Auctioneer & Auctions 02 Dec 2009 10:24 am
Understanding the Buyer’s Premium.
Often in my line of work, we charge a Buyers Premium at an auction. And more times than not, we have people asking what is a Buyers Premium and why is it charged? So, I thought I would take a moment and discuss that issue.
Most of the times, you see a Buyers Premium tagged in an auction ad for an upcoming auction. Many times it will read, “A _% premium will be added to the final bid to determine the sales price.” Most people are aware that this means that more money will be tacked on to the bid. What most people do not know is why it is charged.
Over the years, the auction business became more competitive, as with any business. Auctioneers had to find ways to become more aggressive with their charges in order to make a living. When I was growing up. a Buyers Premium was RARELY used in the middle Tn area. Most people did not like it on their auction and most people did not want to pay it, as they considered it like a tax. But as with anything else, the buyers premium crept into the area, and Auctioneers were forced to consider using it as a way of making a living. NOW, just about 80% of auctions will have some form of a buyers premium on it.
To understand it, you first might need to know what it is not. It is not a tax. It is not an additional fee for the seller. It is not an additional fee for the Auctioneer in most cases.
What it is, is a fee charged by an auctioneer in order to obtain a wage for his services. With competition growing in the industry, Auctioneers were having to cut rates to the point they could no longer make a living doing auctions. Auctions can often be very time consuming, far beyond the time put in the day of the sale. Therefore. auctioneers decided to approach sellers with a new approach, charging them little to nothing, and allowing a buyers premium to be added to bids in order to make a living.
The truth is, the Buyers Premium has drifted in and out of popularity over the expanse of time. Currently, you can find premiums from 1%-15%, depending on the sale and Auctioneer. Often you will see small premiums charged, because an auctioneer has negotiated a separate fee from the seller. As time moves forward, it will once again disappear as people start to drift away from the premium, mostly because of misunderstandings. However, you can mark it down, it is a concept that has been around, and will continue to be around throughout the ages.
If you have personal questions or opinions about a Buyers Premium, go ahead and let us know. I would love to have your feedback.