Buyer's Premium - Do you charge one?

I often get asked about the use of a buyer's premium for an online auction.  How much should I charge or, should I charge one at all?

Before I share my thoughts, here is a little background on buyer premiums.

From Wikipedia...In auctions, the buyer's premium is a percentage additional charge on the winning bid at auction that must be paid by the winner.

In the auction industry, the buyer's premium came about because the auctioneer needed a way to collect a marketing fee upfront to cover the cost of advertising and running an auction as well as a way to get paid for their services.  So, instead of tacking on an additional "commission" to be paid by the seller, it was determined that sellers were more receptive to having the buyer pay for the auctioneer services by adding a buyer premium to their purchase.

So, should you charge a buyer premium on your online real estate auctions?

It depends.

In general, I feel that if you have a good way to get paid for your services without charging one, an auction will always be more appealing to a bidder when there is not one.

However, I also realize there are many cases when using a buyer premium is the best way for the auctioneer to get paid.  There are also areas in the country where a buyers premium is expected.

As an example, I'm a licensed real estate broker in my area (St. Louis, MO).  I collect a $250 marketing fee upfront and then charge the seller a 6% commission.  I do this because sellers are conditioned to paying a realtor commission and many buyers in my area are not familiar with a buyer premium.

So, it really comes down to your area, your business model and what works best for you.

Until next month.

Can properties sold at auction be inspected?

There is a common myth that properties being sold at auction cannot be inspected.

Unless a property is being auctioned by the County’s office, or if it’s a judicial auction, most properties being sold auction can usually be inspected before bidding takes place.

I always encourage buyers to do a thorough inspection and even bring inspectors with them while previewing a house being auctioned.

In fact, in some cases, I've given the buyer a 5 day inspection period after the auction ends.  Many auctioneers don't do this as it leaves you open to having a buyer back out.  However, in my area, auctions are still new and sometimes I need to get more buyers involved and comfortable with the process.

Allowing an inspection period after your auction can help your bidders be more comfortable with the process, but each property and area is different, so it really depends if it makes sense with your process.

Online Real Estate Auctions In Austraila?

You may or may not be aware that in Australia the majority of real estate is sold via the auction method.

When I first found that out about 7 years ago, I figured they would soon embrace doing them online.  Well, that hasn't really happened yet, but that could be changing soon.

I just came across this article about a house that recently sold Lilyfield Australia for $1.6 million all online.  It ran for 3 days and attracted 22 bids.

It is certainly requires less to coordinate and extends the reach of your buyer audience.  It only makes sense to take them online and will be fun to see that trend continue.

Here is a link to the full article in case you are interested.