Posted on 03/21/2019 in Guide & Tips

What Is Buyers Premium. Everything You Need To Know

When you visit an auction house, you’ll notice quite a few differences in the buying experience compared to more modern methods. One of these things is the buyer’s premium that is charged to visitors who partake in the auction events. Not all auction houses will have this charge in place, although many regard it as important to the continued operation of an auction house.

Even online auctions will often add this fee to sales; a sort of payment for being able to offering up a winning bid. But what exactly is this buyer’s premium; how does this money get used?

 

Buyer’s Premium Explained

A buyer’s premium is simply an extra payment or charge added to the hammer price of an auction item, the hammer price being the final, winning bid. This surcharge on top of the bid amount is charged by an auctioneer as a remuneration. This, in turn, comes atop the seller’s commission, which is charged by the auction house to the seller. Both the seller’s commission and the buyer’s premium are paid to the auction house.

Major auction houses have continuously charged buyer’s premium rates for generations, particularly in the dealings of fine art, where premiums can run as high as 30%. On the other hand, premiums in other regions, such as the UK, are often much lower or non existent, with the average being about 3% across real estate auctions. Many small auction houses do not charge these rates at all.

How is the buyer’s premium applied? Say you purchase a set of 4 antique lamps at an auction and you pay $1000 for the lot. If the house has a buyer’s premium of 10%, you will pay an additional $100 on the final bid price, for a total purchase cost of $1100. However, this does not include the additional taxes and fees that with auctioneer may charge on the final sale.

 

What Is The Money For?

The buyer’s premium is thought to be an integral part of the auction process and the continued life of the auction house. Essentially, the money goes to the day to day costs of running regular auctions. Some people think this is just a ploy to get money from buyers and sellers alike, but the truth is a lot more simplistic: with the cost of the sale going to the seller, there needs to be a way for the auction house to make money to run electricity, hire auctioneers and staff to inventory and catalog items for sale and items sold, accounting, and many other mundane things that keep a business running.

 

Generally, an auction house will let you know up front that there is a buyer’s premium to be paid if you are the winning bidder on an item. All of the fees for an auction house should be listed on their website, generally on a fees or commissions page.

Be aware that you may not see “buyer’s charge” listed on a page. In fact, the auction house might have it under a different name. If a charge is not properly explained by an auction house, or you are unsure whether or not you are subject to a particular fee, be sure to check with the auction house before sale begins.

 

How This Fee Improves The Experience

It may not seem like it, but the buyer’s premium is all about providing a better consumer experience in the auction setting. Imagine that auction houses did not charge this fee. The next auction that you go to, you might find the building too small and cramped, that there are not enough people to remove and bring out items in a timely manner that keeps the auction moving, that the building is too hot or too cold, the auctioneer uses an outdated microphone or none at all, making them hard to hear, and a number of other things that make your auction experience a bad one.

 

Buyer's Premium FAQs

 

Are the premiums always advertised?

Nothing in life is 100% but they usually are. This practice is also more common than the seller's commission. However, the premium is often buried in the fine print of the Terms & Conditions of the auction house. So you might have to do some research to figure out the percentage you'll be paying.

 

Are premium-free auctions offered?

It's become somewhat standard for today's auction houses to charge sellers a commission. However, sometimes auction houses offer premium-free auctions.

It's worth noting these are blips on the radar. You should definitely look for these special events since they can save you big bucks on high-end items. That said, remember that these are the exception rather than the rule.

 

Are there any red flags to watch out for?

Look for auction houses that include the buyer's premium in their advertising. If it's hidden in the fine print of the terms & conditions, there might be transparency issues. That's definitely case if the auction house doesn't list the premium rate at all.

 

Can the method of bidding/payment affect the rate charged?

Yes, that's sometimes the case. Auction houses might charge higher rates when buyers use payment methods other than the standard cash/checks. They also might charge higher rates for Internet bidders vs on-site bidders. This isn't always the case, so it's important to do some research.

 

 

Do small auction houses charge premiums?

Yes, but the reasons are generally different. For example, they might use the fees to help cover the costs of the auction like advertising. This is a bigger burden for smaller companies.

 

Can the buyer's premium be negotiated?

No, it's a set/non-negotiable percentage. Nevertheless, you can still shop around to find auction houses that offer lower rates for buyers. As a general rule larger auction houses charge higher rates. However, you'll generally be getting a better selection of auctioned items so it might be worth the higher costs.

 

 

Find Your Next Auction Here

Now that you know more about the auction process, you’re ready to go snag some of the best deals on one of a kind and hard to find items. If you’re in the market for industrial or farming equipment, you can easily find your next auction experience online at https://www.industrialauctionhub.com/.

 

Industrial Auction Hub

752 Winer Industrial Way, Ste G1

Lawrenceville, GA 30047
 


 

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