Buyer Representation, Payment, and Settlement
Buyer Representation, Payment, and Settlement tests what the buyer is charged, when the buyer is bound, and how funds and title move after the fall of the hammer. The buyer obligations should be stated before bidding: buyer premium, sales tax, deposit, payment deadline, removal deadline, financing risk, and transfer costs.
Payment and settlement
- The bid amount is not always the total price. A buyer premium is usually added to the hammer price and should be disclosed in advertising and at registration. Kentucky sales tax generally applies to taxable tangible personal property unless an exemption is documented; the tax base can include the premium, so the auctioneer must apply the terms consistently.
- A buyer who fails to pay may lose the deposit and be liable for the balance or resale loss under the announced terms. The auctioneer should not release property before funds clear unless the contract says otherwise.
- Settlement with the seller should follow the consignment: deduct commission, premium if the auctioneer retains it, taxes, fees, and expenses, then account for the balance.
Worked example
A bidder wins at $1,000 with a 10 percent buyer premium and 6 percent sales tax on the full sales price. The buyer owes $1,000 plus $100 plus $66, for $1,166. If the terms instead say tax applies only to the hammer price, the result changes; the announced formula controls and must be applied consistently.
Traps
Quoting only the hammer price; assuming a bid is contingent on financing; releasing goods on a personal check without authorization; mixing buyer and seller funds while waiting for clearance.