An auction company’s obligation is to protect the interests of the consignor, not the potential buyer. As a buyer, your relationship is at best that of a customer whereby the auctioneer should answer your questions truthfully, but will not protect you from making a mistake on your own, and will not make disclosures that you don’t specifically request. In practice, my experience is that auction companies encourage their bidders to be overly aggressive, especially if the consignor is a close client of the auctioneer, or when the auctioneer holds a principal interest in the items being sold. We act as buyer’s agents at all major U.S. coin auctions. As a buyer’s agent, we protect your interests as a client.
While I prefer buying in a private sale over a competitive auction room, buying the best coins often requires bidding at auction. And when competing at auction is necessary, having an experienced coach to look out for your interests alone, to maintain your privacy, and to offer the same options as a private transaction, all at a minimum cost — that seems like an easy decision. The auction room was once a mysterious and almost scary place for a new collector. According to popular auction myth, a scratch of your nose or wink of an eye and suddenly the auctioneer was hammering a lot your way. While I’m not sure that has actually happened, there was certainly the threat of competing bids from the chandelier, secret reserves placed on behalf of the seller, and house bids designed to drive you toward your limits.
Over my 45+ years in the coin business, there has been an explosion in the amount of information available to buyers, leading to a collapse in buy-sell spreads. Thankfully, for those of us on the sell side, volumes have multiplied well past any of our expectations of even 20 years ago. Cause and effect? Maybe.
However, there is one commission rate that has resisted this trend. As if by some unspoken agreement, fees for buy-side auction representation have held steady at 5%, even as price levels have risen dramatically.
Well, it’s time to ask “Why the High 5?”.
I am a buyer at all major U.S. coin auctions, both for my own account, and on behalf of my clients. My fees are per lot, are based upon the final auction prices realized (hammer price plus buyer’s fee), and are assessed only on those lots where we are the winning bidder, as follows:
APR under $100K : 5% of APR
APR $100K to $250K : $5,000 flat fee
APR $250K to $1 Mil : 2% of APR
APR over $1 Mil : $20,000 flat fee
Even more important than saving money on auction commissions, you will have an experienced auction buyer as your personal “auction coach”. For less than half of the next auction increment, I act on your behalf and protect your interest on the auction floor. Prior to the sale, we discuss condition, prior sales history, comparable sales, and any hidden provenance. During the sale, I bid on your behalf, but under my personal OCNUMIS bidder number, using my established credit. After the sale, I take delivery and handle payment, all in as discreet a manner as possible.
WHY USE AN AUCTION AGENT?
Buying both for inventory and on behalf of clients, I have personally attended and have been an active buyer in nearly every major American coin auction since the late 1980’s. Today’s auction room has become much more transparent, with reserve prices in coin auctions usually disclosed in advance, large high quality photos available for viewing online, and wide accessibility of prior sales data all seeming to level the playing field on behalf of bidders. Additionally, with the rise in popularity of eBay, as well as the many online auction venues operated by individual dealers, buyers have become more comfortable with buying coins through an auction format instead of negotiating privately with a dealer.
What the auction company doesn’t tell you
However, there are a number of items that are not mentioned in auction company advertising, nor are they included in the terms of sale.
The auction company’s client is the consignor, not you, the buyer
The auction company’s obligation is to protect the interests of the consignor, not the potential buyer. A client relationship exists, or should exist, between the auction company and the consignor. As a buyer, your relationship is at best that of a customer whereby the auctioneer should answer your questions truthfully, but will not protect you from making a mistake on your own, and will not make disclosures that you don’t specifically request. In practice, my experience is that auction companies encourage their bidders to be overly aggressive, especially if the consignor is a close client of the auctioneer, or when the auctioneer holds a principal interest in the items being sold.
The auction company’s obligation is to protect the interests of the consignor, not the potential buyer.
Many of the auction lots are owned by the auction company
A significant portion of the lots offered for sale at auction often are owned by the auction houses or their affiliates. These house-owned lots are never disclosed, and without question, the auctioneers cannot provide impartial advice to bidders on items in which they hold a principal interest.
The auction company is often bidding against you, and has knowledge of your prior bidding activity
Auction companies track your prior bidding in order to predict your future interest. They record your bidding activity, noting where you have been the under bidder, even if you are bidding from the auction floor. Armed with that knowledge, they then know just how hard to push you toward your bidding limits as coins in your areas of interest are offered.
The auction companies will often not disclose a coin’s prior sales history
Auction cataloguers are eager to reference a prior sale at a record price, or to draw attention to a favorable comp. However, their memories often become selective when it comes time to reveal a weak prior sale, if a coin has repeatedly failed to sell in prior auctions, or sold previously at a lower certified grade. Even important pedigrees such as Eliasberg, Garrett, Norweb and Pittman have been ignored so as not to provide disclosure on coins that have been cleaned or doctored.
Using an auction agent
An auction agent represents an auction buyer in a client relationship. This client relationship demands that the agent place the interests of the client before his own, and that the agent make his best efforts to discover and disclose all known relevant information about the lot in question.
If you are an auction buyer, it is highly likely that you will benefit from using an experienced auction agent. Call or email Joe to discuss auction representation in his areas of expertise.