Industrial Auction Fees Explained: Commission vs. Buyer's Premium

Industrial auction fees are the charges an auctioneer earns for selling machinery and equipment, and they come from two different parties: the seller's commission, which is deducted from the hammer price before the seller is paid, and the buyer's premium, which the buyer pays on top of the hammer price. Those two charges, plus any reimbursable sale expenses, decide what a seller actually nets from an industrial auction.

The two are easy to confuse. This explainer covers how each charge works, what other line items can appear, how fees are handled in bankruptcy and lender sales, and how to compare competing proposals on the figure that matters: net recovery.

The Hammer Price Is the Base for Every Fee

The hammer price is the winning bid at the moment a lot closes. Under Article 2 of the Uniform Commercial Code, as adopted in most states, a sale by auction is complete when the auctioneer announces it "by the fall of the hammer or in other customary manner". In an online timed auction, the hammer price is simply the high bid when the lot's clock runs out. Both fee streams are calculated from that figure, in opposite directions: the seller's commission comes out of it, and the buyer's premium is added to it.

A useful way to keep them straight: the seller's settlement statement starts at the hammer price and works down, while the buyer's invoice starts at the hammer price and works up.

What the Seller's Commission Is

The seller's commission is the auctioneer's fee for marketing and selling the equipment, agreed in the consignment or engagement contract before anything is listed and deducted from the proceeds at settlement. There is no industry standard rate. The commission on a given sale reflects the work and risk involved, and the main drivers are:

• The expected gross value of the sale and the number of lots
• The type of equipment and how deep its buyer market is
• How much cataloging, photography, staging, and onsite labor the sale requires
• Whether the seller wants a guarantee, an advance, or a fixed timeline

At KD Auctions, fees are tailored to the engagement and quoted upfront, and most sellers pay nothing out of pocket. That is because the commission is taken from sale proceeds at settlement, as a line on the settlement statement, rather than billed in advance.

What the Buyer's Premium Is

The buyer's premium is an additional charge the winning bidder pays to the auctioneer on top of the hammer price. It is stated in each sale's terms and conditions before bidding opens, and it does not come out of the seller's proceeds. A buyer who wins a lathe pays the hammer price, plus the stated premium, plus sales tax where it applies, plus their own rigging and freight.

The premium still matters to sellers: experienced buyers work out their all-in cost before they bid, so the premium is part of what they weigh when deciding how high to go on a lot. Buyers who want the arithmetic step by step can use our guide to understanding the buyer's premium.

Sale Expenses and Other Line Items

Apart from the commission, a seller's contract may allow the auctioneer to recover direct costs of the sale. Depending on the contract, these can include photography and cataloging, advertising and online listing costs, inspection-day staffing, and labor to organize the floor. Some auctioneers fold these into the commission and others itemize them. When comparing proposals, know which approach each one uses: a lower headline commission paired with uncapped expenses can cost more than a single all-in figure.

Removal is usually the buyer's job under the sale terms, but site-specific costs such as utility disconnection, building access, or a load-out supervisor should be assigned in writing before the sale.

Other Structures a Seller May Be Offered

Straight commission

The most common arrangement: the auctioneer markets and sells the equipment, deducts the agreed commission and any agreed expenses, and remits the balance with a settlement statement showing every lot, its hammer price, and the deductions.

Net minimum guarantee

The auctioneer guarantees the seller a minimum net amount regardless of how the lots sell, and bears the risk if proceeds fall short. How proceeds above the guarantee are divided is set in the contract, so read that clause closely: it decides how much upside the seller keeps in exchange for certainty. See net minimum guarantee in our glossary.

Outright cash purchase

The auctioneer or a dealer buys the equipment for a fixed price, so the seller pays no commission and there is no buyer's premium to weigh. The seller trades competitive bidding for speed. At KD Auctions, a cash offer typically comes within 24 to 72 hours, funds typically arrive 3 to 7 days after acceptance, and removal is scheduled within 1 to 2 weeks.

How Fees Work in Bankruptcy and Lender Sales

In a bankruptcy case, 11 U.S.C. 327(a) lets the trustee employ auctioneers and other professional persons "with the court's approval". Section 328 allows that employment on reasonable terms, including a retainer, hourly, fixed or percentage fee, or contingent fee basis, and Section 330 provides for the court, after notice and a hearing, to award reasonable compensation for actual, necessary services and reimbursement for actual, necessary expenses. As a result, an auctioneer's fee terms in a bankruptcy case are generally put before the court rather than agreed privately.

A secured lender selling collateral under Article 9 of the UCC faces a different test: every aspect of the disposition must be commercially reasonable, and the proceeds are applied first to the reasonable expenses of preparing for and carrying out the disposition, under UCC 9-615(a)(1), before they go toward the secured debt. Clear, documented auction fees can help a lender show that both standards were met. This is general education, not legal advice; trustees, receivers, and lenders should confirm the rules for their case with counsel. Our page for lenders and trustees covers how KD supports those engagements.

Comparing Auctioneer Proposals on Net Recovery

A low commission does not guarantee a strong settlement check. The figure to compare is net recovery, and the questions that get there are:

• What gross proceeds does each auctioneer actually project, and on what comparable sales?
• What is the commission, and which expenses are included or charged separately?
• What buyer's premium will bidders pay, and how will it be stated in the terms?
• How many qualified buyers will see the catalog, and how is the sale marketed?
• When is the seller paid, and what does the settlement statement show?
• Who handles removal, site access, and cleanup after the sale?

Our guide to choosing an industrial auctioneer walks through those questions in more depth.

How KD Auctions Approaches Fees

KD Auctions has run hundreds of auctions since Michael and Arlene Treger founded the company in 1996, with hundreds of millions in machinery sales. KD markets its sales to 500,000+ industry contacts, managed auctions run 6 to 10 weeks, KD is licensed and bonded in every state that requires it, and KD Auctions is listed in the Industrial Auctioneers Association member directory. For real results, browse our past auctions, or Get a Free Consultation and call 480.455.3910.

Frequently asked questions

Who pays the buyer's premium at an industrial auction?

The winning bidder pays it, on top of the hammer price, to the auctioneer. It is stated in the sale's terms before bidding opens and is not deducted from the seller's proceeds.

Is the seller's commission negotiable?

Yes. There is no standard rate; the commission is agreed in the contract before the sale. At KD Auctions, fees are tailored to the engagement and quoted upfront.

Does the buyer's premium reduce what the seller receives?

Not directly, because it is paid by the buyer. Indirectly, buyers factor it into their all-in cost when deciding how high to bid, which is why sellers should compare proposals on projected net recovery rather than on one fee in isolation.

Why doesn't KD Auctions publish a commission rate?

Because the work behind a sale varies too much for one rate to fit: a one-machine consignment and a full plant closure are very different jobs, so KD quotes each engagement upfront.

Are auctioneer fees handled differently in bankruptcy?

Yes. Under the Bankruptcy Code, a trustee needs the court's approval to employ an auctioneer, and the court awards the auctioneer's compensation after notice and a hearing.