Buyer Premium and Seller Commission

The hammer price is the pivot

One figure sits at the centre: the price bidding stopped at. The seller's commission is taken out of it. The buyer's premium is added on top of it. Everything else follows from that single number.

So a lot that sells at a given hammer figure costs the buyer more than that and pays the seller less than that, and the house keeps the difference on both sides. This is normal and is how the business is funded.

Why a charge you never pay still costs you

Bidders do not think in hammer prices. They think about what leaves their account, and they work backwards from that to what they can bid.

The consequence is direct. Where the premium is high, the bidding stops sooner, and the hammer figure the seller is paid from is lower than it would have been. The seller never sees the premium on any statement and is affected by it on every lot.

Rates that slide with value

Both charges commonly step with the size of the sale, and both usually step downward: a higher-value lot attracts a lower proportion on each side. Premium structures are often banded, with a higher rate on the first portion and lower rates above it.

The effect on the seller is that a small lot is proportionally much more expensive to sell than a large one, which is another argument for grouping low-value items rather than offering them singly.

Getting the numbers before committing

Ask for the seller commission rate, the bands it applies across, every additional charge that may be deducted, and the buyer premium structure. That last one is not idle curiosity: it tells the seller how much of a bidder's budget is being consumed before the hammer figure is reached.

Rates are not published in one place across the trade and vary by house and sometimes by sale. That variation is why no figure is quoted here as typical, and why the comparison in how the selling channels compare has to be done with the actual schedule in hand.

Reading the remittance advice

The statement that arrives after a sale is the document that tells a seller whether the arrangement worked, and it is worth reading line by line rather than glancing at the total.

Check that the hammer figure matches the result. Check that the percentage applied is the one that was agreed, particularly where a sliding scale means a different band should apply. Then check every additional line against the schedule signed at intake, because a charge that was never agreed sometimes appears through simple error.

Where something does not reconcile, ask promptly and in writing. These are almost always administrative mistakes rather than anything worse, and they are far easier to correct in the weeks after a sale than in the months after it.

Why the two rates are set where they are

The split between what the buyer pays and what the seller pays is a commercial decision rather than a natural law, and understanding the pressures on it explains a lot about how houses compete.

Sellers choose where to consign and are sensitive to the rate quoted them, so competition pushes seller commission down. Buyers largely choose lots rather than houses, and pay whatever premium attaches to the lot they want, so there is less pressure in that direction.

That asymmetry is why the buyer side has grown relative to the seller side over time. It also explains why a house quoting an unusually low seller rate is not necessarily the cheapest place to sell: the money has to come from somewhere, and a high premium suppresses the hammer figure the seller is paid from.

A seller comparing two businesses should therefore ask for both figures rather than one. A low seller rate advertised alongside a high charge to buyers is not obviously the better deal, and the only way to tell is to look at what comparable lots have actually realised at each. Published past results make that comparison possible, and they are more informative than any rate card.