| Don Kraft - 1/28/2008 11:00
Don.. Please explain the concept of buyers premium. Does the buyer share in the real estate commission charges?
Don Kraft,
Buyer's Premium:
One version: The top bidder (buyer) pays a percentage on top of his buy price. Buy price for the land 1000 he'd pay an additonal 3% or $30.00.
Another version: One auctioneer in our area sells all (at least much of) the land he auctions using buyer's premium where the buyer pays for both the land and his auctioneering fee/commission--usually 6%. The land owner would only pay for the advertising, the higher the expected sale price the more is spent on advertising.
Our auction: In our case we payed the auctioneer 6% commission and the buyer payed auctioneer an additional 3% buyer's premium. The 3% could have gone to a Participating Broker if he brings-in the buyer. Since this did not happen the 3% amount was divided equally between auctioneer and seller.
Of course no bidder wants to pay a buyer's premium on top of what he pays for the land. Even more so with today's high land prices. Most people think it's the land owner's responsibility to pay the auctioneer for his services. I agree with this.
Schrader set us up with the 3% buyers premium on the contract and I decided to not hassle them about discarding it. I figured if I cut their income from the auction by insisting on discarding it they would probably do less work for me. I also thought it possible--and it was--there would be a participating broker who would bring-in the top bidder.
Had it to do over again I probably would have sold it myself. (Hind sight's 20/20) My main reason for using Schrader (they are good) was I was confident they could find more deep pocket 1031 exchange people than I could. More deep pocket people, period. Don't think they did but that's mostly timing in that 1031 people are often not available at the time of one's auction. Or, at least those interested in my particular land.
Don |
Our auction
