by Meghan M.M. Trimm

Auction houses make their money in two ways: through buyer’s fees and seller’s fees. When an item is purchased at auction a percentage of the bid is added to the sale. This goes directly to the auction house for operations. In many cases percentages are added from both the buyer and the seller. This is considered an auction best practice, and is used by the foremost auction houses in the country. However, splitting fees occasionally draws confusion. So, here’s four reasons why buyers’ and sellers’ fees work for you.

  1. Buyer’s Premium: Part of a Sweet Deal

Let’s do the math. If you bid $100 on a vintage personal sauna, for example, you might pay a 10% buyers’ premium. You pay $110. Now, examine how much that item might have cost you at retail. In the case of the personal sauna; retail prices range from $200 to $2000. The fact is, as a buyer, auction deals are so potent that even with a buyers’ fee—you’ve beaten every other price.

  1. It’s All About the Customers

Auctions are rare in that they are a double-sided platform; meaning the industry serves both buyers and sellers. That means every auction house strives to cater equally to sellers, who make auctions possible in the first place, and buyers, who make auctions successful.

With the need to keep both sides happy in mind, auction houses divide their fees between buyer and seller. No one is solely responsible for the cost of a sale. That means each side pays less.

  1. Splitting the Bill is Fair

Each customer segment plays an important role. Buyers get to take home things they want. Sellers get to exercise complete control over the sales process as well as a guarantee of sale and sale date. They also reap most of the profits.

Both buyers and sellers get customer service and expertise from auction houses.

If both are essential and both receive the same services, why should they be charged different prices? In an industry that prides itself on fairness, it’s no wonder that split fees have become standard practice.

  1. Freedom & Flexibility for Resellers

Auctioneers know a high percentage of auction buyers become sellers at some point. Collectors purchase items over long periods of time, and then sell their collections for profit. Others resell or upcycle pieces bought at auction. These resellers might use auctions as a place to get rid of old inventory to make room for new. This is a kind of free trade made possible by splitting the fees with buyers.

Traditionally, sellers bore the fees alone. That meant when an auction goer decided it was time to sell a collection or sell off old inventory they would be hit with a very high fee. This high sellers’ fee ended up discouraging sales. That was a problem for everyone. Again, without sellers – no auction at all.

The introduction of the buyer’s premium, as it is also called, helped ensure the balance of cost. Now no one gets knocked for a loop when they need to sell. It’s a good deal for everyone.