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Writer's pictureMike Brandly, Auctioneer

There’s no buyer’s premium?

Buyer’s premiums are charges added to the buyer’s “hammer price” to constitute the total purchase price — plus any other costs. In other words, $10,000 hammer price (Sold! for $10,000) with a 10% buyer’s premium would mean the buyer pays $11,000 — 10% more.

Bidders are attentive to the buyer’s premium, in that it matters, particularly as the hammer price rises. We’ve written about the buyer’s premium numerous times (including common misunderstandings) such as here: https://mikebrandlyauctioneer.wordpress.com/2018/05/16/misunderstanding-effects-of-buyers-premiums/.

Due to some auction bidders being sensitive to the buyer’s premium, some auctioneers advertise there will be “No Buyer’s Premium” suggesting to most that a bid of $10,000 (hammer price) will result in a total purchase price of the same. Is that always the case? Apparently not.

We are privy to some auctioneers who are advertising “No Buyer’s Premium” but then adding other “Service fees” — which affect the hammer price the same way as a buyer’s premium but disguised with a different name. $10,000 hammer price with no buyer’s premium, but a 10% service fee is $11,000 nonetheless.

Interestingly, in Wisconsin, the term “buyer’s premium” is regulated in that in Wisconsin the “regulatory folks” there deemed it “not a premium at all …” https://mikebrandlyauctioneer.wordpress.com/2011/06/20/buyers-premium-in-wisconsin/.

While I don’t necessarily view this practice as deceiving, it can appear to be to some bidders familiar with the term “buyer’s premium” and thus thinking this particular auction doesn’t have any surcharge. It would be better if all auctioneers either used customary terms and/or showed an example of how any surcharges are applied.

Further, many times the buyer’s premium and other such details are buried in the “fine print.” Can bidders be held to any fine print? They probably can. Will bidders tend to avoid such “fine print” auctions subsequently — we think so, as we wrote about here: https://mikebrandlyauctioneer.wordpress.com/2020/12/08/auctioneers-and-fine-print/.

Sotheby’s recently added a 1% “Overhead premium” to the buyer’s costs, instead of raising their buyer’s premium by 1%. We wrote about that here: https://mikebrandlyauctioneer.wordpress.com/2020/09/04/sothebys-bp-increase-or-not/. Why didn’t they just raise the buyer’s premium by that amount?

Lastly, a question for any auctioneer saying “No Buyer’s Premium” but charging like surcharges … why are you advertising in this fashion? It seems clear the only reason would be that bidders might believe there’s not any surcharge at all. If they say that’s not the reason, then what is the reason?

Mike Brandly, Auctioneer, CAI, CAS, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at: Mike Brandly, Auctioneer, RES Auction Services, and Goodwill Columbus Car Auction. He serves as Distinguished Faculty at Hondros College, Executive Director of The Ohio Auction School, and an Instructor at the National Auctioneers Association’s Designation Academy and Western College of Auctioneering. He is faculty at the Certified Auctioneers Institute held at Indiana University and is approved by The Supreme Court of Ohio for attorney education.

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