Guide · Auctions, explained
What is a buyer's premium at a real estate auction?
A buyer’s premium is a set percentage added to the winning bid at a real estate auction. It is disclosed to every bidder before the auction opens, it becomes part of the total contract price, and it is how the buyer side of the sale gets paid. If you know the percentage, you know your total before you ever raise your hand.
Why auctions use a buyer’s premium
On a traditional listing, the seller pays the commissions out of the sale proceeds, and that cost is quietly built into the asking price. Nobody sees it, but everybody pays it.
An auction moves that cost into the open. The seller pays a marketing fee that is agreed before the campaign launches. The buyer side is paid through the premium, and the premium is printed in the terms of sale for anyone to read. Every bidder in the room is working from the same number.
That transparency is the whole point. Nothing about the fee structure is decided after the hammer falls.
How the math works
The premium is added to the high bid, and the sum is the contract price. Say the premium on a given sale is ten percent, just as an example. A high bid of $200,000 becomes a contract price of $220,000. That is the number on the purchase agreement, the number your lender works from, and the number the appraiser is asked to support.
The real percentage varies by auction company and by sale. It is always in the terms for that specific property. Read it before you register, not after.
Bidding with the premium in mind
Work backward from the total. Decide the most you are willing to pay for the house, all in. Divide that by one plus the premium, and you have your maximum bid.
Using the ten percent example: if $220,000 is your ceiling, your last bid is $200,000. Write that number down before sale day. Auctions move quickly, and the people who get in trouble are the ones doing arithmetic while the auctioneer is calling.
If you are financing, tell your lender the contract price will include the premium so the pre-approval covers the full amount.
What the premium does not cover
The premium is not your closing costs. You still pay for title insurance, recording fees, lender charges and any inspections you order during the preview period, the same as on any purchase. Property taxes are prorated at the title company as usual.
It is also not a deposit. Your earnest deposit is a separate amount, due when you sign the contract on sale day, and it is applied toward your purchase at closing.
Where you will find it
The buyer’s premium appears in the terms of sale, in the bidder registration packet, and it is announced out loud before bidding opens. If you cannot find it, ask the auctioneer directly. A professional auction has no hidden numbers.
Read the terms, walk the property during the preview, and bring your questions before sale day rather than after. For the bigger picture, start with how real estate auctions work in Kansas, and see what is coming up on our auctions page.
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Related questions, answered straight
Is the buyer's premium negotiable?
Not on a given sale. The premium is set in the terms before the auction launches and it is the same for every bidder, which is what keeps the bidding fair. What you control is your bid. Decide your all-in ceiling first, then back out the premium to find your maximum bid.
Does my mortgage cover the buyer's premium?
It can. The premium is part of the contract price, so your lender lends against the total, subject to the appraisal and your approval. Tell your lender about the premium up front so the pre-approval is for the full amount. If the appraisal comes in short, the difference is on you, because auction contracts have no financing contingency.
Does the seller pay a commission too?
At a TurnKey auction the seller pays a marketing fee agreed before launch, and the buyer side is paid through the premium. Commissions and fees are negotiable and not set by law, so the arrangement is spelled out in writing before anything goes public. Ask to see it.
Is the premium the same at every auction?
No. Different auction companies use different percentages, and the number can vary from one sale to the next. Never carry an assumption from one auction to another. The terms of sale for the specific property are the only place the real number lives.