What Is a Buyer’s Premium in an Auction? Explained Simply

If you’re new to property auctions, one of the key terms you’ll come across is the buyer’s premium. But what exactly does it mean?

In simple terms:

• A buyer’s premium is an extra charge added on top of the final bid price (also called the hammer price).

• It’s paid to the auction house, not the seller, and helps cover operational and administrative costs.

• The amount varies – it could be a fixed percentage, a tiered percentage, or even a flat fee.

Important to know

• The buyer’s premium still applies if a property is sold before the auction date. This is because it’s part of the auction house’s terms and conditions, agreed upon at the point of sale.

• VAT or additional online bidding charges may also apply, so always read the auction’s terms carefully.

Takeaway

When budgeting for an auction property, don’t forget to factor in the buyer’s premium, it can make a big difference to the total you’ll need to pay.