Buyer's Premium
Synonyms: Sa'y (Saudi equivalent)، Buyer's Commission، Buyer's Fee، Auction House Premium
Last updated: 2026-09-25
Short Definition
A buyer's premium is a percentage added to the hammer price and paid by the buyer to the auction house for its services; the concept is common in Western markets, and its Saudi real estate equivalent is the «sa'y», the brokerage commission that auction terms often place on the buyer.
Overview
Legal Basis
Article 14 of the Real Estate Brokerage Law, issued by Royal Decree No. (M/130) dated 30/11/1443H, sets brokerage commission at 2.5% of the deal value for sales unless the parties to the brokerage contract agree otherwise in writing, makes it payable by the party that contracted the broker, and provides that where the broker contracts with more than one party to the same deal the total commission may not exceed the set rate. Article 7 requires the brokerage contract to be in writing and deposited with REGA, and Article 16 bars the broker from receiving any amount from the parties beyond what its work requires. Brokerage services are subject to 15% VAT. REGA's Real Estate Auctions Regulation (REGA Board decision of 1/12/1444H) requires the auction brokerage contract to set out the auction's terms and conditions.
Practical Example
A foreign investor compares an auction in London with one in Riyadh. In London, a buyer's premium and administration fees set by the auction house are added to the hammer price. In Riyadh, the terms of a warehouse auction awarded at SAR 4,000,000 provide for a 2.5% commission borne by the buyer (SAR 100,000) plus 15% VAT on it (SAR 15,000), in addition to the 5% Real Estate Transaction Tax (SAR 200,000). The total paid is SAR 4,315,000. The investor notes that the commission rate is announced in the bulletin and rests on a statutory default rate, and that a broker contracted with both parties may not collect more than the set rate from them combined.
Common Mistakes
- ✗Assuming a Western-style buyer's premium (which can be high) applies in Saudi Arabia — the equivalent is sa'y, anchored to a statutory default of 2.5% unless agreed otherwise in writing.
- ✗Forgetting VAT on the commission — 15% applies to the commission unless the rate is stated as VAT-inclusive.
- ✗Confusing sa'y with the Real Estate Transaction Tax — the first is a service commission, the second a 5% tax on the property disposal.
- ✗Paying a commission not announced in the auction terms, or one whose combined total from both parties exceeds the statutory rate.
- ✗Paying sa'y in cash without a tax invoice from the licensed establishment.
International Differences
The buyer's premium is well established in international auction houses, especially in the UK and US, where the auction house sets the rate freely and announces it in its terms, with VAT added where applicable. In Turkey, no buyer's premium in the same sense applies in official enforcement auctions; buyers instead pay fees and taxes set by law. The Saudi model is distinctive in framing the equivalent (sa'y) within a default rate in the Brokerage Law and a written brokerage contract deposited with REGA.
