In some auctions, a buyer’s premium is included as a fee that the winner of the auction pays on top of the hammer price (or the final auction price) to the auction house. It’s usually a percentage fee, ranging anywhere from 12 percent to 25 percent, and most auction houses that regularly charge buyer’s premiums have a scale of percentages.
For example, Sotheby’s, an auction house that’s well known for its trade in the art and antique world, charges a buyer’s premium of 25 percent on purchases made at their New York auction house on items that sell for up to and including $200,000. For items that sell for more than $200,000 – up to and including $3,000,000 – Sotheby’s charges a buyer’s premium of 20 percent. For items that sell for more than $3,000,000, the auction house charges a buyer’s premium of just 12%.
The buyer’s premium has been around for quite some time. It was introduced at different times in the United States and abroad, but has generally been in practice since the ‘70s. So why do auction houses charge these fees?
Keep in mind that large auction houses like Sotheby’s and small auctioneers alike charge the seller a fee for selling their item through their auction house. The money that the auction house makes with the buyer’s premium is intended to pay for any services that the buyer receives by purchasing the item in question, such as attending the auction hosted by the auction house, shipping and handling of the item, dealing with paperwork on behalf of the buyer and more.
Generally speaking, most auctions that you attend these days will have some kind of buyer’s premium affixed to the final hammer price to cover the overhead costs of the auction house. Not all auctions will have a buyer’s premium, though – the rules of real estate, for example, are quite different – but we’ll get to that in another post!
To learn more about auction process or to contact us about scheduling an auction for your estate or real estate holdings, call us today at 866-870-5500.