Buyer’s premium: what it costs, and how to bid with it

What a buyer’s premium is

A buyer’s premium is a charge the successful bidder is liable for on top of the hammer price. In South Africa it is more often called buyer’s commission, and some conditions of sale call it auctioneer’s commission where the purchaser is the one liable for it. The names mean the same thing: money due to the auctioneer for running the sale, not money for the seller.

It is usually a percentage of the hammer price. It can be a single percentage or a sliding scale that steps down as the price rises: the sheriff’s tariff for sales in execution of immovable property under the High Court rules, for example, works that way. The conditions of sale for each auction set the rate and the method.

The figures on an auction invoice are easy to mix up, so be clear what each one is:

Why auctions charge it

Running an auction costs money before anything sells: marketing, the catalogue, viewing days, the online bidding platform, the staff on the day, and the administration and paperwork afterwards. Commission is how the auctioneer is paid for that work.

How the cost is split between seller and purchaser varies by auction house and by asset. On our auctions the seller carries an appraisal fee, a listing fee and commission on the sale price, all set out in writing before they sign. The purchaser is liable for the deposit and, where the auction charges one, the buyer’s commission, at the rates and on the terms in that auction’s conditions of sale.

That is a real difference from a private sale through an estate agent, where the purchaser is generally not charged commission and the agent is paid from the sale proceeds under the seller’s mandate. Our auction versus estate agent guide sets the two routes side by side.

We do not publish a house rate for buyer’s commission. It is set for each auction in the conditions of sale, because a house, a yard of plant and a fleet of vehicles are very different sales to run.

Where to find the rate before you bid

The buyer’s commission is a term of the conditions of sale: the contract terms between the seller and the successful bidder, which also cover the deposit, payment periods, transfer and risk. They sit alongside the rules of auction, the document that governs how the auction itself is run.

The Consumer Protection Act regulations require the rules of auction for each sale to be in writing and, for most auctions, available to the public at least 24 hours before the auction starts (regulation 21(1), CPA Regulations, 2011). The rules must contain a breakdown of the total cost of advertising and conducting the auction, and say whether additional costs may be added and, if so, how they will be worked out. Auction advertising, apart from roadside advertising and classified adverts in printed newspapers, must also disclose as accurately as possible the total costs of advertising and conducting the auction (regulation 20(2)(i) and (3)). Our rules of auction page explains both documents and how to get a copy.

The regulations do not set a rate for the auctioneer’s commission. (Sheriff’s sales in execution are different: there the sheriff’s commission comes from the court tariff.) So the number that matters is the one in the conditions of sale for the auction you are bidding at. Before you register, find these points in them:

• The rate, and whether it is one percentage or a sliding scale.
• Plus VAT or including VAT. A rate quoted plus VAT costs 15% more than the headline figure, at the standard rate on SARS’s VAT page.
• When it is due and how you may pay it.
• Any other charges placed on the purchaser, for example documentation, storage or removal costs on movables, or arrear rates and levies on property.
• What happens to the commission if the sale does not go through.

If you are bidding online and cannot find the conditions on the auction listing, ask and we will send them before you register. Our guide on registering and bidding online covers the rest of the process.

How VAT applies

An auction purchase raises two separate VAT questions, and they are often confused.

VAT on the commission

The buyer’s commission is a charge for the auctioneer’s own service. Where the auctioneer is a registered VAT vendor, VAT is generally charged on it at the standard rate, which SARS confirms is 15%. Dynamic Solutions 1068 (Pty) Ltd is registered for VAT (VAT number 4050206442).

Read how the rate is quoted. Using an invented rate of 8%:

VAT on the hammer price

Whether VAT is added to the hammer price is a separate question, which turns mainly on who the seller is and how the lot is sold. A lot sold plus VAT will say so in the catalogue or the conditions of sale. On property, SARS is clear that a sale attracts either VAT or transfer duty, never both. VAT applies where the seller is a registered VAT vendor and the sale is a taxable supply made in the course of its enterprise. Transfer duty applies otherwise: for example, where the seller is not a vendor, or the property is a vendor’s private home or the sale is otherwise not a taxable supply. The catalogue or the conditions of sale should say which applies, and your conveyancer confirms it.

If you are a VAT vendor

If you are registered for VAT and buying goods you will use to make taxable supplies, the VAT on the commission, and on a hammer price sold plus VAT, is generally claimable as input tax, provided you hold the documentary proof SARS requires, such as a valid tax invoice.

There are exceptions. The main one at a vehicle auction: input tax on a “motor car” as the VAT Act defines it (sedans, station wagons, SUVs, minibuses and double cab bakkies, for example) is generally denied, even if the vehicle is used in your business, unless you are a motor dealer or car rental business. Make sure the invoice is in the name of the entity that registered to bid, and confirm the claim with your accountant before you count on it.

Property: the commission counts for transfer duty

On a property purchase there is a second effect that many buyers miss. Transfer duty is worked out on the consideration for the property, and section 6(1)(a) of the Transfer Duty Act adds to it any commission or fees paid or payable by the person acquiring the property.

So the value for duty is the hammer price plus the buyer’s commission, not the hammer price alone. And if the conditions of sale make you liable for the seller’s debts on the property, such as arrear rates and service charges, those amounts are generally added as well (section 6(1)(c)).

On SARS’s transfer duty table, in force from 1 April 2025, unchanged from 1 April 2026, there is no duty on the first R1,210,000:

• A R1,200,000 hammer price on its own falls below that threshold. Add an invented 8% commission and the value for duty rises to roughly R1,300,000, so duty becomes payable at 3% on the part above R1,210,000 (SARS transfer duty table): a few thousand rand you may not have budgeted for.
• Higher up the table the effect grows. Between R2,994,801 and R13,310,000 the rate on each extra rand is 11%, so every R100,000 of commission in that band adds R11,000 of duty. Above R13,310,000 the rate is 13% (SARS transfer duty table, in force from 1 April 2025, unchanged from 1 April 2026).

Two exceptions. Where the sale carries VAT instead of transfer duty, this point falls away. And at a sheriff’s sale in execution, only commission above 5% of the price is added (section 6(1)(a), SARS Transfer Duty Guide); our guide to buying repossessed property explains how those sales work.

Your conveyancer calculates the exact duty. Ask for the figure at two or three bid levels before the auction. The transfer duty guide has the full table, and the costs of buying property on auction sets out the rest of the bill.

Working it into your maximum bid

The classic mistake is to decide on a number and bid to it, forgetting that the hammer price is not the total cost. Work backwards instead:

1. Start with the most you can spend in total, from money you actually have or finance that has actually been approved.
2. Take off every cost that is not the bid or the commission: transfer duty and conveyancing on property; collection, transport, registration and repairs on a vehicle or machine.
3. Divide what is left by 1 plus the commission rate including VAT. At 8% plus VAT at 15% (SARS: VAT), that is 1.092.
4. Round down to the auctioneer’s bidding increment. That is your last bid.

A worked example

These numbers are invented to show the arithmetic; they are not our rates. Suppose a machine is sold with a buyer’s commission of 8% plus VAT, no VAT on the hammer price, and bids rising in R5,000 steps.

Now the same lot, bid to R480,000 because that was the figure in your head. The commission is R38,400 and the VAT on it R5,760, so the lot costs R524,160 before the R20,000 of other costs: R44,160 more than you had.

If the lot is also sold plus VAT, divide by 1.15 × 1.08, which is 1.242. The same R480,000 then supports a last bid of R385,000.

On property, run the sum at two or three bid levels, because transfer duty steps up with the value. If you need a bond, the guide to buying on auction with a bond shows what has to come from your own funds on the day.

Then hold the line. If the bidding passes your ceiling, let the lot go. There will be other lots on the auction calendar.

When the sale does not go through

The Consumer Protection Act regulations deal with commission when one side defaults:

• If the seller defaults, the auctioneer may not charge the purchaser any fee or commission, and must immediately refund anything already paid, including the deposit (regulation 24(c)).
• If the purchaser defaults, the fee or commission the auctioneer may charge the purchaser is limited to ten percent of the purchase price or the total cost of advertising and conducting the auction plus reasonably incurred additional costs, whichever is less (regulation 24(d), CPA Regulations, 2011). That limit is on the auctioneer’s charges. The conditions of sale set out the other consequences of default, so read that clause before you bid.

Note that the ten percent figure applies to a purchaser in default. It is not a cap on the buyer’s commission in a sale that goes through.

Other situations depend on the conditions of sale. If a bid is taken subject to the seller’s confirmation and the seller declines, check in the conditions of sale how and when anything you have paid is returned. If you make an offer before or after the auction, ask in writing whether commission applies to it and at what rate. The reserve price guide explains how confirmation periods work, and what happens after you win takes you from the hammer to transfer.

How it works on our auctions

The sequence is the one on our buying on auction page. You register before bidding opens, meet the FICA identity and address checks, and pay a registration deposit that is refunded if you do not win. The deposit is payable at the fall of the hammer, and the buyer’s commission and the balance as that auction’s conditions of sale set out.

The rates differ between property and movable assets, between auctions and sometimes between lots, so check the conditions attached to the lot you want, whether it is on our property auctions, among our movable assets or at a vehicle auction. If you want the figure before you register, ask us and we will tell you.