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Learn all about the buyer's premium in auctions - what it is, why it’s charged and how it impacts your budget. Get tips for smart bidding and making informed buying decisions.
Buying
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Understanding the buyer’s premium: all you need to know

Helen
Helen

When buying at auction, you need to understand every cost involved - and one of the most important is the buyer’s premium, or BP. In this blog we’ll explain what the buyer’s premium is, why it’s charged, how it affects your total cost and how you can strategise to make informed bidding decisions.

What is the buyer’s premium?

The buyer’s premium is an additional fee that most auction houses charge on top of the winning bid amount. It’s typically calculated as a percentage of the hammer price (the price at which the item is sold). The purpose of this fee is to help cover the auction house’s operational expenses, from marketing the auction to cataloguing items and providing a secure environment for transactions.

Here’s a quick example:

• Winning bid: £1,000

• Buyer’s premium: 20%

• Total cost: £1,200

In this scenario, a buyer’s premium of 20% would mean you pay an extra £200, bringing your total cost to £1,200.

Why charge a buyer’s premium?

Buyer’s premiums have become a common practice in the auction world, providing auction houses with a steady income to cover their extensive costs. Here are some of the main reasons for the fee:

1. Operational costs: Running an auction requires a team of professionals to authenticate, catalogue and market items. The buyer’s premium helps cover these services.

2. Marketing and promotion: Auctioneers invest in advertising to attract a wide range of bidders, which benefits both buyers and sellers by creating a competitive environment.

3. Security and authenticity: Ensuring the authenticity of items is paramount. Many auction houses work with experts to verify items, adding to the cost.

How is the buyer’s premium calculated?

The buyer’s premium typically varies from auction to auction, depending on the category of item, the auction house and the item’s value. Generally, it falls between 10% and 30% of the hammer price, but it can vary significantly:

Fixed percentage: Many auction houses apply a flat percentage to all items sold.

Tiered percentage: Some auction houses use a sliding scale where higher-value items incur a lower percentage premium. For example, the buyer’s premium might be 25% on the first £1,000 of the sale price and 15% on amounts over £1,000.

Flat Fee: In rare cases, a flat fee may be charged regardless of the hammer price, though this is less common.

Always check the auction terms beforehand, as buyer’s premiums and calculations can vary widely. On williamgeorge.com you can clearly see this displayed within the main details of each auction.

What to consider when factoring in the buyer’s premium

It can have a significant impact on your final cost, so it’s essential to include it in your budget from the beginning. Here are a few strategies to help you make informed bidding decisions:

1. Know the BP in advance: Before bidding, review the terms to understand the buyer’s premium percentage.

2. Adjust your maximum bid: To avoid overspending, consider the charge as part of your maximum bid. For example, if your top budget is £1,000 and the premium is 20%, set your highest bid at around £833 to stay within budget.

3. Check for additional fees: There may have be other fees, such as VAT or shipping, so make sure you account for these.

Buyer’s premium FAQs

Q: Do all auction houses charge a buyer’s premium?

Yes, the majority of auction houses apply a buyer’s premium, although the rate may vary.

Q: Can the buyer’s premium be negotiated?

In most cases, the buyer’s premium is non-negotiable. However, some frequent or high-value buyers might be eligible for slight reductions at certain auction houses.

Q: Is the buyer’s premium tax-deductible?

It depends on your location and tax laws. For investors, the buyer’s premium may be considered part of the acquisition cost, but you should consult a tax advisor for guidance.

Final tips for budget-savvy buyers

1. Track auction trends: Keep an eye on recent sales to see if prices are rising or falling. Auctions may adjust buyer’s premiums in response to market conditions.

2. Stay updated on special events: Some auction houses run special events or member programs that reduce fees, which can lower the overall cost.

3. Watch for value opportunities: Items in niche categories, or auctions with lower demand, may allow you to secure great pieces without fierce bidding competition, making the buyer’s premium feel like less of an impact.

In conclusion

Understanding the buyer’s premium is crucial for smart bidding. By considering this cost in your bidding strategy, you can avoid surprises and bid confidently on items you love. Whether you’re a seasoned bidder or a newcomer, knowing how the premium works will help you budget effectively and make the most of your auction experience.

Take a look at our live auctions now, where you’ll discover one particular auction with our lowest ever BP! Happy shopping. 😁