Does the Buyer's Premium Mess Up the Auction?

Does the buyers premium mess up the auction?

Here is Why Auction Fever Outweighs the Math when using the Buyer’s Premium as a buyer at any auction including Real Estate.

When auctioneers are asked whether a buyer’s premium affects the final selling price, the most honest answer is usually, “Somewhat… sometimes yes, and sometimes no.” However, use your math skills in either case. Some savvy bidders that understand the buyer’s premium just reduce the BP and end the BID the amount of the percentage less… What happens is BID plus the added Buyer’s Premium places the total money right where they want to be. All the while giving the bidder additional opportunities to bid, in the chance they get out bid by a few more dollars…

To understand why, you don’t need to look at economic theory—you just need to listen to the people who have spent their lives on the auction block. Two veteran auctioneers recently shared their own experiences, proving that when the bidding starts, human psychology often overrides the math.

Cookie Lockhart’s 10% Surprise

For Cookie Lockhart, a trailblazing Hall of Fame auctioneer from Colorado who has been in the business since the 1960s, the perfect example came when she was the one holding the bidder card.

Vertical infographic titled "Auction Psychology: The Buyer's Premium vs. 'The Win'" detailing real estate stories from auctioneers Cookie Lockhart and Randy Wells.

Around 1987, Lockhart attended an auction in Denver featuring bank-owned properties. Though already a highly established auctioneer, she was there simply as a buyer. She ended up successfully bidding on two properties sight unseen—a lake cabin near what is now the Black Hawk gaming area, and a cliffside vacant lot. Both turned out to be worthwhile investments, but that wasn’t her main takeaway from the day.

When Lockhart sat down to sign the closing papers, she was surprised to see the total was 10% higher than the number she had in her head.

She had completely forgotten about the buyer’s premium.

“I’m sure it was printed in the brochure I was holding,” Lockhart recalled. “I’m equally sure the auctioneer announced it before the bidding began. As an auctioneer myself, I knew better. Yet once I became caught up in the excitement of bidding, the buyer’s premium disappeared from my thinking.”

She didn’t complain or refuse to pay; she simply wrote the check and quietly laughed at herself. It was proof that even someone who had spent a lifetime in the business could become so focused on winning the bid that the premium didn’t cross her mind until settlement time.

For Lockhart, it perfectly answers the age-old question: sometimes the premium influences the price, and sometimes the excitement of the auction outweighs the math.

Randy Wells and the Unpredictable Bidder

Lockhart’s experience is far from an isolated incident. Randy Wells, a longtime auctioneer from Idaho, echoed her sentiment with his own stories from the field, noting that while some people meticulously adjust their bidding for the premium, most don’t—and some just flat-out forget.

Wells recalled a time he sold a small farm at auction in southern Idaho. It was the last of seventeen properties his team had moved that week, and the winning bidder happened to be a fellow local auctioneer.

At the contract signing, the buyer looked at the paperwork and said, “Hey, I only bid X amount on this property.”

Wells’s heart sank for a moment as he gently reminded his colleague about the buyer’s premium. The buyer just laughed, said, “You would think I would remember that,” and signed the contract.

In another instance, the buyer’s premium proved its worth despite local skepticism. Wells was at an open city council meeting in southern Idaho to discuss selling an old college campus. A competing auctioneer stood up and confidently told the town council that charging a buyer’s premium in that area wouldn’t work because “bidders don’t like it.”

Wells’s team won the contract anyway. On auction day, the property sold for more than three times what the city was hoping for—plus the buyer’s premium.

The Bottom Line

Together, Lockhart and Wells highlight a universal truth of the auction industry. While the buyer’s premium is a clearly stated financial variable, human nature is highly unpredictable. Whether it’s a first-time homebuyer or a seasoned auctioneer with decades of experience, the thrill of the win often leaves the calculator behind.

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