Most auction companies will be paid based on a percentage of the Gross Auction Proceeds. This percentage is a negotiated compensation between the Seller and the Auction Company. Seller’s typically prefer this method because the auctioneer’s pay is determined by the success of the auction. The higher the auction gross, the higher the commission paid.
A Buyers Premium (BP) is sometimes added to a commission structure. A Buyers Premium is a commission percentage charged to the buyer, in addition to the bid price. For example, in an auction with a 10% BP an item with a final bid price of $100 will actually cost the buyer $110. Buyer’s Premium is also a negotiated commission between the Seller and the Auction Company. Some Seller’s prefer to pass a portion of the commission along to the Buyer through the application of a Buyer’s Premium in an effort to reduce their own costs.
A third method of commission is flat fee. In this method the auction company has determined a flat fee they will charge for conducting the auction. This may be used in a situation where the auctioneer is not confident in the auction’s success and wants to make sure they achieve a minimum amount of payment.
Commissions can be one of the above three, or a combination of all. It’s important to remember that a lower commission may not equate to a higher return to the Seller. For example, an auction company who achieves a $100,000 Gross Auction while charging a 20% commission is actually a better value to the client than an auction company who charges a 10% commission while only achieving an $80,000 Gross Auction.
Some factors to consider when interviewing prospective auction companies are website content, social media presence, referrals, affiliations with professional associations and professional designations. All of these factors can help you determine whether the auction company is at the forefront of today’s marketing concepts and able to deliver your asset to the largest selection of interested buyers.