What Is a Buyer’s Premium?

Buyer's Premium

If you’ve ever attended an auction, you may have noticed the term “buyer’s premium” listed in the auction terms. For first-time bidders, it can be a bit confusing—but understanding it is key to knowing the true cost of your purchase.

Definition of a Buyer’s Premium

A buyer’s premium is an additional fee that the winning bidder pays on top of the final bid price. It is typically a percentage of the hammer price (the winning bid) and goes directly to the auction company as part of their compensation for conducting the sale.

For example, if the buyer’s premium is 10% and you win an item at $100, your total cost will be $110. The $100 goes to the seller, and the $10 premium goes to the auction company.

Why Do Auction Companies Charge a Buyer’s Premium?

Running an auction involves significant costs—marketing, staff, technology, venue, photography, cataloging, and administrative support. The buyer’s premium helps cover these expenses and allows auctioneers to keep commissions to sellers competitive. In many cases, this approach benefits both sides: sellers are encouraged to bring quality items to auction, and buyers enjoy professionally run events.

How Much Is It?

The buyer’s premium percentage can vary depending on the auction and what’s being sold. Common ranges are:

• Real Estate Auctions: 5%–10%

• Estate or Personal Property Auctions: 10%–20%

• High-End Art or Collectibles: Sometimes higher, depending on the market

The exact percentage will always be listed in the auction terms and conditions. Smart bidders make a habit of reviewing those details before raising their paddle.

Why Buyers Should Pay Attention

The buyer’s premium directly impacts how much you are really paying for your purchase. If you set a bidding limit in your head, remember to add the premium before you start bidding. That way, you won’t end up paying more than you intended.

For example, if your max budget is $1,000 and the buyer’s premium is 10%, you should only bid up to $900—because your final bill will be $990.

Final Thoughts

A buyer’s premium isn’t a hidden fee—it’s a standard part of the auction world. By understanding how it works and planning your bidding strategy accordingly, you’ll be better prepared to bid confidently and make smart purchases at auction