Stillwater News Press

Local Columnists

March 29, 2014

Sold at Auction 03-30-14

What you should know about ‘buyer’s premium’ auctions

According to Wikipedia, in auctions, the buyer’s premium is a percentage additional charge on the hammer price (winning bid at auction) of the lot that must be paid by the winning bidder. The buyer’s premium is basically a charge levied by the auction house (auctioneer) which is paid by the buyer in addition to the winning bid.  By way of example:  the auctioneer advertises there exists a 10 percent buyer’s premium.  An item is auctioned for $1,000 when the winning bidder pays for the purchase.  The amount due will be $1,000 plus $100 (the buyer’s premium) or a total amount due of $1,100.00. There can be additional charges such as sales taxes that can also be levied on the buyer. Typically the auctioneer retains the buyer’s premium for services rendered.

How did this “Buyer’s Premium” get started? According to research done by this author, the buyer’s premium originated in England.  A buyer’s premium was levied on the sale of fine art starting in 1975. The trend quickly spread to the United States in 1977. The use of the buyer’s premium is a quite common practice in almost all auctions including real estate, machinery and antiques.

There is hardly no other subject of greater controversy in the auction profession or in the minds of the buying public than the buyer’s premium.  Some people view the buyer’s premium as a complete “rip off” and refuse to attend any auction where a buyer’s premium is levied.  On the other hand, some people view the buyer’s premium as a legitimate charge and consider the additional buyer’s premium a “cost of doing business”.

What should you know about the buyer’s premium controversy?  The author is convinced the buyer’s premium has been evolving and gaining acceptance for well over three decades.  If auctioneers wish to charge the public a buyer’s premium, they should have every right to do so.  If, on the other hand, auctioneers wish not to charge a buyer’s premium, so be it.  The most important issue for the consumer to know about the buyer’s premium is that it should be known and advertised well in advance of the actual auction event.  With advance knowledge, the consumer can make an informed decision on attending the auction, and be able to adjust the bidding amounts accordingly.  In the end, the free market and the consumer will make the final decision as to the existence and popularity of the “Buyer’s Premium.”

Tom D. Berry is a Stillwater native and is the owner of Tom D. Berry, Auctioneers.  You may reach him at tomdberry@berryauctions.com or call 405-372-2466.

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