How will the final payment be calculated?

[Myers Jackson]

When purchasing property at auction, the winning bid is only part of the total cost. Buyers should understand that the final payment often includes several additional fees that can significantly affect the total amount owed. Knowing how these costs are calculated helps avoid surprises at closing.

Starting Point: The Bid Price

The bid price sometimes referred to as the “hammer price” is the amount the auctioneer announces as the winning offer. This figure forms the foundation for calculating the final payment. However, it does not represent the complete cost to the buyer.

Buyer’s Premium

In many auctions, a buyer’s premium is added to the winning bid. This is a percentage fee paid by the buyer to the auction company as part of the transaction. For example, if the buyer’s premium is 10% and the winning bid is $200,000, an additional $20,000 would be added to the total due.

The buyer’s premium should be clearly stated in the auction terms before bidding begins. It’s important for bidders to factor this cost into their bidding strategy to ensure they stay within budget.

Auctioneer’s Fee

An may also be included, separate from the buyer’s premium. In some cases, this fee is incorporated into the buyer’s premium; in others, it is charged independently. The fee compensates the auctioneer for conducting the sale and can vary depending on the auction’s scope, location, and terms.

Additional Fees

Beyond the bid price, buyer’s premium, and auctioneer’s fee, other charges may apply:

1. Closing Costs – These can include title search, recording fees, and escrow charges.
   
   
2. Transfer Fees – Costs related to transferring ownership of the property from the seller to the buyer.
   
   
3. Documentation Fees – Charges for preparing and processing legal documents.
   
   
4. Attorney Fees – If legal services are required for reviewing contracts or resolving title issues, attorney fees may be part of the final amount due.
   
   

These expenses vary depending on the property type, location, and specific requirements of the transaction.

How the Final Payment Is Reported

Typically, the auctioneer reports the bid amount and any applicable buyer’s premium or auctioneer’s fee at the moment the winning bid is awarded. The additional costs such as closing, transfer, and attorney fees are then outlined in the closing documents prepared by the title company or closing agent.

This ensures that the buyer has a complete breakdown of the total payment due before the closing date.

Conclusion

The final payment at an auction is more than just the winning bid. It includes the bid price, buyer’s premium, auctioneer’s fee, and other associated costs like closing, transfer, documentation, and legal fees. Understanding these elements before bidding helps buyers make informed decisions and prevents unexpected costs after the auction ends.