Essentials of Buying & Selling at Auction
If you are interested in buying or selling fine art, jewelry, or antiques, you'll likely find yourself dealing with an auction house. For those of you who may be unfamiliar with this industry, here is an introduction to buying and selling at auction.
1. Not All Auction Houses are Created Equal
If you are interested in selling your valuables, it is imperative that you consign them with an appropriate auction house. Every auction house has its own market, and typically only consign items which meet their criteria. Don't take offense if an auction house declines the opportunity to sell your items. When an object is declined for consignment, it is because it would not do well with their market. If this happens, always ask for a referral to another auction house as they will likely know which ones would be better suited to sell your consignment for the highest possible return.
Make sure that your consignment fits within your selected auction houses typical price range (look at any relevant past sales listed on their website). While a mid or low tier auction house may be thrilled to have your high-end item, they're unlikely to get you top dollar.
Auction Estimates are not Guarantees
An auction estimate is an estimate. It is representative of the specialist's best guess of what the item will sell for at that auction house, given the current demand and the state of the secondary art market. Lots can sell well above or well below auction estimate depending upon the level of interest within the market.
If you are selling your item, it is advisable to request a reserve be placed on your lots. A reserve is a minimum price at which a lot can sell. Reserves are kept secret and are determined by the client and his/her representative. If a reserve exists, it is typically somewhere between half and two-thirds of the low estimate (reserves are never higher than the low-end estimate).
Most auction houses are pleased with a 90% sell-through rate. If a lot does not sell, a post-sale offer can be made by a buyer. Post-sale offers can be made at below the reserve, and it is up to the seller to accept or reject them at his or her discretion.
If a lot does not sell (during the sale or post-sale), it will typically be re-offered at a lower estimate in a future sale. It may also be advised that a lot is sold via another auction house; one where it may have better luck and find fresh buyers.
Consigner's Commission & Buyer's Premium
Auction houses make their money through consigner's commissions and buyer's premiums.
The Consigner's Commission is a percentage of the hammer price which the auction house takes for its efforts. Depending on the desirability of your consignment, commissions vary. While high-value consignments typically receive very competitive commissions, most consigners can expect a commission rate somewhere between 10-20% of the hammer price.
The Buyer's Premium is a percentage that a buyer pays on top of the hammer price. Depending on the auction house, and the value of the item. Buyer's premiums are typically tiered, based upon the value of the lot. For example: a multi-million dollar painting will likely be subject to a considerably lower buyer's premium than a several-thousand dollar painting in the same sale. Buyer's premiums between 20-25% are standard for most lots.
Here is an example of how premiums are tiered.
$0 - 200,000: 25.0%
$200,001 - 3,000,000: 20.0%
Know the Increments
Auctioneers bid based upon increments that change depending upon the value range. Check with the auction house in advance of the sale to familiarize yourself with these numbers to make sure you are aware of your bid amounts. You don't want to find yourself bidding an additional $10k when you thought your were only bidding an additional $1k!
You should always ask for a condition report. Auctions sales are done on an as-is basis. Do not assume that the everything is in working order or in excellent condition. Auction house specialists will, when asked, provide interested buyers with a comprehensive condition report. If you cannot inspect an item personally, you must request a condition report to be fully knowledgable about a piece so that your can bid appropriately.
Be sure to factor in the condition of the item, when deciding how much to bid. If you're unsure of how condition affects value, contact a professional.
Bids are Final
When you register to bid at auction, you sign a contract stating that you will make payment on all items for which you are the winning bidder. If you are considering buying an item at auction, you must be prepared to pay. If you chose not to make good on your payment, you are likely to be sued and black-listed by the auction community.
P.S. Auction houses appreciate clear and direct bids (i.e., raising your paddle high in the air).
P.P.S Never wave to a friend you see at an auction!
You don't have to be in the room to bid
Thanks to the world wide web, auctions have an international client base, most of whom chose not to attend the auction, but rather to make their bids through other means. If you are interested in buying an item at auction, but cannot be present you can leave an absentee bid, you can request a phone bidder, or you can bid online. Be aware that most online platforms typically charge an additional 5% on top of the buyer's premium for the use of their service. While this may be the most convenient method, it is also the most costly.
Specialists are not infallible
Like the rest of us, auction house specialists are humans and can make mistakes. While mistakes are often negligible and have no impact on value, it is common that a specialist accidentally neglects or omits to facts which can affect the value of a lot. This can result in the sale of an item well below its true fair market value, but it can also result in the inability of said item to sell at auction. If you have a high-value item, it is advisable to consult with an unbiased third-party professional who can assist you in identifying the best possible markets and values at which to sell.
This is especially valuable if you have chosen a mid or low-tier auction house who may not employ specialists with extensive market knowledge.
Don't Forget about Shipping Costs
If you don't intend to pick up the items yourself, you must consider the cost of shipping. Prior to a sale, it is advisable that you consult with a recommended shipper to receive a quote. While these quotes may be modest for smaller items, large pieces of furniture may be subject to substantial shipping fees. Be sure to consider the cost of shipping, or the logistics of a personal pick up, when deciding which auction house to buy from.
In the event you are interested in selling your items, please feel free to consult with Arcadia Appraisals. We provide art advisory services to clients across the United States.