A buyer’s premium is the auction house’s charge to the buyer. It is quoted as a percentage of the hammer price and added to every winning bid, so a bidder who wins a lot at $1,000 under a 20% premium owes $1,200 before tax and shipping. The percentage is set out in the conditions of sale and shown to bidders before they register.
Why auction houses charge it
The premium lets an auction house earn from both sides of a sale. The consignor pays a seller’s commission on hammer; the buyer pays the premium on hammer. Together they fund cataloging, photography, marketing, the sale itself and settlement. Many auction houses use a low or zero seller’s commission to attract consignments and recover the margin from the premium instead, which is why the two figures should always be read together.
Flat and tiered premiums
A flat premium applies one percentage to every lot. A tiered premium applies a higher rate to the first band of hammer and lower rates above it, for example 25% up to $10,000, 20% from $10,000 to $100,000 and 15% above that. Tiers are calculated per lot, on the portion of hammer that falls in each band, not on the whole amount at the top rate. Auction software should calculate this automatically on the invoice; Circuit’s invoicing applies tiered rates from the hammer price without manual arithmetic.
Marketplace fees on top
When a lot sells through a third-party marketplace, the bidder usually pays the auction house’s premium plus the marketplace’s own buyer fee, shown as a single combined percentage. The auction house gets the reputation for the total. Running the sale on your own website under your own brand, with white label auction software, keeps the premium you set as the premium your bidders see. Our guide to LiveAuctioneers alternatives shows the difference in a worked example.
Disclosing the premium
Every bidder should see the premium rate before they register, on the lot page and on the bidding screen. Online, a good platform also shows the all-in price next to the current bid so a bidder is never surprised at the invoice. Surprises at the invoice are the single most common reason for a non-paying bidder; see our bidder confidence checklist.
