Sotheby’s is overhauling its fee structure in what constitutes the first major revision to its terms since 1979.
“It’s the most significant change that we’ve made to our fee structure since introducing the buyer’s premium 45 years ago,” Sebastian Fahey, Sotheby’s managing director of global fine art, told Observer.
The revised fee schedule has been in the making for several months and aims to address high buyer premiums and ambiguous selling fees. “If you look across the market, we’re seeing a lot of new buyers coming in,” said Fahey. “This takes away some of the barriers to participating at auction because it’s much clearer and easier to understand.”
In May, buyer’s premiums will be reduced by 26 percent for most lots. Instead of the previous tiered fee system based on the value of a sale item, buyers will pay a 20 percent premium for lots valued up to $6 million and an additional 10 percent premium for any portion above that. For example, a lot that sells for $10 million will see a 20 percent premium on the first $6 million and a 10 percent premium on the remaining $4 million. Sotheby’s will also sunset the 1 percent administrative fee on all sales.
Previously, a calculator was required to understand the buyer’s fees, according to Fahey. “We actually found that in auctions, sometimes you’d have delays as people were trying to calculate what the next bid would be and what the commission would be on that, and then potentially also turning that into another currency,” he said. “This takes away a lot of that.”
The revisions were implemented in response to buyers seeking lower premium fees at Sotheby’s, which has incrementally been increasing the fees over the past four and a half decades. “We’re of the belief that by reducing the price for the buyer, that will attract more participants,” said Fahey.
The revisions could also encourage higher hammer prices
Sotheby’s is also addressing concerns from sellers seeking more clarity on selling fees from the auction house, which has seen a rise in bespoke negotiations. “In today’s market, it’s been a little more opaque what each seller is paying,” said Fahey. Now, Sotheby’s is introducing a uniform seller’s commission rate of 10 percent for all lots with a low estimate of $5 million or less—one that will be capped at $50,000.
This will be waived for works valued between $5 million and $20 million, while sellers will also receive 40 percent of the buyer’s premium for works valued between $20 million and $50 million. Sotheby’s will implement a 2 percent performance fee from sellers for any lots that sell above their high estimate. And for guaranteed works, the auction house is introducing a fixed fee of 4 percent of the guarantee amount.
The new fee system will apply to all of Sotheby’s global auctions excluding cars, real estate, wine and spirits. These markets have separate fee structures that are already more simplified than the rest of the auction business. The revised seller terms will take effect for consignments signed after April 15 for auctions taking place on or after May 20, while the new buyer’s premiums will go into effect on May 20.
“It really is about reducing the ambiguity and complexity and being something simple, fair and easy to understand,” said Fahey. “It takes away the time that both clients and the specialists need to be negotiating bespoke deal terms and consignment terms, and that allows us to focus on client experience and generating the best price for ourselves.”
