Understanding Buyer's Premiums, Reserves & Estimates

The True Cost of Buying at Auction

The hammer price — the price at which the auctioneer declares a lot sold — is not what you actually pay. Every auction adds a buyer's premium on top of the hammer price, and depending on your location and the auction house, you may also owe sales tax and shipping. Understanding these costs before you bid is essential for staying within budget and making informed purchasing decisions.

Buyer's Premium Explained

The buyer's premium is a percentage of the hammer price that the auction house charges the winning bidder as its primary revenue source. Current typical rates (always verify before bidding, as rates change):

• Heritage Auctions: 20% on lots over $10
• Stack's Bowers: 20%
• Legend Rare Coin Auctions: 17.5-20%
• GreatCollections: 0% for buyers paying by check; 10% for credit card payments (their model charges sellers instead)
• eBay: No buyer's premium (but sellers pay eBay fees that are factored into pricing)

Example calculation: You win a coin at $1,000 hammer price with a 20% buyer's premium. Your subtotal is $1,200. Add 8% sales tax ($96) and shipping ($15), and your total cost is $1,311 — 31% above the hammer price. This is why calculating total cost before bidding is critical.

Pro tip: When determining your maximum bid, work backwards from your total budget. If you're willing to spend $1,300 total, and the buyer's premium is 20% with 8% tax plus $15 shipping, your maximum hammer bid should be approximately $1,000. Set your proxy bid at that level.

Reserve Prices

A reserve is the minimum price a consignor will accept. If bidding doesn't reach the reserve, the lot goes unsold ("bought in" or "passed"). Key points:

• Reserve vs. no-reserve: Some auctions are entirely no-reserve (every lot sells regardless of price). Others allow consignors to set reserves. Heritage's Sunday Internet auctions are no-reserve; their signature sales may have reserves.
• Reserve indicators: Most platforms indicate whether a lot has a reserve. "Reserve not met" during bidding means the current bid hasn't reached the minimum.
• Opening bids: The starting bid often represents 50-75% of the reserve, giving you a rough indication of the consignor's minimum expectation.
• Unsold lots: Lots that don't meet their reserve may be offered at reduced prices after the auction ("post-auction" or "make offer" listings).

Pre-Sale Estimates

Auction catalogs typically provide estimated value ranges for each lot (e.g., "$800-$1,200"). These estimates serve as guidelines but should not be your primary pricing reference:

• Conservative estimates attract more bidders (everyone thinks they're getting a deal). Some houses intentionally estimate low to generate bidding enthusiasm.
• Aggressive estimates may reflect the consignor's expectations rather than market reality. Don't assume an estimate of $1,000-$1,500 means the coin is actually worth that range.
• Your research trumps estimates: Base your maximum bid on your own research (Heritage Archives, PCGS/NGC price guides, recent comparable sales), not the auction house's estimate.

Seller's Fees (For Consignors)

If you're selling coins at auction, the auction house charges the consignor a seller's commission:

• Major houses: Typically 5-10% of the hammer price, negotiable for large or valuable consignments
• GreatCollections: Higher seller fees (15-20%) but no buyer's premium on check payments, potentially attracting more bidders
• Additional costs: Photography, catalog production, insurance, and lotting fees may apply

When comparing auction houses for selling, consider the net return — hammer price minus all seller fees and costs. A house with a lower commission rate but less buyer traffic may produce a lower net than a house with higher fees but more competitive bidding.

Sales Tax

Sales tax on auction purchases has become increasingly complex:

• Many states exempt coins and precious metals from sales tax — check your state's laws
• Internet sales tax: Following the Supreme Court's Wayfair decision (2018), auction houses must collect sales tax in states where they have "nexus" (physical presence or sufficient sales volume)
• Ship to a tax-free state: Some buyers ship purchases to states without sales tax on coins. This is legal if you have a legitimate address in that state.
• Tax on the total: Sales tax is calculated on the hammer price plus buyer's premium, not the hammer price alone

Check the auction house's tax policy before bidding. The difference between a taxable and tax-exempt purchase can be 5-10% of the total — significant on high-value coins. Our tax guide covers broader tax implications of coin transactions.