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auction, auctioneers, auctions, bid calling, bidders, buyer's premium, by the hour, Christie's, commission, contract, day rate, disclosure, expenses, fee, flat fee, forced sale, salary, Sotheby's
I’ve heard this question 100’s of times in auction school, and otherwise when I speak to virtually anyone about my profession. How are you paid? What do you get paid? When do you get paid? We’ll address the “how” in this article.
There are two parties to an auction. On the one side, there is a seller who typically owns the item, or otherwise represents the title holder. Then, on the other side, there is a buyer who upon, “sold” agrees to take title.
For hundreds of years, and many still today, auctioneers solely charged the seller. This is done in several ways, including:
- Commission. Auctioneers charge the seller a commission, which is typically a percentage of the gross sales. For example, an auctioneer charging the seller 15% on the gross proceeds of $25,000 would earn $3,750.
- By the hour. Auctioneers charge their seller a fixed rate by the hour. If an auctioneer is selling cars for a car auction, and charging $150 per hour, he would earn $750 for 5 hours of auctioneering.
- Flat rate. Auctioneers charge their seller a single, fixed rate for their auctioneering services. For instance, an auctioneer charging a $1,000 flat rate would earn that fee regardless of the auction gross proceeds.
- Salary. Auctioneers may be employed by a seller who might be conducting auctions on some regular basis. For instance, if a police department had an auction every Saturday of surplus or confiscated items, the department might employ an auctioneer full time, and pay him a salary.
- Commission with minimum. Auctioneers charge the seller a commission, which is typically a percentage of the gross sales, or a minimum fee, whichever is greater. For example, an auctioneer charging the seller 15% or $1,000 would earn $1,500 for a $10,000 auction, but earn $1,000 for a $5,000 auction.
- Fee + expenses. Auctioneers charge either by the hour, a percentage, flat rate, or otherwise, plus expenses. These expenses could be for additional staff, advertising and marketing, hotel, meals, travel, setup, cleanup, etc. These expenses could be paid up-front, and/or following the auction.
- Net profit. An auctioneer as the seller owns the property being sold. Therefore, the auctioneer is paid the difference between the price of procurement and the sale price. Such as, an auctioneer might purchase some antiques and collectibles for $700 and resell them at his auction for $2,100. His pay, minus expenses, would come to $1,400.
Then, beginning in 1975, Christie’s and Sotheby’s introduced the buyer’s premium in England, and soon after (1977) in the United States. This allowed the auctioneer to have the buyer supplement his income with additional commission.
While it may be that technically the buyer’s premium belongs to the seller, and not the auctioneer — unless the seller agrees to pay the auctioneer this fee — which would be almost universally the case — the buyer’s premium allows the auctioneer to earn additional income.
- For instance, an auctioneer could charge a seller 15% of the gross proceeds, and also a 12% buyer’s premium. For an auction totaling $20,000 in bid prices, the auctioneer would earn $3,000 in seller commission, and $2,400 in buyer commission, for a total of $5,400 (or about 27% of the auction total.)
- Or, depending upon the exact wording of the agreement between the auctioneer and seller, the auctioneer could earn this 15% on the auction total including the buyer’s premium. If so, the seller commission would be 15% of $22,400 ($3,360) plus the $2,400 in buyer commission, for a total of $5,760 (or about 29% of the auction total.)
Auctioneers are paid in a variety of ways and are generally not required to disclose their method of compensation nor amounts to the public, unless their auction involves entities such as government, a court-order, or the like. However, it is held that a buyer’s premium must be disclosed prior to bidding for it to be enforced upon a buyer, and of course, the seller and auctioneer must agree to any fee arrangement prior to the auction.
Auctioneering, not unlike a number of other professions, is typically seen as something one cannot do themselves (such as a dentist, surgeon or optometrist.) Because of this, auctioneers are paid a premium as contrasted to occupations where the public feels they can do it themselves (lawn care, cleaning jobs, and the like).
Too, auctioneering often involves valuable assets, which have to be carefully and skillfully marketed and presented to maximize proceeds. For these reasons, many auctioneers are paid rather handsomely.
Mike Brandly, Auctioneer, CAI, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at: Mike Brandly, Auctioneer, Keller Williams Auctions and Goodwill Columbus Car Auction. His Facebook page is: www.facebook.com/mbauctioneer. He serves as Adjunct Faculty at Columbus State Community College and is Executive Director of The Ohio Auction School.
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Gabriel Marques said:
Thanks a lot sir, it seems very promising business.
Robert Ellis said:
Percentages taken from buyers are too high. They brought their item to the auctioneer to sell, If they get one commission from the seller, why should they get another commission from the same seller in the form of a buyers premium?
Carol Fuller said:
I am inheriting an estate in Ohio and the auction has been held and the executor has sent the bill to me for 20 per cent of gross plus labor plus advertising. Is this fair?
Seems inflated to me!
Mike Brandly, Auctioneer, CAI, AARE said:
An auction was held and the Estate has been charged 20% plus expenses? This is quite customary unless the asset total was significant, or possibly if real estate was involved.
SarahAnn said:
What if I’m a auction house and I need to contract an auctioneer. Using my staff for advertising, and running items for the sellers.
1. Can we charge seller 15% for auctioneats fee
2. Charge buyers 12% buyers fee for auction house?
Or is that not the right way it would work?
Mike Brandly, Auctioneer, CAI, AARE said:
I suppose you could. I don’t know why not?
Larry bowley said:
Is there a maximum percentage rate for the buyers premium?
Mike Brandly, Auctioneer, CAI, AARE said:
There isn’t a maximum buyer’s premium. It is determined by the seller/auctioneer unilaterally.
Mike Brandly, Auctioneer, CAI, AARE said:
No maximum. Whatever the market will withstand.
Clint Spencer said:
Very helpful! You were one of my instructors at Hondros for my RE license and I am currently tossing around the idea of becoming an auctioneer (mainly for farm ground or implement auctions). What, in your opinion, would be an average premium fee for farm ground?
Mike Brandly, Auctioneer, CAI, AARE said:
Clint,
Great to hear from you. There may not be a “typical” fee, as fee’s range and/or are commensurate with the value of the property.
Probably similar fees as traditional real estate transactions, if not a bit higher would be my answer I suppose.
The other thing about farm ground at auction is that is is commonly sold at auction, so having an auctioneer’s license (and training) would open that market up to you.
Sheila said:
Is there a going hourly / daily rate to act as the buyer on behalf of a client at an auction?
Mike Brandly, Auctioneer, CAI, AARE said:
Nothing particularly customary so far as rates to be a “picker” or the like. Whatever the two parties consider fair and reasonable.
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Deborah Simpson said:
We want to sell our $400,000 home at auction. What percentage can we expect the auctioneer to charge?
Mike Brandly, Auctioneer, CAI, CAS, AARE said:
Deborah,
There’s no certain commission nor fees so it may be prudent to check around. Also, many auctioneers charge the buyer rather than the seller (a buyer’s premium.)
Ronald Westrup said:
Years ago I did some work with a reputable auctioneer who charged a modest commission for his services – and did very well out of it. I have to say I am shocked to learn of the ‘buyers premium’ which didn’t exist in the past and consider it to be outrageous! If Auctioneers wish to rob people, then maybe they should wear masks and carry a nice set of pistols as this appears to be akin to Highway robbery!
Kelly Sue Prewitt said:
I am very interested in becoming an auctioneer. I’ve done here all of my life I’m 56 female and where would I go to Auctioneer school I live in Chandler Arizona. If you could get back with me it would be greatly appreciated the price how long and our jobs readily available and do you help me get started thank you Kelly Prewitt
Mike Brandly, Auctioneer, CAI, CAS, AARE said:
Our school is http://www.theohioauctionschool.com
maxsoldinc said:
Despite changes in the mode of conducting auctions and various other advancements, what has managed to remain the same is the payment method of the auctioneers. They have to handle a lot- staging, pricing, negotiating, taking the items under auction, etc. And even after the sale is confirmed, they undertake the responsibility to deliver and clear payments. With so much responsibility, they deserve what they earn.