More recently, with the advent of sales tax issues, buyer premiums, and other charges added to the final sales price, the term, “hammer price” has become material only in calculating the total due by the buyer.
The hammer price at auction is the price the auctioneer announces at the time the hammer falls. For instance, “Sold! for $1,000 to buyer number 621.” In this case, the hammer price is $1,000.
The National Auctioneers Association defines the hammer price as follows:
- Price established by the highest bidder and acknowledged by the auctioneer before dropping the hammer or gavel.
I would suggest this definition is correct in theory, however the number auctioneers announce just before the hammer falls is almost never the sale price, but rather the next increment higher.
Such as, “Anyone for $1,100? Sold for $1,000 to buyer number 621.” The $1,000 bid would have been acknowledged maybe a few seconds before the “Anyone for $1,100 …” but not just before. We discussed this in more details when we wrote about Auctioneer bid calling: Want? Sold! Have & Buyer.
Too, the price which is established is only such when accepted by the auctioneer; the highest bidder merely offers a price, and when accepted by the auctioneer becomes the contract price.
Nevertheless, the hammer price serves a base price. You might be able to say that:
- In 1920, an auctioneer would have said, “Sold for $100 to buyer 26,” and buyer number 26 paid $100 at checkout. Since the 1990’s, auctioneers have said, “Sold for $100 to buyer 26,” and buyer 26 paid the $100 plus maybe a 15% buyer’s premium, plus sales tax for a total of $122.25.
Today, the hammer price has become otherwise largely irrelevant. If we look at market price, it includes the concept of what a buyer is willing to pay. So, if that item in 1920 sold for $100, it was worth $100. Today, if that items sells for $122.25, then the market value of that item is $122.25.
We wrote about Why do we say, “It sold for … including the buyer’s premium?” and I maintain that the truly important number is the total the buyer paid, and not the total the seller necessarily received.
From a historical standpoint, how did the use of “hammer price” come to be? Probably because auctioneers were known in some areas as “Knights of the Hammer.” The tools of these auctioneers included the Colonel style hat, a cane, bell, hammer or gavel. With use of a hammer or gavel, it became customary for the auctioneer to bang the gavel in recognition of an item being sold.
In the 1940’s when the Uniform Commercial Code was being developed, and the UCC 2-328 was written, this phrase was used:
- A sale by auction is complete when the auctioneer so announces by the fall of the hammer or in other customary manner.
The term, “hammer” has a rich history and is still referenced today in terms of when an auction is complete. However, the hammer price is becoming akin to the starting price — and it’s not where you start, but where you finish.
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.