Does BP comprise part of a page's value? 0

[Guest Race]

Curious to see whether everyone is using just an auction final bid OR a final bid + BP as a means of establishing proper market price... As an example, I stopped bidding on a piece last weekend b/c it was slightly above FMV but -- with BP -- WAY above FMV. Just wondering how others approach this issue

[shadroch]

I only care about the price out the door which would include buyers premium,sales tax and shipping. If I paid $1,000 plus 20% premium plus sales tax and shipping, my cost is $1300 and change, not $1,000.  Any future sales price has to be based off  the $1300plus, not the $1,000 winnning bid.

[cstojano]

On 6/23/2022 at 7:08 AM, shadroch said:

I only care about the price out the door which would include buyers premium,sales tax and shipping. If I paid $1,000 plus 20% premium plus sales tax and shipping, my cost is $1300 and change, not $1,000.  Any future sales price has to be based off  the $1300plus, not the $1,000 winnning bid.

Same. But I have had people try to treat the expenses as just the cost of doing business, which disappears when valuing. 

[vodou]

On 6/23/2022 at 10:00 AM, Race said:

Curious to see whether everyone is using just an auction final bid OR a final bid + BP as a means of establishing proper market price...

Good question. Is this actually $2m or 2.4m?  

[comix4fun]

On 6/23/2022 at 9:00 AM, Race said:

Curious to see whether everyone is using just an auction final bid OR a final bid + BP as a means of establishing proper market price... As an example, I stopped bidding on a piece last weekend b/c it was slightly above FMV but -- with BP -- WAY above FMV. Just wondering how others approach this issue

The total cost, including shipping, fees, customs if any, etc etc. is the total cost of the piece. At bare minimum, for fiscal responsibility's sake, I don't know anyone serious who doesn't include BP to the "market sales price". I put my total cost basis in to the hopper when doing the math.

[vodou]

On 6/23/2022 at 10:23 AM, cstojano said:

But I have had people try to treat the expenses as just the cost of doing business, which disappears when valuing. 

Different people calculate cost basis and their taxes (personal or business) differently.

Many probably load "everything" (not just hammer and BP, but also sales tax and shipping) into cost basis. Others, particularly those that itemize their business deductions will load all shipping (incoming and outgoing) into that deduction, all state/federal tax activity (actual expenses and advance estimates/payments) into that bucket, etc. This is going to be more appealing to business filers that both buy and sell in some volume, but not necessarily moving the same items in/out of inventory within the same fiscal/filing year. And, of course, if one has a view of the present and then the future, where sales/gains fluctuate, the filer would likely take as many deductions as possible in years where basis is lower and gains are higher, than other years where they may not be.

[fsumavila]

I factor in the BP into the latest valuation of original art. If I tried to sell a piece that cost me $3K at Heritage (2.5k + 20% juice) I would base my asking price off that number. 

[vodou]

On 6/23/2022 at 10:38 AM, fsumavila said:

I factor in the BP into the latest valuation of original art. If I tried to sell a piece that cost me $3K at Heritage (2.5k + 20% juice) I would base my asking price off that number. 

Another way of asking the OP question is: when you're pricing your own FS pieces against public comps, do you include the perceived BP and expect to get that 20% (or whatever) inclusive of your private sale, even though it's not through the 20% BP venue? Or do you strip it out and feel like it's fair to give a deal privately (versus publicly) to -more likely- get a deal done?

For instance, this seller...

certainly thinks it's reasonable to use the 15% BP from this sale below as a basis for their own.

 

[kbmcvay]

The total value should include all cost factors in my opinion.

[grapeape]

On 6/23/2022 at 7:30 AM, vodou said:

Good question. Is this actually $2m or 2.4m?  

Depends on who bought it

[vodou]

On 6/23/2022 at 10:30 AM, vodou said:

Good question. Is this actually $2m or 2.4m?  

On 6/23/2022 at 10:54 AM, grapeape said:

Depends on who bought it

Oh crud.

You mean this could be false advertising?

Yikes 

[delekkerste]

The total value is hammer + BP. This is the industry standard. Why? Because not everybody (dealers being the main exception and constituting a large amount of the buyer pool) pays sales tax or shipping or whatever other costs you want to load on to the price. Yes, many of us do pay these costs, and they become part of the cost basis for tax purposes, but, the market value is the lowest common denominator value that everyone has to pay, which is the hammer + BP.

Something is not worth more just because I had to pay sales tax to get it; if a dealer bid $9900 and I bid $10K (inclusive of BP, for simplification purposes), it's not worth $10.9K just because I live in New York and not in Delaware and had to pay tax on it.

Edited June 23, 2022 by delekkerste

[rjpb]

On 6/23/2022 at 7:23 AM, cstojano said:

Same. But I have had people try to treat the expenses as just the cost of doing business, which disappears when valuing. 

I'm guessing these people would be potential buyers not sellers.

[comix4fun]

On 6/23/2022 at 10:51 AM, delekkerste said:

The total value is hammer + BP. This is the industry standard. Why? Because not everybody (dealers being the main exception and constitute a large amount of the buyer pool) pays sales tax or shipping or whatever other costs you want to load on to the price. Yes, many of us do pay these costs, and they become part of the cost basis for tax purposes, but, the market value is the lowest common denominator value that everyone has to pay, which is the hammer + BP.

Something is not worth more just because I had to pay sales tax to get it; if a dealer bid $9900 and I bid $10K (inclusive of BP, for simplification purposes), it's not worth $10.9K just because I live in New York and not in Delaware and had to pay tax on it.

But it may be "worth" more on a net cost basis if you're NOT paying sales tax to get it. 
Two equivalent "value" pieces available to two buyers.

Buyer 1 in a sales tax state may have a $50k limit because it's going to actually cost him $55k
Buyer 2 in a non sales tax state (or is sales tax exempt) may have a $55k limit as he is unencumbered by the costs associated with being buyer #1.
They are equal "value" in the hobby but if you're not paying sales tax for the item you may be able or willing, to pay more for it...which creates it's final "worth".
An owner who didn't pay that tax wouldn't factor that in, of course.  
To put it another way the item has an all in (including tax) cost to a buyer that he considered when buying it. An arm's length buyer, fully aware of all costs associated with acquiring a piece, paid that price voluntarily, it's hard to see that as not the full "worth" of the piece in the market at that time given that the bargained for exchange included that as part of the transactional costs. 

[delekkerste]

On 6/23/2022 at 12:59 PM, comix4fun said:

But it may be "worth" more on a net cost basis if you're NOT paying sales tax to get it. 
Two equivalent "value" pieces available to two buyers.

Buyer 1 in a sales tax state may have a $50k limit because it's going to actually cost him $55k
Buyer 2 in a non sales tax state (or is sales tax exempt) may have a $55k limit as he is unencumbered by the costs associated with being buyer #1.
They are equal "value" in the hobby but if you're not paying sales tax for the item you may be able or willing, to pay more for it...which creates it's final "worth".
An owner who didn't pay that tax wouldn't factor that in, of course.  
To put it another way the item has an all in (including tax) cost to a buyer that he considered when buying it. An arm's length buyer, fully aware of all costs associated with acquiring a piece, paid that price voluntarily, it's hard to see that as not the full "worth" of the piece in the market at that time given that the bargained for exchange included that as part of the transactional costs. 

In the example you just provided, Buyer 2 is going to beat Buyer 1 by one bid increment and is not going to pay either of the two bidders' $55K theoretical max (unless this is Hake's and the next bid increment is $55K). 

At the end of the day, the only way to keep everything apples-to-apples is by standardizing comps at the lowest common denominator, which is hammer + BP and nothing else. The market value of a piece shouldn't be dependent on where the buyer lives or whether they have a reseller certificate. And, in any case, the market uses hammer + BP as the accepted standard.  If I win a piece at $10K (inclusive of BP), but pay $10.9K with tax and shipping, and I turn around and try to sell it at $10.9K, the market is going to (correctly) perceive that I'm marking up the piece by 9%, even if it's just breakeven for me.

Edited June 23, 2022 by delekkerste

[rjpb]

On 6/23/2022 at 10:23 AM, delekkerste said:

In the example you just provided, Buyer 2 is going to beat Buyer 1 by one bid increment and is not going to pay either of the two bidders' $55K theoretical max (unless this is Hake's and the next bid increment is $55K). 

At the end of the day, the only way to keep everything apples-to-apples is by standardizing comps at the lowest common denominator, which is hammer + BP and nothing else. The market value of a piece shouldn't be dependent on where the buyer lives or whether they have a reseller certificate. And, in any case, the market uses hammer + BP as the accepted standard.  If I win a piece at $10K (inclusive of BP), but pay $10.9K with tax and shipping, and I turn around and try to sell it at $10.9K, the market is going to (correctly) perceive that I'm marking up the piece by 9%, even if it's just breakeven for me.

True, though depending on the selling venue and payment options, a 10% markup is probably perceived as an attempt to break even at best, and thus seen as less raising the price but passing on expenses.

[comix4fun]

On 6/23/2022 at 12:23 PM, delekkerste said:

In the example you just provided, Buyer 2 is going to beat Buyer 1 by one bid increment and is not going to pay either of the two bidders' $55K theoretical max (unless this is Hake's and the next bid increment is $55K). 

At the end of the day, the only way to keep everything apples-to-apples is by standardizing comps at the lowest common denominator, which is hammer + BP and nothing else. The market value of a piece shouldn't be dependent on where the buyer lives or whether they have a reseller certificate. And, in any case, the market follows this accepted guideline - if I win a piece at $10K (inclusive of BP) but pay $10.9K with tax and shipping, and I turn around and try to sell it at $10.9K, the market is going to correctly perceive that I'm marking up the piece by 9%, even if it's just breakeven for me.

I see what you're saying and that probably works in local, domestic, transactions pretty well. Yet, I think where a seller and buyer live, and other shipping/payment/tax concerns can and do have an impact on the sales price/value of all types of items great and small. I am thinking beyond minimal or local shipping and more how collectible items move in our hobbies.

I've run into this with props and graded vintage toys from sellers in another country or just distant domestic shipping.
What ran through my mind was a recent sale of a rather rare graded toy item. Not a huge sale but in the mid-five figure range being offered in Europe. Crating, shipping, insurance, taxes to the US would add a material amount to the cost of the item, in the range of 20-25% on top of whatever is paid for the item.
Now the item is "worth" (for argument's sake) $5,000.
A local buyer can pay $5,000 cash and carry and go on with their life. Seller gets $5,000, it's worth $5,000, done.
A buyer in another country, buying the item worth $5,000, would likely bristle at the $1,000+ total transactional attached costs and offer less than $5,000...but end up wanting to pay the total worth of the items of $5,000 in the end. The seller, however, would be getting $4,000 or less for the item.
Both buyer's are at $5,000 out the door for it and, I highly doubt, the second buyer would shrug off material costs outside of just the cost of the item itself. It's still worth $5,000, or it should be. 
If we limit the value/worth of an item to just what's paid for the item itself without any tax or logistic concerns such as customs or shipping cost, we might be misidentifying the true "worth" of the item as $4,000 by eliminating material costs to the transaction that forced adjustment of the net cost of the item.

So, I guess the answer is...IT DEPENDS.  

[Bronty]

On 6/23/2022 at 1:41 PM, comix4fun said:

I see what you're saying and that probably works in local, domestic, transactions pretty well. Yet, I think where a seller and buyer live, and other shipping/payment/tax concerns can and do have an impact on the sales price/value of all types of items great and small. I am thinking beyond minimal or local shipping and more how collectible items move in our hobbies.

I've run into this with props and graded vintage toys from sellers in another country or just distant domestic shipping.
What ran through my mind was a recent sale of a rather rare graded toy item. Not a huge sale but in the mid-five figure range being offered in Europe. Crating, shipping, insurance, taxes to the US would add a material amount to the cost of the item, in the range of 20-25% on top of whatever is paid for the item.
Now the item is "worth" (for argument's sake) $5,000.
A local buyer can pay $5,000 cash and carry and go on with their life. Seller gets $5,000, it's worth $5,000, done.
A buyer in another country, buying the item worth $5,000, would likely bristle at the $1,000+ total transactional attached costs and offer less than $5,000...but end up wanting to pay the total worth of the items of $5,000 in the end. The seller, however, would be getting $4,000 or less for the item.
Both buyer's are at $5,000 out the door for it and, I highly doubt, the second buyer would shrug off material costs outside of just the cost of the item itself. It's still worth $5,000, or it should be. 
If we limit the value/worth of an item to just what's paid for the item itself without any tax or logistic concerns such as customs or shipping cost, we might be misidentifying the true "worth" of the item as $4,000 by eliminating material costs to the transaction that forced adjustment of the net cost of the item.

So, I guess the answer is...IT DEPENDS.  

This happens every day for those of us who happen to live outside the US.

Hammer + BP is the only approach that makes sense IMO, and that's why the market uses it.

Trying to factor each individual person's circumstances into account is a fool's errand.    

[comix4fun]

On 6/23/2022 at 12:55 PM, Bronty said:

This happens every day for those of us who happen to live outside the US.

Hammer + BP is the only approach that makes sense IMO, and that's why the market uses it.

Trying to factor each individual person's circumstances into account is a fool's errand.    

I'm not sure the "market" uses it as in "it's the standard and you're bananrama to consider other costs". I've run into private sellers left and right who can and do factor in their total cost of acquisition into their cost basis for setting limits they can't go below, and it's hard to begrudge them that when those costs are material to the final full payment. It's logical and factual and in many cases the costs outside of BP can actually exceed BP. 

It may be a  fool's errand unless (for example from a toy I sold years ago) you're the fool that paid $400 to ship a Boxed ESB At-At, that only cost $500 for the toy itself, to your house in Okinawa. 
I doubt if you're that buyer you're in a hurry to set your cost basis at 55% of outlay.

Everyone private deal is, by its nature, a discussion of individual circumstances. their cost, their expectations, their rationale, their analysis of market. There's no escaping that. 

Maybe being in these hobbies themselves is the fool's errand if we stop to think about it.  
 

[shadroch]

On 6/23/2022 at 8:51 AM, delekkerste said:

The total value is hammer + BP. This is the industry standard. Why? Because not everybody (dealers being the main exception and constituting a large amount of the buyer pool) pays sales tax or shipping or whatever other costs you want to load on to the price. Yes, many of us do pay these costs, and they become part of the cost basis for tax purposes, but, the market value is the lowest common denominator value that everyone has to pay, which is the hammer + BP.

Something is not worth more just because I had to pay sales tax to get it; if a dealer bid $9900 and I bid $10K (inclusive of BP, for simplification purposes), it's not worth $10.9K just because I live in New York and not in Delaware and had to pay tax on it.

If you sell it for less than 10.9K you are losing money.  You are into it for  10.9K, not 10K.   I don't care what it is worth, I care what it sells for.  If I'm selling for less than I paid, I get grumpy.