36 replies to this topic

[martin swan]

I've been surprised to discover in a recent thread that auction houses charge sellers large penalties if they choose to withdraw their items from sale before an auction. Skinners for instance charge 35% of an average drawn from the low and high estimates ...
I thought this must be some weird Skinners thing, but a quick check of a Tarisio consignment agreement shows that they charge 25% in the same scenario.
What is the actual justification for this practice?
I can see that it involves a good deal of wasted time and energy for the auction house, but let's look at the figures.
If I consign a violin to an auction house and it sells for £50,000 on an estimate of £30-40,000, I pay them (on average) a sellers commission of 15%, or in the case of Tarisio significantly less. For the sake of argument an average of £5000.
If I want to withdraw my violin from sale at any time, even before it has been catalogued or photographed, I will have to pay an average of 30% of £35,000, or £10,500.
Can this be right?
The maths I mean ......!

I'd like to point out that this isn't meant to be critical of the auction houses, I'm just trying to understand this policy and whether it's standard practice. I will continue to consign stuff to auction houses even though this policy seems pretty bizarre.

[jacobsaunders]

Perhaps you shouldn`t sign contracts that you don`t feel obliged to carry out, Martin

[martin swan]

Perhaps I should read them!

[henrypeacham]

Add Heritage Auctions to the list of auction houses that charge a percentage if a consignor chooses to withdraw after having signed the contract. It would seem to be an established standard practice of which you are just now becoming aware.

[jacobsaunders]

I am constantly telling customers to steer well clear of the Dorotheum in Vienna with their violins. The joke there is that they give astronomic valuations/reserves when taking consignments, then unsurprisingly fail to sell anything at all at the auction. After the (failed) auction they refuse to return the consigned violin and insist on putting it in the next auction 6 months later, where it fails to sell a second time etcetera ad infinitum. This becomes a never ending loop. There are 2 particularly negative effects:
1. I get a shop full of people grumbling that their violin is being held hostage, although I told them never to go there in the first place, at the pain of death.
2. The Dorotheum catalogue is emetic, since it, for the most part, only contains the crap I didn`t buy last time.

[fiddlecollector]

For those interested Bonhams terms are in the table on the left at 3.1.1 ,on withdrawal a notation fee is payable which is a percentage of the commision and buyer premium (that would be charged if it had been sold).But it goes by at what stage in the process the consignment is at.
Having bought and sold at auction for decades i have never read all this small print and never needed to,thank god.
By the way is the Skinner fee a percentage of the sale price or premium/commision?? Makes a big difference!
Bonhams

[Christopher Reuning]

I believe auction houses calculate their withdrawal fees as approximating the total fees they earn from both buyer and seller.

Most auction houses charge 20-25% buyers premium and up to 15% sellers fee.

[martin swan]

Bonhams seem to charge withdrawal fees (!) on a sliding scale depending on how close the item is to the auction and what work they've put in. It starts at 25% of what they'd hope to net for a sale (the "notional fee") and rises to 100% once the thing's in the catalogue.
"The Notional Fee will be the sum of such
Commission and the Buyer’s Premium
which would be payable to us if we were
to have sold the Lot at the Sale for the
Notional Price."
Tarisio's 25% appears to be on the average sale price, Bromptons charge 20% of the reserve price .... it's a lot of money!
I imagine the reason for these penalties (one has to see them that way) is to prevent people withdrawing stuff at the last minute because they get an offer from someone else.

Anyone else admit to never reading the fine print?

[Ben Hebbert]

Martin,

The huge curse for the auctioneer is the vulnerability of exposure. Essentially, you do all the work to get the business, you expose the object on the market, and then on the basis of your market expertise, the owner of the property and another party do a deal behind your back. You loose the sale, and all the work that you have done to line up bidders, as well as all the money that you were contractually entitled to. It may seem senseless on a violin worth a few thousand, but put into the perspective of a Picasso or a Rubens (let alone, the star lot in a violin sale) it makes more sense, and ultimately one rule fits all. Once the auctioneer has played his cards - i.e. estimating a lot at a certain value - its not unknown for vendors to market their property themselves, and certainly not unknown for other parties who know the vendor to try to make counter-offers before the sale (and with high profile lots, anyone who needs to know who the vendor is probably does. Therefore it makes sense that they can protect their interests.

Hope that this helps!

All my best,

Ben

[mhfais]

First off, many thanks to everyone who wrote in for all the support and input I received concerning my recent thread about my experience with Skinner. Once that thread returns to Maestronet, I hope to reply more specifically to individuals.
Martin, your post about auction withdrawal fees is quite relevant, and I just want to say I could better understand the reason for a withdrawal fee once real money has been invested by the auction house (for example if they had produced a printed catalog and the item had been advertised for many weeks), but it doesn't make sense in a case like mine where I officially gave notice of my desire to cancel the contract within 36 hours.
Heather Fais

[deans]

I think a point that Ben is making is that the auction house might want to protect itself from an individual who already has a potential buyer but is taking advantage of the house's expertise to establish a fair private sale price (which may be different than other appraisals), thus both the buyer and the seller are happy to make a deal and avoid paying any auction fees.

I'm not in the auction business, so maybe I got it wrong, just trying to look at it from their point.

[Christopher Reuning]

Ben, an auction house generally will provide a free market appraisal with no obligation. In other words, a client can access their expertise prior to signing any contract.

[martin swan]

Ben, how are you?
Thanks for the reply - that's pretty much what I had figured out!
When my attention was first drawn to this (I have consigned many items to auction and never noticed this clause before) I thought it was ludicrous, but I now understand it as a kind of penalty which the auction house imposes on sellers who decide to do private deals in the run-up to an auction. It's a draconian measure but I see the logic.
As you point out, these deals happen because people tend to know where items have come from - it's a small world.
However, I hope that auction houses routinely waive these penalties when the reasons for withdrawing an item are demonstrably non-commercial.

[GlennYorkPA]

First off, many thanks to everyone who wrote in for all the support and input I received concerning my recent thread about my experience with Skinner. Once that thread returns to Maestronet, I hope to reply more specifically to individuals.
Martin, your post about auction withdrawal fees is quite relevant, and I just want to say I could better understand the reason for a withdrawal fee once real money has been invested by the auction house (for example if they had produced a printed catalog and the item had been advertised for many weeks), but it doesn't make sense in a case like mine where I officially gave notice of my desire to cancel the contract within 36 hours.
Heather Fais

Heather,

Could you answer my questions about what caused you to change your mind when you stood to make a nice profit from the public sale of your violin?

Glenn

[martin swan]

With respect Glenn and Heather, I think Maestronet would rather we didn't discuss this specific case for now, that's why I started a new thread about a general issue of auction house policy which interests me.
My apologies if I made that thread more contentious than it needed to be ...

[Ben Hebbert]

Ben, an auction house generally will provide a free market appraisal with no obligation. In other words, a client can access their expertise prior to signing any contract.

Chris - good to hear from you and as always you are absolutely right! And its the free appraisal service that many auction companies offer that is their biggest tool for business-getting.

However,

1) when the contract is signed, the contract is signed.

2) From the auctioneer's point of view, there can be an enormous investment - sometimes years upon years of relationship - expended in getting a piece to market.

3) From the moment it is consigned, the auctioneer could be working on pre-sale marketing, long before the catalogue appears, lining up clients that will have to raise the cash.

4) Its seen as very humiliating for auctioneers to have major lots withdrawn. It suggests that they have got things wrong, and clients can be justifiably aggrieved if they have put their focus on a lot that they are unable to bid on because the auctioneer failed to properly research/secure the lot. That has a cost to business.

5) Its no different from when you take a violin on commission, and once you've taken it to market, the owner turns around to his stand partner and offers it at a 'less commission price' privately, having used the contract to set the market value.

6)There is an interesting flip-side to this. If you make an offer prior to the sale, because the auctioneer is working on behalf of the vendor, he is compelled(at least under European law) to bring it to the attention of the vendor (and thus earn his commission), although in practice this rarely happens.

This all makes a huge amount of sense in the art-market with paintings worth millions, but as I've said before - one rule fits all. Moreover, specialist departments in the big auction houses tend to be ruled (not run) by very blinkered 'business managers' who are brought in as management accountants from the outside to see things as black and white. It makes discretion a much harder thing to work with.

Anyway, why am I defending the auctioneers? I hope I'm not - just playing devil's advocate and expressing it through their eyes (and legal departments).

All my best,

Ben

[jacobsaunders]

Anyway, why am I defending the auctioneers? I hope I'm not

Yes Ben, I have also been in this very quandry and felt very uncomfortable about it during these two threads. Bottom line is that the lady from America would, with the benifit of hindsight, almost certainly have been better off, in a whole list of respects consigning her fiddle to a good violin shop, possibly one that she has known, used and trusted for the last 30 years or so. It is curious how many musicians think that they, on the one hand “will get more” for there violin, selling at auction and on the other hand think they could buy one there more cheaply.
Moral of the story, I think is for musicians to keep clear of Ebay, Tbay, Skibay, Sothbay, Bonbay and all other bays.

[Conor Russell]

Years ago, a good teacher, who had been a client of my then business partner for years, came in to us wanting to sell his Italian violin.

We reckoned the value at about £30k, the violin would have needed repair, and a good freshen up before it could be sold by a good shop, but he took it for a valuation to a big auction house, one of Jacob’s bays, and they told him £60k. We were the worst in the world, rip off merchants etc, which in a small pond like Ireland is no good thing to be!

So off he went with his fiddle, and put it in to the auction. It didn’t sell, so in it went again, with another £600 for a picture in the book. It didn’t sell, so in it went in November, because that would be better. It didn’t sell.

Eventually a certain amount of panic set in. The fiddle was taken out and given to another house on the bays list, who estimated it at £30k.

It sold first time, at £29k.

I was told he came home with £6k, but not by him. We were still the worst rip-off merchants in the world. We never saw him again.

One of the reasons I prefer to be a violinmaker.

Conor.

[GlennYorkPA]

With respect Glenn and Heather, I think Maestronet would rather we didn't discuss this specific case for now, that's why I started a new thread about a general issue of auction house policy which interests me.
My apologies if I made that thread more contentious than it needed to be ...

My question was ignored in the previous thread and will doubtless receive no response in this one either so, Martin, if I were you, I would continue to sneak in my own interests but not advise others to restrain their interests based on the supposed sensitivities of a public forum.

Glenn

[martin swan]

Glenn, once again apologies, I think you have mistaken my meaning.
I didn't advise you to restrain your interests, I suggested that we might be putting Maestronet and its moderator in an uncomfortable position by discussing the particular case further. I for one am very interested in hearing the answer to your question if and when that thread is re-opened.