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In auctions, the buyer's premium is a percentage additional charge on the hammer price of the lot. It is made by the auctioneer to cover 'administrative expenses'.
In the fine art sector, major auction houses have made this charge for some time, with premiums in the region of 10%-20%. In the real estate sector, the premium, if charged at all, is much less (2%-2.5%). However, more recently, in the UK foreclosure properties have been offered without fee to the seller, but with a substantial buyer's premium of 10%.
The amount of the buyer's premium will normally be stated in the auction house terms and conditions or, in the case of UK properties, it would be listed in the RICS (Royal Institute of Chartered Surveyors) Common Auction Conditions or in the special conditions for the lot. In Europe, the buyer's premium will also be subject to VAT (value added tax).
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