What is a buyers premium?

A buyer's premium is an additional fee charged on top of the winning bid at an auction. It's essentially a service fee paid by the buyer to the auction house for facilitating the sale.

• What it is: The buyer's premium is a percentage of the hammer price (the final bid amount) or a fixed fee. This is added to the hammer price to determine the total amount the buyer pays.

• Why it exists: Auction houses charge a buyer's premium to offset their operational costs, such as advertising, staffing, venue rental, and catalog production. It also contributes to their overall profitability.

• How it's calculated: The buyer's premium is usually a percentage (e.g., 10%, 20%, or even higher) of the hammer price. Some auction houses use a tiered system, where the percentage decreases as the hammer price increases.

• Important Considerations:

  • Budgeting: Buyers must factor the buyer's premium into their budget before bidding. Failing to do so can lead to overspending.
  • Transparency: Reputable auction houses will clearly state the buyer's premium in their terms and conditions, online auction platforms, and often announce it before the auction begins. Always confirm this information.
  • Negotiability: The buyer's premium is typically not negotiable.

• Related Terms: The hammer price is the winning bid amount. The total price, also known as the purchase price, is the hammer price plus the buyer's premium plus any applicable taxes.

Understanding the implications of the buyer's%20premium is crucial for anyone participating in auctions. It helps prevent surprises and ensures informed bidding decisions.