In an effort designed to bring clarity to an often-murky corner of the art market, Sotheby’s will simplify its fee structure for both buyers and sellers, a move that the house believes will ultimately raise hammer prices and bring in new clients.
The change will see buyer’s premiums, essentially commissions paid by those who win lots at auction, lowered across price points. Sotheby’s says the new structure will result in a 26 percent reduction on most lots sold.
The new rate, according to a charts provided to ARTnews by Sotheby’s, will be 20 percent of the hammer price for works up to $6 million, above which the rate lowers to 10 percent.
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Under the current structure, which will remain in effect through the May sales in New York, the buyer’s premium was 26 percent of the hammer price for works estimated at $1 million or less. For works that were estimated at between $1 million and $4.5 million, the premium was 20 percent. For anything higher than that, the fee was 13.9 percent.
“These changes are something we’ve been contemplating for a long, long time,” Charles Stewart, Sotheby’s chief executive officer, told ARTnews. “I think this it’s good to have a fair, and clear, set of terms in the art market. This is kind of a growing-up moment. It’s a step toward maturity for the art world.”
Stewart framed the change as a “smart disruption” for the market, and a move away from the “bespoke pricing structure,” which moved sellers to fixate on negotiations over commissions, rather than starting a conversation on how to achieve the highest price for a work.
To that point, the seller’s commission rate will be capped at 10 percent on the first $500,000 of a lot’s hammer price. With the understanding that bigger clients get better terms, the auction house will waive the seller’s commission rate for lots with a low estimate above $5 million. For lots with a low estimate in the $20 million–$50 million range, the seller will rake in 40 percent of the buyer’s premium on top of the hammer price.
Sotheby’s is also getting rid of Overhead Premium, a 1 percent administrative charge on all sales, and adding a “success fee” of 2 percent on lots where the work hammers above its high estimate.
Each of the changes is applied to works that do not come with a guarantee. Those works, the house said, will now come with a “commitment fee” of 4 percent of the guarantee, owed by the seller.
“On most marketplaces, you go on to their terms of business and it’s very clear,” Stewart said. “It doesn’t have to be complicated. It shouldn’t be.”