What does the "buyer’s premium" represent in an auction?

The buyer's premium is a fee that auction houses charge to the winning bidder as a percentage of the final bid. It is added to the winning bid amount, making it the total cost that the buyer must pay to acquire the item. The importance of the buyer's premium lies in its function as a source of revenue for the auctioneer, helping to cover the costs associated with conducting the auction.

This charge is typically outlined in the auction's terms and conditions, ensuring that bidders are aware of the additional cost when they participate. For instance, if an item has a winning bid of $100 and the buyer's premium is set at 10%, the buyer would ultimately pay $110 ($100 winning bid + $10 buyer's premium).

Understanding the buyer's premium is crucial for bidders because it affects their overall expenditure and should be factored into their bidding strategy. Recognizing this fee helps bidders make informed decisions during the auction process.