How Auction Houses Work
Auctions – one of the most exciting yet intimidating ways to buy something you love at a fair market value. Although it may seem complex, the process is actually quite simple. The key to being a knowledgeable buyer is not only knowing how to bid, but also how to do your research, and understanding the role that auction houses play. After all, there are really three sides in an auction: buyers, sellers, and the referee between them.
How to Sell at Auction
In order to sell something at auction, you must get it valued beforehand. This valuation can either be done in person or online by sending photographs to the auction house. One thing to note is making sure the experts providing the valuation are certified. It's not required... however certified appraisers are held to specific standards – not only in the methods they use, but also ethical standards. Once you determine who should value your item, the specialists work their magic and provide an estimated value of your item. This brings us to our next point… what is that magic that they work, exactly?
How Auction Houses Come up with an Estimated Value
An appraiser considers a number of important factors before arriving at an estimate. These professionals are incredibly detail oriented. Valuing an item includes a thorough examination and analysis of the following, but certainly not limited to: the artwork quality, size, subject matter, complexity, rarity, if it has sold previously, for how much, comparable works that have sold recently, consultations with art historians/curators or specialists, or even technical analyses such as X-rays or using infra-red light to examine condition or authorship. These are just to name a few! For a deeper explanation of how appraisers arrive at an estimate, take a look at the article on how appraisals and valuations work.
Once you know what your item is worth, the auction house should explain their conditions of sale, commission structure, and discuss any 'reserves' that should be set. A reserve is the confidential price below which they will not sell the item. You should also discuss if you need to get movers to bring your property to the auction house – sometimes, auction houses will take care of it for you, other times – you are responsible.
Once you’ve understood the auction house’s terms and have signed the consignment contract (which should always list an inventory of all your items, their high/low estimates, reserves if any, date received, and date of auction), all you do is sit back and relax until auction day. Once the auction is complete, you receive a ‘results of sale’ statement listing the hammer price for each item sold. Many auction houses handle payment differently. Here at Gray’s, we send a payment by check within thirty days (less our agreed upon commission/fees.), together with a final settlement statement listing prices and fees.
Buying at Auction: Pre-Auction Day
Every auction house will publish an online catalog for each auction a few weeks before auction day. This allows potential buyers to scroll through the extensive amount of information about each item – not only prices, but about the each work’s history. This also gives buyers the opportunity to do research, which is an imperative part of being a smart buyer.
Do Your Due Diligence
Researching the item you’re interested in will help you understand why it is worth buying, and at what price. Apart from Google, you can also use websites such as Liveauctioneers.com to see if the item has previously sold, for how much, and/or find similar items to get a better idea of the value.
If you have your eye on a high ticket item, ask the auction house specialist for a complete condition report. Always try and examine the artwork for yourself. All auction houses should offer buyers the opportunity for in person examination. Most auctions hold a public exhibition for a few days before the auction. Just like with any other large financial purchase, it is always a good idea to ask for an expert’s opinion before you bid and buy.
Another important part of the buying process is to not be afraid to ask questions. It’s okay to ask the specialists how they arrived at the estimate. Find out if there are other bidders interested in the work. No question is off-limits if it will help you make a more intelligent decision on how much to bid.
See the Art in Person
Auction houses usually preview auction items before auction day. Take this opportunity, if possible, to experience the art with your own eyes. Take the chance to get a better sense of size, texture, color, and overall feel. Although a piece may have moved you on-screen, that doesn’t necessarily mean the same will happen while experiencing it in person.
Buying at Auction: Auction Day
Before auction day, you can prepare yourself for how you’d like to take part. Of course, the most exciting method is live. There is an indescribable energy in the air – the thrill of art-lovers standing shoulder to shoulder and beating out the competition. In order to take part in the live auction, you must register beforehand (either on auction day or during the preview period.) Using the paddle provided, simply raise it up high anytime you want to bid during the live auction.
If you can’t make it on auction day, there are other ways to participate. Usually auction houses offer phone bidding, live online bidding, or absentee bidding which allows you to put a bid in to the auctioneer before auction day. The beauty of absentee bidding is that if no one else bids on the item, you’ll get it at the lowest possible price. Here at Gray’s, we have an app that you can use to browse the catalogue, register to bid, watch the auction when it is live and of course, most importantly bid online.
Finally… What Is It Really Worth?
By auction day, you should have an idea of how much the item of interest is worth. Furthermore, not only it’s market value, but what it is worth… to you.
As Steven P. Murphy, the CEO of Christie’s (2010 - 2014) stated, “Every piece of art is unique, and in any economic model, rarity and scarcity are key drivers of price. Picasso was prolific, but when a particular 1932 Marie Therese portrait comes up for sale, there is only that one on offer, driving the price. There will be only one person who will own it, to wake up and have their coffee in front of it and experience the emotional resonance of the master's genius. To live with a picture that moves you is what should motivate you to buy a work of art.”
Take this into consideration on auction day… and happy bidding!