Are you thinking about buying or selling goods at a Phoenix auction? This article will provide you with information about buyer's premiums and how to avoid getting caught up in these unethical practices. Specifics may vary from auction to auction; however, the following information includes helpful and important guidelines from which everyone can benefit.
Buyer's Premiums Also Create Seller Dissatisfaction. Educated sellers almost universally dislike buyer's premiums. They feel, and accurately so, that the buyer's premium is primarily coming out their own pocket. Sellers also understand that a buyer's premium may cause a key buyer to skip their auction, costing them top prices for their items. The more experienced the auction seller, the more negative their opinion of buyer's premiums. The only sellers that seem to like the buyer's premiums are those that have been erroneously convinced that the premium is not costing them anything.
Buyer's Premiums Add An Element of Deception to the Auctioneer/Seller Relationship. A candid Phoenix auctioneer will readily admit buyer's premiums are just another form of commission. An item worth $1,000 is only worth $1,000, so an informed bidder will not bid $1,100 for the item. The bidder will instead just subtract the buyer's premium and bid accordingly. Some argue buyer's premiums are service fees and not truly a portion of the merchandise purchase price. The fact that most states require auctioneers to charge sales tax on buyer's premium included as a part of the total transaction amount shows, that at least in those states, the buyer's premiums are legally a portion of the total purchase price. Some auctioneers will even tell a seller they will conduct an auction at no cost because they are only going to charge a buyer's premium. This assertion seems awfully close to fraudulent behavior considering the sales tax status of buyer's premiums.
When buyers reduce their bid prices to compensate for buyer's premium, the seller's revenue is negatively impacted -- a fact rarely shared with the seller. The only way an auctioneer can be completely honest is to inform the seller that at least 70% of the buyer's premium is additional auctioneer commission. It is the rare auctioneer who makes such an up-front announcement. If an auctioneer is not totally forthright about the nature of a buyer's premium, they introduce an element of deception into their seller relationships.
Buyer's Premiums Are Often a Tool of Unethical Phoenix Auctioneers. Many unethical auctioneers use buyer's premiums to underbid their competitors and to increase their profit margins at the seller's expense. They fail to mention the buyer's premium in their auction proposals but have every intention of adding them on sale day. If the seller later objects to the buyer's premium, the unethical auctioneer explains that the buyer's premium is paid by the bidder and actually increases the overall auction revenue. If the seller is still upset, the unethical auctioneer simply refunds the buyer's premium and moves onto the next unsuspecting seller.
Additionally, a surprising number of sellers (particularly institutional sellers) do not attend their own auctions. Many sellers may never realize an undisclosed buyer's premium was charged at their auction. If buyer's premiums were prohibited, buyers could help police the unethical auctioneers by alerting sellers to undeclared buyer's premiums being charged at their auctions. However, if even a small percentage of Phoenix auctions charge legitimate buyer's premiums, unethical auctioneers are free to add buyer's premiums to every auction they book. To continue reading about buyer's premium, check out our next article: Learn How to Avoid Buyer's Premiums in Arizona Auctions.
Author Resource:-
Deb Weidenhamer is President of Auction Systems, the Southwest's most active auction and appraisal company. Check out our website for our Phoenix auction schedule with no buyer's premiums or call 800-801-8880 for more information.
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