Commissions, Premiums, Smoke & Mirrors - Don't Let the House Win

The traditional auction world almost seems designed to confuse the uninitiated.

Commissions, Premiums, Smoke & Mirrors - Don't Let the House Win

Arcane terminology, obscure laws, and theatrical presentation can make it hard to discern what is really going on in an auction. No part of the process is more misleading than fees, commissions, and buyer's premiums. So, what are they, and what should you know?

The commission is simple, it is the percentage of the final price of the item charged to the seller. While a standard commission is often published, in reality, it is highly variable, depending on who you are, what you are selling, and how much the auction house wants it.

A private seller with a run-of-the-mill item may be charged as much as 15%, regular sellers or 'trade' around 5%, and for those with a highly desirable item, the charge may be zero - or in exceptional cases - less than zero.

The same is true for the other fees which can include transport, storage, insurance, photography (a variable charge depending on size and position), listing fee, success fee (a new wheeze to charge more should they manage to get over the high estimate for your lot) and - if you are unsuccessful, an 'unsold' fee which may be charged unless you agree to re-list at a lower reserve price. All of the above can be applied, or not, at the whim of the auction house, depending on how badly they want your custom.

Believe it or not, prior to 1975 there was no such thing as a buyer's premium. Then Sotheby's and Christie's both decided to add 10% to the final price paid by the buyer, to be retained by the auction house. There was outrage, but they persisted and eventually the buyers paid it and other auction houses followed suit.

Over the years the fees have steadily increased with a tiered reduction in the headline rate over certain, eyewatering, price thresholds. For watches and jewellery, the major auctioneers charge between 23% and 27% (plus VAT) although the rates other commodities such as cars may be lower. Of course, an increasing buyer's premium allows auction houses to tempt naïve sellers with offers of 0% commission, knowing that they are still earning 25% at the other end (or, indeed, to offer exceptional clients a cut of this 25% to secure a prize lot- see 'less than zero' above.).

This, often correctly, assumes that sellers don't join up the dots and see how little of the 'achieved price' they are receiving. Grateful to have their commission cut from 15% to 10% and a few sundry fees waived they don't realise that they are effectively being charged the buyer's premium too, as it is part of the total price that they never see.

Auction houses love to trumpet their achievements, but it is rare that they mention 'hammer price' for more than that brief moment in the saleroom. Achieved prices, including premium, are quoted because more sounds like...more. The actual amount returned to the seller, the hammer price minus any of the aforementioned deductions is a private matter.

Watch Collecting do things differently. There is no commission charge to the seller at all, so there is no negotiation necessary. The only fee is photography - paid to the photographer - and only if you need it. Our total 'take' from the deal is clear and unambiguous 5% plus VAT above £10,000 and a flat fee of £500 plus VAT below. Our published prices are the 'hammer price', i.e. The amount received by the seller.

To extract this from traditional results you would have to deduct 30% and guess how much the seller was charged. A comparison of Watch Collecting's results in the short time we have been 'live' show that we return far more to the seller than most other auctioneers, even those with global offices and centuries of history. If our overall 'achieved' price is sometimes lower, this can be seen as a 'win-win' with the seller receiving more and, at the same time, buyers paying less.

If you have a watch to sell, look behind the hype and ask how much you will actually receive. Don't let the (auction) house win. Consign with Watch Collecting.