What is a buyer's premium in the context of an auction?

A buyer's premium is an additional fee that is calculated as a percentage of the final bid amount, or hammer price, at an auction. This fee is added to the hammer price and is paid by the winning bidder as part of the total cost of the item purchased. It serves to compensate the auctioneer for their services and is often disclosed before the auction takes place so that bidders understand the total amount they will owe should they win a lot.

In many auctions, the buyer's premium can significantly increase the total price paid by the buyer, and it is a standard practice in the auction industry. This fee helps auction houses cover their operational costs and can vary depending on the auction house and the type of auction being held. Understanding the concept of a buyer's premium is essential for bidders, as it affects the overall budget and value of their bids during an auction.