Definition
Auction Premium refers to the additional charges auction houses impose beyond the hammer price. The buyer’s premium (charged to purchasers) typically ranges from 20-28% of the hammer price, while seller’s commissions (charged to consignors) vary based on negotiation but often range from 0-15%.
Significance in Alternative Asset Valuation
Understanding auction premiums is essential for accurate valuation and transaction planning:
Impact on buyers:
- A $100,000 hammer price may result in $125,000-$128,000 total cost
- Premium structures vary by auction house and sale tier
- Online-only sales may have different premium schedules
Impact on sellers:
- Net proceeds after commission may be significantly less than hammer price
- Unsold lot fees may apply if items fail to sell
- Additional charges for insurance, shipping, and photography
Valuation implications:
- Comparable sales analysis must consider total realized prices
- Different venues’ premium structures affect price comparability
- Insurance values should reflect replacement cost including buyer’s premium
Failure to account for auction premiums can lead to significant valuation errors, particularly when comparing prices across venues with different fee structures.
How Impossival Approaches This
We normalize auction data to account for varying premium structures, enabling accurate comparisons across venues. Our valuations specify whether they represent hammer price equivalents or total replacement costs.
Related Concepts
• Buyer’s Premium - Fee charged to auction purchasers • Hammer Price - Winning bid before fees • Auction Value - Total transaction price at auction • Realized Price - Actual amount paid or received