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More and more, auctioneers seem to be using a phrase, “There will be a standard buyer’s premium of …” What exactly is a “standard buyer’s premium” contrasted with merely a “buyer’s premium?”

I’m guessing that the word, “standard” is being used in this manner to mean usual, common, or customary. Yet, is the buyer’s premium any of those things … usual, common and/or customary?

In a case in which I have been asked to consult with a law firm, the question seems to be: “Is the buyer’s premium standard?” In other words, is it to be expected (likely to occur, or anticipated) by clients of auctioneers and customers of the auctioneer and seller?

  • Let’s say a seller is discussing with an auctioneer selling an inventory of antiques and collectibles at auction. Should the seller anticipate that a buyer’s premium will be utilized?
  • Let’s say a bidder is attending an auction of antiques and collectibles. Should this bidder anticipate that a buyer’s premium will be utilized?

I do not believe that in either case the buyer’s premium is to be expected, anticipated, or seen as likely to occur. Rather, I think that sellers and bidders (buyers) are right to expect no buyer’s premium is being charged by the auctioneer unless it is clearly disclosed to all parties involved.

The phrase, “standard buyer’s premium” seems a bit misleading. If something is standard — in this sense — then it would be rightly expected, anticipated or seen as likely to occur. Yet, there are in fact 1,000’s of auctions every day in the United States which do not charge a buyer’s premium.

Why do auctioneer’s use this language to describe the buyer’s premium? It seems clear that the word, “standard” is used to suggest that this is customary. In that way, sellers and bidders (buyers) are less likely to question it and/or attempt to find alternatives.

    Kevin has just arrived at JFK International Airport and is seeking a cab. A cab pulls up and loads Kevin’s luggage. Kevin secures his seat in the back of the cab, and notices that there is a “Standard” $15 airport pickup surcharge.”

    How likely is Kevin to get out of the cab, and try to find another cab without this $15 surcharge? Not likely, because the fee is “standard” and therefore he thinks, “All the cabs charge this same fee.”

    However, if the sign in Kevin’s cab says, “$15 airport pickup surcharge,” would Kevin be more likely to question this fee, and/or seek alternatives? Absolutely, because by the lack of the word, “standard,” the expectation is that this is optional and not always the case.

We would include that there are three important aspects of the buyer’s premium in this regard.

  • The use of a buyer’s premium mandates that the auctioneer’s client has knowledge of — and consents to — its use. An auctioneer lacking his seller’s knowledge and consent cannot charge a buyer’s premium.
  • The use of a buyer’s premium mandates that the auctioneer’s bidders (and buyers) have either actual or constructive notice of its use prior to bidding. An auctioneer lacking this disclosure cannot charge a buyer’s premium.
  • The use of the word, “standard” in regard to a buyer’s premium is, at best, questionable. There is neither a standard amount of a buyer’s premium charged, nor a standard buyer’s premium utilized in the United States.

What is a standard buyer’s premium? I would submit there is no such thing. Furthermore, even if some day the buyer’s premium becomes universal, this will not quiet the requirements for knowledge and consent.

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.