What Is a Buyer’s Premium?

27 Sep 2021
Buyer’s premium everything you need to know

 

If you’ve visited an auction house recently and bid on a product, you might have heard of the term buyer’s premium. A buyer’s premium is an additional charge paid by buyers on top of their winning bidding price and goes to the auction house. Within this latest post, our expert Toronto-based liquidators will explore the topic of buyer premiums, and help explain the total costs involved in buying equipment at local auction houses.

Planning for Future Auctions

As part of their working processes, auction houses must plan for future auctions. They must consider how to staff their facility, how to ensure the facility is in the best condition for a safe and effective auction experience, and how to make sure their team has all the resources needed to analyze equipment for sale and verify its quality. These planning processes require additional resources, and that’s why they charge buyers a premium over their bidding price. This amount goes directly to the auction house team to fund the holding of future auctions.

How much is the buyer’s premium?

The total cost of the buyer’s premium varies depending on the auction house facility and their location. Those in high-demand areas with high real estate costs have larger monthly expenditures. So, they may charge a bigger buyer premium for their services. The industry average is around 10%. This 10% fee is on top of your winning bid price. You can ask for a receipt from the auction house to get a breakdown of the total costs for their services.

How can I safeguard my finances at an auction?

So, now that you know a little more about the buyer’s premium and the role this fee plays within the auction house industry, you might now consider how to protect your finances while you move forward with your auction. 

Below are a few steps you can take to ensure that you don’t overspend as you bid on equipment at future events:

Analyze the Trends

Before entering the auction, review the market trends and determine the best value for the equipment up for sale. Are you sure you’ll need the equipment in the future? Is the industry going to be using this specific equipment for many years to come? These are vital questions to consider as you decide an amount for your bidding process. For example, you might avoid overbidding on wired systems if wireless technology is thriving throughout the industry.

Set a Clear Budget

Before visiting the auction house, make sure that you have a clear idea of your total budget. This budget should include every expense involved in the transaction. How much tax do you pay on the auctioned equipment? How much money will your company require to fix any potential equipment issues before using the system in your facility? These are critical questions to consider when evaluating your budget. Have your financial experts review the total costs. Then, craft a budgetary plan that sets clear values on each line item.

Review Needs for the Future

If your company requires a range of equipment over the coming years, you might wish to buy each of the pieces at the same auction. Our Toronto-based liquidators find that this approach can help save time and ensure that you’re not spending more money traveling back and forth to different auction houses across the area. Work with your in-house team to analyze equipment requirements and ensure each of these requirements is within your budget. 

Tips for Working With the Auction House

Establishing an effective business relationship with the auction house is a great way to save money on your equipment costs in the long term. It will also mean you have access to the latest information on equipment going up for auction. So, your team gets to know the auction house team and has a clear line of communication with those working in the facility. Below are several tips for working with your auction house.

Call the Company Ahead of the Auction

Before your team visits the auction house, make sure you call their facility directly to discuss the process. This call can help you discover more about the auction process and will mean you don’t miss out on any potential details before your visit. 

For example, when calling the company ahead of the auction, you might find out more about the venue for the auction. You may discover that there’s an equipment inspection on the day that the auction takes place, which will then allow you to review the pieces you’re bidding on so you can prevent wasted spending. Take the time to speak with a member of the team before making the trip.

Discuss the Equipment Seller

Ask the auction house about the company selling the equipment and review the equipment’s maintenance history. The maintenance history will tell you more about the total value of your purchase and can help ensure you’re not overspending on systems that may break down over the coming months. 

The auction house may place you in direct contact with the seller, which can give you far more information about the specific operation of the equipment and its potential value within your facility.

Analyze the Bidding Process

Does the auction house have a unique bidding process? Do they require you to register one or more members of your team for the auction before it begins? By working with the auction house ahead of the event, you can learn more about the bidding process and place your company in a prime position to capitalize on those standout deals.

Turn to Michaels Global Trading for Auction Services

Michaels Global Trading is one of the leading liquidators serving the Toronto market and the surrounding areas. We can advise you on selling your inventory at auctions and ensure that you get the best value for money for your equipment. To discover more about our full array of liquidation and auction services, contact us today.

Sources:

https://www.wilsonauctionltd.com/what-is-a-buyers-premium/

https://infinityassets.com/buyer-s-premium-basics/blog.html

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