From time to time everyone has thought or asked why do Auction Houses charge what they do just to sell an item and make all the money? Here are the basic answers.
A. Mortgage or lease payments for the building
B. Heat, air-conditioning and utilities
C. Insurance both for your items and liability
G. Website cost
I. Catalogue and Ad copy layout
K. Taxes (these don’t even go away when you die)
L. They need to make money to stay in business
M. The list goes on and on!
Now what do you get for paying commission to the Auction House and why do they charge a buyers premium?
A. Proper advertising, professional design and layout
B. Proper evaluations (appraisers charge $150.00 and up and hour)
C. You don’t have to deal with the buyer someone else has all the headaches
D. A focused sale to the proper market and all the contacts the Auction House has developed over years of selling. This includes direct mailing to clients you can’t reach.
E. The Auction Houses make money based on a commission, so the more it brings for you the more they make. With this incentive they strive to get the highest price possible
F. Access to the Auction Houses facility to sell the item in an atmosphere that is conducive for selling the item
G. Auction Houses are in competition with each other. The more valuable your item the lower the commission charged to you. This is how buyer’s premiums came about; with the buyers paying a commission your commission is reduced.
H. As in any business everything in the Auction business cost money. The Auction company generally knows what it cost them to sell an item or have an item go threw the auction. The cost vary but in most cases for upscale Auction Companies it runs between $100 and $200 per item. So when you hear of an auction with 1000 items grossing $1,000,000.00 it has cost the company a minimum of $10,000.00 just to pay for the labor to move the items in general and does not include advertising and other expenses. This money is gone before one item is sold.
I. The Major Houses can charge a low as 0% for selling an item; of course the value of the item is mind boggling too.