R. O. Schmitt Auctions vs. Jones and Horan auctions

Discussion in 'American Pocket Watches' started by robert jeansonne, May 15, 2016.

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  1. robert jeansonne

    robert jeansonne Registered User

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    #1 robert jeansonne, May 15, 2016
    Last edited: May 15, 2016
    Does anyone on this board follow the R. O. Schmitt clock and watch auctions? There was a watch auction that ended today, and I typically follow the Howards, with special interest on presentation watches. The Schmitt auctions typically fetch 1 1/2 to 2 times more for their merchandise (same quality and rarity) than the Jones and Horan auctions do. Is there a difference?? Any thoughts anyone? I think it would interesting to see if one could "load up" on some of the pieces offered on one of the two yearly J & H auctions, and ship them out for resale at the Schmitt auctions. Not for sure the fees between the two, but one could make out nicely......
     
  2. Dave Coatsworth

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    Hmmm... I won 3 lots today and was just thinking they went for less than they would have at Jones-Horan. That's typically been my experience. However, RO Schmitt has a 18% buyer's premium, whereas Jones-Horan has none, so that might bring my buying experience pretty much to equal.
     
  3. Marty W

    Marty W Registered User

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    Buyer's Premium is the worst type of extortion in the world.

    Just think about that statement.

    You, as a buyer, have to pay a 'tax' on your bid.

    That's out-f----rageous.

    End of rant.
     
  4. Tom McIntyre

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    I have not seen any of the auction house accounting records, but I suspect that they calculate profit and loss just like any other business.

    If you add up the staff cost and facility costs as well as the travel and overhead of gathering auction items, the revenue from the auction needs to cover those expenses and leave a bit over for incentive for doing the work.

    About 15 to 20 years ago there was a competition among auction houses to acquire collections for sale from potential sellers. I do not know who proposed the idea of a buyers premium, but it was pitched with the idea that it lowered the cost of selling for the consignor. I remember discussing this at the time with some auctioneers and doing the math to show that it actually cost the consignor more to put in place a buyer's premium if the buyers all rationally included the premium when deciding how much to bid. The counter to my argument was that buyers are not always rational. Over the years I have come to agree with that view and have experienced the irrationality myself.

    I still believe that the buyer's premium is not a good idea because it causes confusion and some uncertainty for those bidding. However, the auctioneers that use the mechanism are pretty well set in the practice at this point. In any case it is hardly extortion since the formula is known in advance from the auction rules.

    If you want to know which auction house is the best value you need to look at results. You might think that those with large facilities in major cities would be much more expensive to use. In fact the practical shore of the results of the sale yields about 50% to those venues from the sale. However, the visibility and advertising reach of the auctions houses may easily justify paying such a premium. Ultimately all this money comes from the consignor. If you contrast Christies, Sotheby's, Bonhams or Skinners with Jones & Horan or R. O. Schmitt you see much lower overhead for the latter two but not as large a presence in the overall antiques community. The expectation is that if all other things were equal, the low overhead auctioneers would realize lower final prices on the items sold but, perhaps, the consignors would realize the same net cash results over the long haul.

    If you are a buyer rather than a consignor, you are not really part of the equation since you have only a simple purchase contract as a result of your bids. You are competing with the other bidders, not the auction house and the consignors. From the buyer's perspective the more expensive the auction house, the more they may expect to pay, but that is not really as clear as it seems either. I have been buying and (rarely) selling in all these venues for over 40 years and my experience is that there are things I can enjoy buying in all of them. On the occasions when I have caught bidder's fever and paid more than I had thought for items I have been comforted by the knowledge that I was only a little bit more reckless than the under bidder.
     
  5. robert jeansonne

    robert jeansonne Registered User

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    I believe the underlying reason for a buyer's premium is to basically cover the Seller's consignment fees. I don't think auction houses "double dip" getting extra revenue from both sides. The reason I say this, is that a reputable consignment auction house in Illinois I had contacted to sell one of my CW firearms was calculating my return based off the "hammer price" minus fees (18%) and not the selling price minus fees (18%). The buyer was basically paying the consignment fee for the seller. I don't know how Jones and Horan does it. The seller must be absorbing all costs to do business, which is the way it should be.
    If the buyer's aren't factoring in the buyer's premium (which they don't appear to be at the Schmitt auctions, because some of those watches were going for well over the predicted estimates, without the BP factored in.), they are way over paying for the items, IMO. Regardless, I guess one still has to ask themselves, "what is this item worth", and my response is always "what someone is willing to pay for it".
     
  6. Keith R...

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    jones/horan, short answer.

    Keith
     
  7. Tom McIntyre

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    If you paid 18% of the hammer price and the buyer paid 18% of the hammer price then the house received 36% of the hammer price. If the buyer was rational, they subtracted 18% from what they were willing to pay, so you effectively paid both fees. If the buyer were rational, his 18% reduced the hammer price and therefore reduced the sellers fee by 18% of 18% and lost money for the auction house in the amount of 3.24%.
     
  8. topspin

    topspin Registered User

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    Consignment fee... is that like postage/shipping cost? If so then I am uncomfortable with charging it as an arbitrary percentage of anything. That does not feel fair.

    Incidentally... I have seen, on an online auction site, items being "offered" where the online auction site is actually just being used as a form of cheap advertising for an "auction event" elsewhere, in which the item will be sold. The "auction event" has what I consider to be a hefty buyer's premium, plus on top of that you then have to arrange shipping with the seller.
    I would have to really, really want the item to even consider participating.
     
  9. Harvey Mintz

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    Come on, folks - we're talking about buying old watches! There's no point in talking about being rational and buying old watches in the same sentence: the two are mutually exclusive (and yet I still go out there and buy. Sigh!).

    :excited:
     
  10. Keith R...

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    Now here is the odd part. I do not like auction premiums, as a matter of fact, there are many things I
    do not like about on line auctions. I used to work for Gilbert Auction Company in North Carolina. Not
    only did I catch bids, but I was allowed to bid. Auction houses asking for a 20% premium is highway
    robbery.

    Keith
     
  11. topspin

    topspin Registered User

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    I believe a buyer who is buying purely as an investment or for "business", could be said to be acting rationally if they calculated a price limit beforehand and then stuck to it.
    I'm sure we could think of a few more examples.
     
  12. Greg Frauenhoff

    Greg Frauenhoff Registered User
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    Agreed.
     
  13. Marty W

    Marty W Registered User

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    That applies to any capricious collectible that enthralls us, be it watches, stamps, cars, paintings, rare books or autographs.

    There are very few things that are needed to sustain life, i.e., food, shelter, clothing, medical care, some money and a good mind. Everything else that we purchase to please ourselves can be deemed to be capricious and really unneeded to exist.

    Remember.................you cannot take it with you.
     
  14. Harvey Mintz

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    Marty -

    Yes, but you must also remember:

    "He who dies with the most toys wins!" :p

    :)
     
  15. Marty W

    Marty W Registered User

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    Au contraire, mon ami.................."He who lives the longest wins."
     
  16. Tom McIntyre

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    The commissions the auctions charge is based on competition. They are competing for consignors by offering the best deal they can put together and to a much lesser extent they are competing for buyers. Ultimately the market determines what the prices are, so the buyer has no need for concern so long as they look at what they are buying and decide what they are willing to pay. How it gets divided up between the auctioneer and the owner is not really relevant to the buyer. In many instances the seller is a lazy fiduciary, so it doesn't matters to anyone except the auctioneer who is trying to make a living.
     
  17. Tom Huber

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    .

    Marty, Disagree with you. There is a way to take it all with you. Sell all your assets, put the cash into travelers checks and have the checks buried with you. LOL

    Tom
     
  18. Marty W

    Marty W Registered User

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    Tom:

    My father tried that but when he got to the pearly gates they would not cash anything larger than a $50 traveler's check, and all of his were in $100.00 denominations......so out of luck.
     
  19. Clint Geller

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    #19 Clint Geller, May 16, 2016
    Last edited: May 16, 2016
    Unless a mistake is made, the consigner is really paying all fees, regardless of what the fees may be called, because buyers factor the "buyer's premium" into their maximum bids. (The only exception is sales tax, because not all buyers pay sales tax. Many have reseller numbers. So if you do pay sales tax and you are bidding against someone who doesn't, then you and not the consigner are paying the tax.) Splitting up the auction fees between a consigner's fee and a buyer's fee merely obfuscates the fact that the consigner is really on the hook for all of it. Sometimes an inexperienced bidder does overlook the buyer's premium, and even an experienced bidder can make a mistake. But most often, it is the consigner who pays all the freight. Consequently, as a buyer I am never personally deterred by buyer's premiums. Sales tax is more of an issue for me, when there is sales tax. Fortunately, NH doesn't have sales tax.

    What a consigner should really care about is the fraction of the total price paid for his lot - which is the market's statement on what his item is worth - that ends up in his pocket, rather than someone else's pocket. If there is no sales tax, a consigner's fee of x% and a buyer's premium of y%, then that fraction is: (100 - x)/(100 + y). So for example, if both fees are each 15% of the hammer price (which is less than the total price), then the consigner pockets 73.9% of the total market value of the item, and the auction house collects 26.1%. The buyer merely pays market value for the item, no fee.
     
  20. ben_hutcherson

    ben_hutcherson Registered User
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    When I bid in auctions with a premium, I decide the maximum out of pocket I want to pay for an item and then subtract the premium from that to get the maximum hammer price I'm willing to pay.

    Of course, I've been guilty of the "Just $10/$20/$50/$100 more" mindset, but even then if I have a concrete idea of what the real price will be at my max bidding up another increment won't make a drastic difference. For example, with an 18% premium and the sale is at $50 increments, going one increment over my max is really going $59 over-not a drastic difference.
     
  21. kevin h

    kevin h Registered User

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    Last year i bought several from Jones/Horan , no real reason , it seem there small online auction suits me better . If there is too much to look at I end up with nothing . I really detest a buyers premium might be the reason, I know it is only a number to subtract from the price , it just irks me .
     
  22. Keith R...

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    I worked for an Auction company for several years catching bids. Back then it was 7% on
    items and 7 to 10% on farms. I'm with Kevin and stay away from auctions with a premium.
    I did pick up the Tremont from JH but on a sep. listing on that other big auction site. It was
    a nice runner Rob serviced for me shown in the lessons learned thread.

    Keith
     
  23. Bruce Alexander

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    I collect clocks but the Thread Title caught my eye as I have done business with R. O. Schmitt on a number of occasions. I was happy to see prices headed back up this time around. Buyer's Premiums keep inching up and up. Some Online Auction Houses charge 25% and I've seen at least one which has now gone over that to 26%. Whatever the market will bear, that's what will be charged. I agree that Auction Houses have to cover their overhead and that they provide a valuable service, but some are just getting greedy in my opinion. I tend not to bid on items with what I consider to be ridiculous Buyer's Premiums but if I really want to throw my hat into the ring, I'll set my maximum with the Buyer's Premium figured in. The higher the Buyer's Premium, the less likely I am to go over my pre-set maximum bid.

    While I may not have to pay the Sales Taxes of another State, I still have to pay for Packing/Shipping/Handling/Insurance. In most cases, I would much rather pay the Tax. That's an expense which doesn't really figure into the price of the item, but it's a cost of collecting none-the-less. Much less so for Watches I imagine. If I were rational, I probably would never have started collecting antique clocks to begin with.
     
  24. MartyR

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    Buyers Premium was invented by Sotheby's and Christie's, acting in concert, in 1975. That became a central issue amongst the charges brought against the CEO's of both companies when they were charged with operating a cartel under US Antitrust Laws by the US Federal authorities in 2000, and I believe that both men were imprisoned when found guilty in 2001. Sadly, buyers premium was not banned following that case.

    The reality is that it is a corrupt practice for three reasons. First, in law the auction house has a contract to work on behalf of the seller, but the auction house charges greater fees to the buyer than the seller! At the very least this creates a conflict of interests, but the facts on the ground are much worse than this. It is widely accepted (on a nod-and-a-wink basis) that many auction houses are acting in favor of their regular and privileged buyers, many of whom are dealers who are the life-blood of the auction house's business. Auction houses regularly pressurise an unknowledgeable seller into reducing reserves to below market value, and then privately notifying their regular buyers that there may be a bargain to be had; that means that they are acting against the seller's interest and in favour of the buyer's.

    The second problem is that most sellers are simply unaware that buyer's premium exists, or of the significance to them, as sellers, of a charge which contains the word "buyer". It is noteworthy that an auction house who is asked to give a valuation of a seller's item informs him of the hammer price, which is not in nornmal terminology the value. When people take their items to be "valued" at an Antiques Roadshow or similar TV program, they are similarly given the hammer price. Unknowledgeable sellers are therefore (quite deliberately) kept in the dark about the true buying value of the item. Buyer's premium is intended to deceive sellers.

    I disagree with the suggestion that in general buyers do not take buyers premium into account at auction. Certainly all dealers and all regular collectors do - and they probably represent a huge proportion of all sales made at auction. If I think a watch is worth $500, I bid $400 to take account of buyers premium, and I know of not a single collector who does anything else. It is worth noting in this context that dealers have an advantage in this respect because they effectively do not pay sales tax on buyers premium, and in the uk that will be typically 5% of the item value.

    Finally, a note to all members here. Whenever I consign a watch to auction, I negotiate a seller's commission of 50% of the advertised seller's commission (which is what the auction houses offer to dealers as a matter of course) and if I am consigning a number of watches then I pay zero seller's commission. I also negotiate zero extras which many auction houses are now charging, such as photogrpahic cjarges, insurance, lottage fees and so on. No auction house will offer to reduce buyer's premium (except sometimes to big dealers) because they don't want the very existence of buyer's premium to become public knowledge.
     
  25. mauleg

    mauleg Registered User
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    Maybe I'm speaking from the perspective of geographic isolation, but I don't see how these auction houses can compete with online services, which have a much larger exposure and do not charge such ridiculous fees. Perhaps it's all just a Ponzi scheme, as Marty suggests...
     
  26. Ethan Lipsig

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    There isn't anything fraudulent about fairly disclosed auction fees, nor do fairly disclosed fees make auctions "ponzi" schemes.

    As for how auction houses can compete against eBay, eBay fees add up to about 10-12%, which is not a great deal less than what, e.g., Jones Horan, charges. Selling things on eBay is much more of a pain than leaving it for an auction house to do. With eBay, one has to write up the listing, answer sometimes inane inquiries, mail items, and deal with recalcitrant buyers. I would rather pay for an auction house to handle those issues. That said, I am not sure that certain items sell for as high a price at auction house auctions as they would on eBay, where one can set sufficiently high minimum bids and reserves to protect against bargain basement sales.
     
  27. mauleg

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    While this is essentially correct, if the auction house effectively colludes with the dealers to artificially manipulate prices, as Marty alleges, then it begins to enter into the realm of questionable, if not illegal practices.

    Both as a seller and buyer, I find the "formal" auction houses much more difficult and cumbersome to deal with, as opposed to online services. YMMV.
     
  28. Marty W

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    With all of what has been said above, both pro & con, it still boggles my mind that people would pay a premium for buying something, no matter how you figure your bids.

    These auction houses know that they have very captive audiences and therefore can put into play any charges they want to.........it's almost like the way my government taxes things.

    Just look at the taxes on tobacco and alcohol products which have gone through the roof, but no similar taxes on Preparation H, which is not in such demand. I know, bad analogy, but you should get the point. Bah Humbug.............!
     
  29. MartyR

    MartyR Registered User
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    #29 MartyR, May 19, 2016
    Last edited: May 19, 2016
    I just want to make clear that I am not "alleging" anything in this respect. What auction houses do with dealers (and other regular clients) is to drop them a hint that there may be a bargain to be had. I don't classify that as collusion - but it is to the disadvantage of an unwary seller. I accept that caveat vendor applies here, and if a seller doesn't research the itiem he is selling, then he will suffer the consequences. I do see a problem with the fact that a seller may believe that the auction house is working for his benefit (and that is enshrined certainly in European law) but that does not absolve him from forming his own opinion as to value.

    By contrast Sotheby's and Christie's did engage in price fixing from the 1970s onwards, their CEOs were prosecuted by the US Federal authorities, and they were convicted. I don't know the detail of the legal case, but I understand that buyer's premium was one of the prices they were fixing.

    And Ethan, I do not accept that buyer's premium is a "fairly disclosed" fee. It is worth asking why it was invented in the first place if not to deceive sellers. More importantly, I believe that if you were to ask consignors whether or not they are aware that the buyers of their items are actually paying 20-30% more for them than the hammer price, the large majority of them would say "no". If so, that alone would indicate unfair disclosure.

    Further, it is fascinating to note that most auction houses have been increasing their buyer's premium but not their seller's commission! I wonder why that would be :whistle:
     
  30. Marty W

    Marty W Registered User

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    MartyR:

    You'll never will your argument with this highly respected, retired, California lawyer. That's just a fact of life.

    MartyW
     
  31. John Pavlik

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    Interesting trying to follow the purpose of this... Is it to dissuade the auction houses from charging a buyer premium or trying to define the word "auction" to mean the same thing
    with the same "Rules" through out the world..?
    I find it quite easy to understand if I bid $1000 for an item and the auction house "published" the buyers premium of 23%, I end up paying $1230 for the item..
     
  32. Jim Haney

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    John,

    I think the point was that J& H doesn't charge a buyers premium and Schmitt does. Argument
     
  33. ben_hutcherson

    ben_hutcherson Registered User
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    One thing I will say to Bonham's credit is that when they publish the prices realized list after the sale, they publish the price with premium and not the hammer price. At least that saves having to do the math on the real price of the item(since, again, a smart buyer will have taken the premium into account).
     
  34. Tom McIntyre

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    Ben, All the auctions I use regularly publish the total price exclusive of tax. The other valuable piece of information in price lists is that those auction houses that use reserves omit the lots that did not sell.

    To balance things a bit we should probably talk about how buyers abuse auctions and how consignors conceal damage and alteration. The auction business has always been pretty Wild West, even back before there was a West.
     
  35. Clint Geller

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    Ben, Heritage, which is a major force in the coin market, and which also sells pocket watches, including some with Civil War provenances that are of particular interest to me, also lists total prices paid exclusive of tax in their prices realized.

    There may be one other subtle reason for an auction house to split its fees between a consigner's fee and a so called "buyer's premium." It is that consigner's fees are private, and therefore negotiable, whereas buyer's fees are not. Therefore, the published buyer's fee establishes a minimum floor below which the auction house's total percentage of commission cannot easily drop, and this fact puts large consigners in a weaker bargaining position.
     
  36. Fred Hansen

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    I've read many discussions of Heritage paying out in excess of 100% of hammer for high value coin consignments.
     
  37. Tom McIntyre

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    I was once bidding on an item at a Sothebys auction and the auctioneer actually made a reserve bid of the low estimate. I was the only active bidder and I refused to go the next increment because he had violated one of their internal rules. The rule is to always ensure that a real bidder bids the low estimate. After the sale I inquired about the "error" and they agreed to sell the item to me at my high bid and reduce their commission to pay the seller his minimum. i.e. they can always "do business" to move merchandise. They can do similar things when items do not sell and an offer is made after the sale. The old adage "everything is negotiable" always applies.
     
  38. MartyR

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    I think not, Clint.

    Actually that reasining would put the auction house into a weak position because it could not properly negotiate its fees!

    In any case, since the very concept was invented by two corrupt men working for (presumably) corrupt companies, surely it is entirely reasonable to assume that the concept was designed to deceive? If seller's knew that the auction house was taking anywhere between 40% and 60% of the value of their item, I suspect that private consignment to auction houses would quickly dry up!
     
  39. Clint Geller

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    Well that's interesting, Fred. I guess I'm not entirely shocked to learn that. Nevertheless, I'm guessing they probably only do that for very high value consignments.
     
  40. Clint Geller

    Clint Geller Registered User
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    #40 Clint Geller, May 23, 2016
    Last edited: May 23, 2016
    I stand by what I said, Marty. Occasional, onesy-twosy consigners may well not realize that a buyer's fee is really coming out of their pocket, but the big boys mostly all do. (Most wealthy big-time collectors aren't naive about such things.) When you consider that most high-end consigners' only real alternatives are either other auction houses or dealers, who's mark-ups are typically even higher than those of the auction houses, Sotheby's and Christie's had a right to expect that the increased profit on the business they retained would more than compensate for the business they lost. What made the scheme work was that the two leading auction houses colluded not to compete with one another. And even given Fred's information, splitting their fees that way certainly makes the auction house's bargaining position no worse, especially if your chief rival is doing the same thing.
     
  41. Keith R...

    Keith R... Registered User
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    ^Pay to play.

    Keith
     
  42. Maximus Man

    Maximus Man Maximus Man

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    J & H has always been the best house for me to work with - period!
     
  43. Ted Collins

    Ted Collins Registered User
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    As an auction bidder, I certainly always calculate all associated costs of the item, be it buyer's premium, sales tax, shipping, etc. I don't understand why everyone would not do so. As well, I discount any item that is on-line, as opposed to in hand, because of the inability to thoroughly inspect, and the hassles if it needs to be returned.

    Personally, I like the way Jones-Horan does business. I assume their seller's fee varies based upon the quantity and quality of their consignments? Is anyone familiar with their range of seller's fees?
     

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