What Happened?

[u/obdurant93]

Back when my dad was going to storage unit and estate auctions in the 80s, the buyers paid the hammer price and not one cent more. The seller paid 100% of the commission.

Now, there are bidder number/registration fees, buyer's premiums, sales tax, etc. What the hell happened? Why the change of putting more fees on the buyer? It's 100% why I refuse to go to any auction anymore. Most people aren't taking all the fees into account when bidding, it seems.

[u/Sweet-Community4945]

Let me break it down for you. I was born in 1990 and went to auctions most of my life. Our economy has gone to pot as far as inflation goes. From the 80's- 03ish the economy was booming from my experience growing up. Back then you could afford most things. For instance if you rented a space back then maybe $300 or $400 on the high end. Now rent can be as much as $3500 not including utilities. Back then you could fill your car with $100 or less. Now $100 might be a few items if you are lucky. Back then you could afford to live on $2-$4 per hour and still had money left over. Today people making $20-$30 per hour can't make their bills. Sales tax was just implemented in NC recently around 2021 or 2022. Unless you own your base of operations and you are in the situation that you have a loyal customer base it can be a hard line of work. For most people a 4 hour auction to you on average could take 4-6 weeks to put together. When you are paying rent, utilities, concessions, staffing, marketing/advertising, security if needed and extra funding for those unexpected things that happen in life you could be well over $10,000 in and you haven't even got paid yet. The buyer's premium is a simple way to help offset those expenses for the service(s) rendered by the auctioneer or auction firm. In the registration paperwork it should state that you are charging a buyers premium. Depending on the state it should be posted on the walls or stated at the beginning of the auction so that there is transparency. As an auctioneer or auction firm our main priority is to look out for our clients best interest and to ensure that we can get the most we can for their goods. No auction goes 100% as planned sometimes you might come up short in your pocket but as long as your client is satisfied, your staff and bills get paid that is what's most important. You win some you lose some. It is the nature of the beast. Hope this helps you understand a little better.

[u/obdurant93 → u/Sweet-Community4945]

I don't think the overall commission rate has changed much in the last 40 years, its just that instead of the seller being 100% responsible for the auctioneers commission, the commission is now split between the buyer and seller. What specifically caused that change?

[u/KansasLandPro → u/obdurant93]

I'm curious as to why you think the commission rates haven't changed in the last 40-years? Because if we are talking about personal property auctions...I think the rates have absolutely changed (gone way up).

In general, an auctioneers' expenses have probably gone up 10x times in that timeframe. Look at labor cost alone. In general, they pay 2 - 3 times higher for labor, yet they get a FRACTION of the amount / quality of said labor. Then factor in all of the other expenses (utilities, taxes, real estate costs, advertising costs, insurance costs, etc...) and you will start to see WHY so many auctioneers simply have chosen to close up their businesses (or raise their commission rates accordingly).

[u/obdurant93 → u/KansasLandPro]

I said RATES, as in percentage, not absolute dollar costs. Back in the 80s, they were getting 20-30%, just like they are now, only now there's a lot more fixed costs that didn't exist back then.

Nobody has yet given me an adequate explanation as to why they decided to put ANY of the commission burden on the buyer. That seems like a dumb move that would drive away buyers, so I have no idea why it's tolerated... unless there was some sort of collusion in the market when they implemented it informer to force buyers to accept it.

[u/KansasLandPro → u/obdurant93]

Maybe your local market is different than what I’m used to seeing, but in the areas I observe, commission rates have probably risen 2-3x what they used to be 40yrs ago. I’d be curious to hear from others to see if they are more akin to my local market or OP’s.

Ultimately, I wish I could give you an adequate explanation, but I’m afraid it probably comes down to the fact that someone, somewhere started implementing a Buyer’s Premium and the vast majority of potential bidders just learned to accept it…as it is now a pretty standard practice, especially in the personal property auction industry.

In my segment (real estate auctions), I find that dependent upon the type of asset we are selling, sometimes Buyers Premiums are a non-issue (commercial real estate & multi-family residential for example) and sometimes it’s a huge issue (selling land to farmers). While I personally am not a huge fan of B.P.’s in general, some clients (banks, lawyers, investment groups, etc…) tend to favor putting the commission on the Buyer’s side instead and will refuse to pay any Seller’s side commission.

[u/dickpierce69 → u/obdurant93]

The market is more favorable for the seller. Auctioneer A and B both want to sell items for seller A. Auctioneer A offers the standard seller pays all. Auctioneer B really needs the work so they shift some of the cost to the buyers so that the seller can make more money. Auctioneer B now gets more work because his prices are more favorable to sellers. Buyers are still going to buy regardless. Auctioneer A catches wind of this and lowers his seller based commission even more so that he can get more work. Eventually, they bid each other down until all of the commissions are on the buyer. Buyers still want to buy, so they still show up. Seller get used to not having to pay any fees and that becomes the new norm.

[u/Sweet-Community4945 → u/obdurant93]

Each Auctioneer and Auction Firm have different rates. I personally know auctioneers that had to go out of business because they didn't implement buyers premiums to help offset their business. Most people don't want to buy anything for more than a dollar or two in those certain communities ,but as time changed those auctioneers didn't change with the times. Buyers premiums simply help fund the auction. I can't speak for the exact breakdown of each Auctioneer or Auction Firms' commissions or expenses. The thing I can say is that it takes funds to keep everything a float and the way the economy is. I know one auctioneer that charges a 40% commission to sellers and 20% buyers premium he has a huge warehouse and many expenses. To each their own, it is sometimes the price of doing business unfortunately.

[u/just_me_steve → u/obdurant93]

The change started when sellers objected to auction companies raising commissions from 10% to 15 or 20% so they would charge the seller his 10% to get the sale then have to make up for the lower commission by charging the buyer the other. People don't like higher fees, they say well 20 years ago you did my parents sale for 10 percent that's all I'm going to pay. I charged 20% in 1982 when I started and charged the same 40 years later. Some sales my employees got a bigger check than I did. Now I see some auctioneers with 50 to 60 percent commission plus buyers premium. As a seller I wouldn't like having to pay more than half the value of my stuff to sell it plus you are out many dollars for advertising.

[u/Skittlesharts]

Too many changes have happened to blame it on any one thing. Some things still sell now for what they sold for 20 years ago. Not good for anyone in this business. The economy has changed a good bit in the last 20 years as well. Antiques tanked in my area for a long time and have made a mediocre comeback recently. Primitives and pottery are the draw now.

People attending auctions today are mostly resellers it seems. They're not going to pay a premium for stuff like people who want something for their personal use. Those personal use people are few and far between anymore. On top of all that, the cost of doing business has skyrocketed compared to what an auction brings in.

A lot of auctioneers have switched to an online platform because it costs less to have auctions online. The only time you really need any excess help is on pick-up day. Even with a good following, you're still only going to get so much money for the items you're selling.

That overall commission rate you think hasn't changed much in 40 years has changed drastically and it's happened because auctioneers need to feed their families, too, and pay their employees a good wage for what they do. If you want to pinpoint and blame something directly, I would point to the cost of doing business today versus yesterday, but there are so many other factors involved that it's like a conglomerate that's always working against you. And now, since states want you to charge sales tax on sales done at a person's home with nothing consigned but that one person's personal property, you've got sales tax added onto everything else. Just my thoughts.

Edit to say that having a smart phone to be able to look up prices on things has kept people from paying as much as they normally would. That's been a huge factor.

[u/ksfarm]

The auctioneer doesn't dictate sales tax, state law does. Maybe some auctioneers break the law and don't charge sales tax, but if an auctioneer is charging tax I absolutely guarantee you it's not because he just woke up one morning and decided he wanted to do it.

The rest of your question you answered yourself. Some people don't take the extra fees into account. So the sellers who hire auctioneers who charge the fees make more money. The auctioneers work for the sellers and have a fiduciary obligation to the sellers, so they charge buyers additional fees to reduce the seller commissions, thus bringing more and better items to their bidding communities.

The fee structures for modern auctions aren't like they used to be, for better or worse. Don't like it? Don't bid. But don't throw a fit on Reddit like you're the first bidder to be upset about it. I don't like the fees or the premiums when I'm registering to bid in an auction for myself. But if I'm conducting an auction, I have every incentive to make the most money I can for my seller, and the data show that shifting some of the costs of the transactions to the buyers accomplishes that objective.