Question: What Is A BUYER'S PREMIUM?
Answer: A Buyer's Premium Is An Amount, Usually A Percentage, Added To A Final Sales Price Of Personal And Real Property. In Regards To Real Estate It Is Customary To See Any Where From 1% to As High As 10% Factored Onto A Final Sales Price. Much More Can Be Added On To Personal Property Such As Art, Collectibles, Etc.
Question: Why Is A BUYER'S PREMIUM Charge?
Answer: It May Be Necessary For A Seller Of Personal Or Real Property To Recoup Expenses From The Cost Of A Sale—Including The Cost Of The Marketing Program. A Marketing Firm May Charge A Buyer's Premium To Separate The “Better-Deal” Bidders From Serious And Able Buyers For The Property. If An Item For Sale, Whether Personal Or Real, Is Highly Sought After By Buyers In The Market A Buyer's Premium Will Be Charged To Control A Competitive Situation Demanding Performance Buyers To Place Bids.
Question: Who Negotiates/Determines How Much Of A BUYER'S PREMIUM To Charge?
Answer: First, The Market Overall. The Question To Be Asked Is: Does The Property Have Enough Interested Activity To Be Able To Charge An Amount High Enough To Continue Qualified Bidder Interest, But Not So High As To Act As A Taming Device For Activity. Once It Is Determined A Buyer's Premium Could Be Charged In The Market Place The Seller (And/Or Marketing Firm Responsible For Bidder Awareness/Due Diligent Information Gathering/Etc. Of The Item For Sale) Will Negotiate The Final Decision.
Question: What Is Seen As The Final Cost? During Bidding Is The Bidder Bidding A Final Cost Figure Or The Cost Before A Buyer's Premium Is Added In?
Answer: The Final Cost Of The Transaction Is Equaled To The Acceptable Bid Price Times The Buyer's Premium Percentage: Ex.: Final Acceptable Bid Price Is $300/Acre Of A Section Of Range Land ($300 X 640 Acres = $192,000) Times (X) A 2% Buyer's Premium ($192,000 X 1.02 = $195,840 Final Cost) Will Equal The Final Cost Of The Range Land At $195,840.The Bidders Are Bidding On The Land Before The Buyer's Premium Is Factored In. Therefore, Bidders Must Be Able To Factor The Addition Buyer's Premium Into Their Thinking During Their Bidding To Not Surpass Their Desired Price.
Question: When Is A BUYER'S PREMIUM Announced To Potential Bidders?
Answer: All Sales Involving A Buyer's Premium Must Be Disclosed Prior To The Start Of A Sale. A Marketing Firm Must Post A Notice That A Buyer's Premium Will Be Charged And The Amount Of The Buyer's Premium. If A Registry Of Bidders Is Taken They May Have To Sign A Form Indicating They Are Aware Of The Buyer's Premium. If A Buyer's Premium Is Charged It Becomes A Vital Part Of The Negotiated Transaction. Failure To Pay A Buyer's Premium Forfeits A Transaction And Earnest Money And Seller/Marketing Firm May Use Legal Remedies For Damages And/Or Performance.
Question: Is Charging A BUYER'S PREMIUM Legal?
Answer: Absolutely. With Full Disclosure Throughout The Marketing Process.
Question: What Is Buyer Getting In Return For The Cost Of A BUYER'S PREMIUM?
Answer: Buyer’s Are Receiving An Exclusive Opportunity To Submit Their Offer On An Even Playing Field—And Know That The Seller Will Give It Consideration. They Also Receive A Property Information Package Put Together Specifically To Assist Them In Making An Informed Decision In A Timely Manner.
Question: Can A BUYER'S PREMIUM Be Tied To A Reserve Price Amount On The Item For Sale?
Answer: Another Reason A Seller May Elect To Charge A Buyer's Premium Is To Be Able To Help Them Reach Their Desired Reserve Price If The Bidding Lags In Reaching It.
Question: What Is The Usual Amount 1st Realty / Big Sky Bid Real Estate May Charge For A BUYER'S PREMIUM?
Answer: 1st Realty / Big Sky Bid Real Estate Will Rely On The Market Conditions Based On Location Of Property, Projected Marketing Time Invested, Market Activity For Property Type Offered For Bid, Etc. Many Elements Go Into Reaching An Amount To Expedite The Sale Of Properties To The Most Qualified Bidders Willing And Able To Come Forward With Performing Offers And Goals To Close Transactions Under Terms And Conditions Acceptable To The Sellers. Charges May Range From 1/2% to 3%, to even as high as 15%. Buyer Premiums Will Be Dictated On A Case By Case Basis. |