Sotheby’s announced recently they were instituting a new “Overhead Premium” of 1% on the hammer price to cover:
The overhead costs relating to our facilities, property handling and other administrative expenses, and reflects the increasing costs associated with delivering great service and experiences in a highly competitive marketplace.
Sotheby’s could have of course just raised their buyer’s premium (BP) 1% but what sounds better … 25% buyer’s premium plus 1% overhead premium, or 26% buyer’s premium? Can they say they didn’t raise their buyer’s premium?
We have long held that any expenses quoted in pieces might seem lower to the public than one large number. For instance, $500 + $300 + $250 for various charges instead of one charge of $1,050.
However, I’m not sure there’s any more to this story other than increasing costs and proper disclosure. This overhead premium allows Sotheby’s to slide more expense over to buyers, keeping (or lessening) the expense directly charged to sellers.
In Sotheby’s market, buyers are certainly accustomed to costs added to their hammer prices. Sellers in Sotheby’s market are used to somewhat discounted seller commissions and I doubt this change is anything that will get much attention.
Mike Brandly, Auctioneer, CAI, CAS, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at: Mike Brandly, Auctioneer, RES Auction Services and Goodwill Columbus Car Auction. He serves as Distinguished Faculty at Hondros College, Executive Director of The Ohio Auction School, an Instructor at the National Auctioneers Association’s Designation Academy and America’s Auction Academy. He is faculty at the Certified Auctioneers Institute held at Indiana University and is approved by The Supreme Court of Ohio for attorney education.