction buyer.
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