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auctionhouseinsideWe’ve run an auction house for 15 years. We have an auction every Wednesday at 5:30 p.m.

We previously wrote more about our operation here: https://mikebrandlyauctioneer.wordpress.com/2014/05/27/auctioneers-and-d-u-s-t/

Another facet of our auctions is that we permit our auctioneers, clerks, cashiers, ring-workers and anyone else working for us to participate in the auction.

If they want to buy something, they bid just like any other bidder. They can bid themselves, or leave an absentee bid with any of our clerks.

Our theory is simple: By allowing our staff to bid, our clients benefit with higher prices.

I personally buy very little. However, about a month ago, I was the high bidder on a green art glass bud vase. I think my winning bid was $12.50. Following the auction, the bidder who had bid $10 on this vase approached me.

    “You won that bud vase? I bid up to $10 but you bid $12.50? That’s fine, but I want you to know that I know when you buy, you get a discount. As the auctioneer, you don’t pay full price.”

Admittedly, we charge a commission on the sale of all property that comes through our auction house. In the case of this vase, we charged our consignor 25%. His theory was that I received a 25% discount on this vase.

However, upon further analysis, this is only a perception, and not reality.

Let’s look at this perception issue with two scenarios:

    1. Someone else buys the vase for $12.50. The buyer pays me $12.50. I earn $3.13. My seller receives $9.37.
    2. I buy the vase for $12.50. I pay my seller $9.37 and take the vase home.

My customer says, “See, anyone else pays $12.50, and you only pay $9.37.” And it does seem so, but let’s take a closer look, focusing on the sale of this one item.

    • If I start the evening with $100 in my pocket, and someone else buys the vase for $12.50, I go home with $103.13 in my pocket.

    • If I start the evening with $100 in my pocket, and I buy the vase, I go home with $91.63 in my pocket.

What’s the difference in these two scenarios ($103.13 minus $91.63?) $12.50 — the actual purchase price. In other words, I can go home with the $103.13 in my pocket and no vase, or go home with the vase and $91.63 in my pocket.

As such, the vase costs me $12.50, just like it would have anyone else.

Some have said that with a buyer’s premium, this calculation changes, and the auctioneer does receive a discount. Let’s look at this perception issue with two scenarios and a 10% buyer’s premium in lieu of a 25% seller commission:

    1. Someone else buys the vase for $12.50. The buyer pays me $13.75. I earn $1.25. My seller receives $12.50.
    2. I buy the vase for $12.50. I pay my seller $12.50 and take the vase home.

My customer says, “See, anyone else pays $13.75, and you only pay $12.50.” And it does seem so, but let’s take a closer look, focusing on the sale of this one item.

    • If I start the evening with $100 in my pocket, and someone else buys the vase for $12.50 + 10% buyer’s premium, I go home with $101.25 in my pocket.

    • If I start the evening with $100 in my pocket, and I buy the vase, I go home with $87.50 in my pocket.

What’s the difference in these two scenarios ($101.25 minus $87.50?) $13.75 — the actual purchase price. In other words, I can go home with the $101.25 in my pocket and no vase, or go home with the vase and $87.50 in my pocket.

As such, the vase costs me $13.75, just like it would have anyone else.

Do auctioneers not pay full price when purchasing? On the contrary, they pay full price just like any other bidder.

Mike Brandly, Auctioneer, CAI, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at: Mike Brandly, Auctioneer, Keller Williams Auctions and Goodwill Columbus Car Auction. He serves as Adjunct Faculty at Columbus State Community College, Executive Director of The Ohio Auction School and Faculty at the Certified Auctioneers Institute held at Indiana University.