Many people who attend auctions do not understand what a buyer’s premium is or why auction houses even charge them. Although it may seem like a random extra charge, it actually works to provide a lot of comforts and necessities for the auction itself.
What is Buyer’s Premium?
A buyer’s premium is an additional charge on the hammer price or winning bid at an auction that must be paid by the winner. The premium is charged by the auctioneer as a remuneration. The buyer will pay for the item with the additional premium, along with any other fees that are charged by the auction house such as sales tax. However, it is important to remember that the buyer’s premium is an additional charge and not an additional tax.
Why do auction houses charge the buyers with a premium?
Auction houses charge their buyers for several reasons. The most common one is to help cover the costs of running the auction house and its future auctions. There are many costs that go into an auction that most people do not consider.
Here are a few of those costs:
- Building Rental
- Heating and Air Conditioning
- Auction Software
- Advertising and Marketing
- Staff Wages
- Auction House Set-up
- Online Catalogs
- General Upkeep of Electronic Equipment
When attending an auction keep in mind that the buyer’s premium is used to enhance the customer experience. The buyer’s premium is charged so buyers are comfortable during the time of auctions and so the auction can operate efficiently. The extra charge is always put to good use. Buyer’s premiums are common these days and are continuing to grow, about 80% of all auctions now charge some amount of buyer’s premium.
Hopefully, this information gave you a better understanding of what a buyer’s premium is and why its crucial to providing both the buyer and the seller with the necessities needed for a great auction. Be sure to join us at our next auction so you don't miss out on a great deal! Enjoy auctioning!