Many auctioneers charge their clients commission.
Prevailing theory is that with a commission structure, the auctioneer and client work together with the same interest … the more the client makes, the more the auctioneer makes.
However, auctioneers have options how they structure their commission rate, and clients need to be aware of how these different structures work, exactly. Basically, there are three types of commission plans: Flat, Sliding and Incremental.
A Flat commission structure is a constant, fixed number which is applied to the total proceeds of the auction (or some part-of, by agreement.) For example, an auctioneer might charge 15% commission. Therefore property selling for $300,000 would net the seller $255,000 and property selling for $3,000 would net the seller $2,550.
A Sliding commission structure is a series of fixed numbers applied to various levels of total proceeds of the auction (or some part-of, by agreement.) For example, an auctioneer might charge 30% for property selling for $1.00 to $1,000, 20% for property selling for $1,001 to $5,000 and 10% for property selling for $5,001 or more. Therefore, property selling for $3,000 would net the seller $2,400.
An Incremental commission structure is a series of fixed numbers applied to each level of total proceeds of the auction (or some part-of, by agreement.) For example, an auctioneer might charge 30% for property selling for $1.00 to $1,000, 20% for property selling for $1,001 to $5,000 and 10% for property selling for $5,001 or more. Therefore, property selling for $3,000 would net the seller $2,300.
There is commonly confusion about how the Sliding and Incremental commission structures differ. Both apply different rates of commission to ranges of auction proceeds. Yet, the Sliding scale looks only at the total proceeds, where the Incremental scale applies commission to each range of the total proceeds.
In our above example, the Sliding commission structure applied 20% to the $3,000 in proceeds, where the Incremental commission structure applied 30% to the first $1,000 in proceeds, and 20% to the remaining $2,000 in proceeds.
Commission structures are common in the auction industry; care must be taken to ensure both the auctioneer and client understand exactly how it is calculated.
Mike Brandly, Auctioneer, CAI, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at: Mike Brandly, Auctioneer, Keller Williams Auctions and Goodwill Columbus Car Auction. His Facebook page is: www.facebook.com/mbauctioneer. He serves as Adjunct Faculty at Columbus State Community College and is Executive Director of The Ohio Auction School.
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