The concept behind an auction is straightforward: bidders submit bids for items, and the person with the highest bid receives that item. Beyond that, there are many nuisances involved with an auction, ranging from the types of auctions held to certain terminology used to describe aspects of an auction. This blog will explore some of the top questions people have about auctions.
This question is almost always asked by anyone who is new to the world of auctions. A buyer’s premium is an additional charge in the form of a percentage the winning bidder pays for an item. The buyer’s premium, plus the winning bid amount, equals the total sale price of an auction.
For example, if you’re the winning bid on a $10 tool set at an auction and the buyer’s premium is 10%, you would pay $10 for tools plus $1 in a buyer’s premium for a total of $11 (10% of 10 is $1).
It’s worth noting the buyer’s premium is separate from sales tax. The only difference is instead of paying sales tax on the $10 item, you would be required to pay tax on $11.
Since it’s often viewed as “just another charge” by potential buyers, a buyer’s premium tends to have a negative connotation. Because of this, it’s important to understand why buyer’s premiums exist.
In general, a buyer’s premium helps cover costs associated with running an auction. It’s more than just your typical commission. Setting up and running an auction requires time and money. A buyer’s premium helps cover any costs associated with building maintenance, auction software, advertising and marketing the auction, set up costs, and heating and air conditioning to host the event.
Each auction house will have a different buyer’s premium. At Dakil, the buyer’s premium usually is somewhere between 10% and 15%.
This type of auction is known as an absolute auction. Items are sold to the highest bidder regardless of price.
While some auctions have minimum bids, an auction without a reserve attracts more interest because there aren’t limitations on what the price needs to be to reach a final sale. Most auction items are sold as part of an absolute auction.
As the name suggests, a reserve auction means the seller reserves the right to accept or reject winning bids made on their items. Before the auction, the seller will come up with a price (this price isn’t always made public) and will then decide if they want to accept any bids. This method is common in real estate auctions.
If you’ve never stepped foot in an auction house, you’ll probably be surprised when you hear an auctioneer start talking. In fact, many people wonder if the person running an auction is simply talking in gibberish.
However, the way auctioneers talk is called an auction chant or bid calling. Auctioneers use this lingo to inform bidders of the price of items in an efficient and speedy manner.
The following parts make up an auction chant:
When put all together in a sentence, these words can be hard to understand. That’s because filler words are used to create rhythm and pace for potential bidders. Examples of filler words include “bid to buy,” “dollar bidder now,” or “what do you want?”
Most people who bid at auctions have the financial means to pay for the items they win. But occasionally, things come up and some bidders wonder what happens if they can’t pay.
You’re legally bound to pay for your items, including a deposit on the day of the auction and paying off the remaining purchase price by a fixed deadline (usually within a month).
That said, auction houses tend to work with you if you can’t pay. After all, it’s not always worth it to file a lawsuit or engage in litigation over a few items. In the event this occurs, auction houses will either return the items to the original owner, add the items to a future auction, or sell the items privately to recoup the costs.
As a bidder, you can do your part by being proactive in the event you’re unable to pay for auction items. For starters, you can find short-term financing to receive cash now and avoid breaking your contract with the auction house. You can also offer to sell your items back, although you may receive less than what you originally paid for. As an alternative, you can request your item be used in a future auction. That way, you can use the proceeds from the sale to pay the auction house for what you originally owed.
If you’re interested in learning more about how auctions work, stop by one of our in-house auctions or bid online using our online software. We update our auction schedule regularly with new events! Please contact us at 405-266-2709 with any additional auction requisitions you may have!
