Buyer's Premium? A unique opportunity an auction for real estate provides is the ability to use a buyer's premium, which offsets some or all of the seller's auction transaction costs. The buyer's premium is an additional amount that is added to the high bid price to determine the total contract price the buyer will pay to the seller at closing. The agreement between seller and broker/auctioneer provides the particular percentage of the buyer's premium that is paid to the broker/auctioneer by the seller at the close of escrow.
In an active and aggressive bidding environment, the buyer's premium is perceived by bidders almost as a sales tax and can lead to higher net proceeds for the seller. Specified buyer's premium can range from 3 percent to 10 percent of the bid price and is an accepted part of the process throughout the auction industry.
The buyer's premium allows the seller to increase the gross sales price and is a way for the seller to transfer transaction costs onto the buyer. When implemented properly, the seller's total effective transaction costs (marketing expenses plus commission) can be less than that of a traditional brokerage sale.
Wouldn't you rather take home more of the transaction, rather than less?
Omar P. Bounds III A.A.R.E., C.E.S., G.P.P.A.
The Bounds Auction Company
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