Buyer's premium

rdf:langString Buyer's premium

rdf:langString In auctions, the buyer's premium is a charge in addition to the hammer price (i.e. the winning bid announced) of an auction item, or lot. The winning bidder is required to pay both the hammer price and the percentage of that price called for by the buyer's premium. It is charged by the auctioneer in addition to the commission which has always been charged by auction houses to sellers. One hundred per cent of the "buyer's premium" is retained by the auction house and is not shared with the item's seller. Major auction houses have levied the buyer's premium for several decades, particularly in fine art auctions, with percentages in the region of 10–30%. In real estate auctions in many European countries, the buyer's premium, if charged at all, is much less (2–2.5%). More recently in the UK, however, foreclosure properties have been offered without fee to the seller, but with a buyer's premium of 10%. The buyer's premium has been characterized by auction houses as a necessary contribution to the costs of the administrative process, although some in the auction-buying community see it as an unreasonable additional charge. While a few auction houses may market themselves as "not charging a premium" to gain favor with customers, this is now rare and the buyer's premium is commonplace with auction houses. However, small independent auctioneers in the US have been slow to adopt the buyer's premium. The amount of the buyer's premium will normally be stated in the auction house terms and conditions. For UK properties, it is listed in the RICS (Royal Institute of Chartered Surveyors) Common Auction Conditions or in the special conditions for the lot. In Europe, the buyer's premium may also be subject to VAT (value-added tax), while in the United States, most states require sales tax to be calculated on the amount of the premium since it is a component of the price being paid for the item.