by Sylvie Schwartz
The art world was abuzz after the big sales at Christie’s and Sotheby’s last week. Auction sales are something that we often hear about, as the sale prices are public information and works often sell for hundreds of thousands if not millions of dollars. But how do we read these houses? What do these sales actually mean? Reading auction reports can be confusing, especially if the terminology is unfamiliar, and navigating the fluctuations in the art market is a feat in itself. Here are some of the major things you need to know to understand the goings-on of the auction house:
Why do people choose to sell at auction?
Before the day of the auction, works to be sold are evaluated and researched by specialists. In addition to being professionally appraised, the auction house normally does a full conditions report, and extensively researches the work to contextualize its place in art history, as well as to figure out the provenance of the work, as things like prior sales and exhibition history often increase the value of a work. Auction houses will also vigorously market the works that they’re trying to sell, because a successful auction is a plus for all parties involved.
What are the downsides to selling at auction?
Selling at auction is riskier than private sales. When a work isn’t sold at auction, it’s “bought in,” and that’s bad news. When this happens, it’s returned to the consignor (the person trying to sell it), but the work’s public failure makes it much harder to sell thereafter, even on the private market. Auction houses generally won’t try to sell a work a second time after it’s been bought in. It is also important to note that those wishing to sell their works at auction must pay a fee to the auction house, which is meant to cover the cost of research, marketing and appraisal. When the work is sold, the consignor will make a commission, usually between 10% and 30% of the selling price.
How does pricing work?
Each work sold at auction will have an already-determined estimate price, given as a range. These prices are often fairly accurate, but it is not unheard of for works to exceed the upper estimate by quite a bit, especially if there happen to be two people in the room that really want the work. Each work also has reserve, which is the minimum price that the work can be sold at. If bidding fails to reach that minimum price, the work is bought in. To make selling at auction less risky, auction houses can promise a guarantee, which is a set amount of money that the auction house will pay the consignor whether their work is sold or not. This practice has been less common after the economic recession of the late 2000’s. Now, third-party guarantees are more common, if a guarantee is offered at all. This is when a buyer agrees ahead of time to buy the work for a certain price, generally above the reserve price.
Who is buying these works?
Some buyers will come to the auction themselves and bid in person. Others will bid through a surrogate who attends the auction of behalf of a collector, in which case the bidding is called an absentee bid. There are also telephone bids, when a bid is called in to an auction house employee working at the phone bank situated behind the auctioneer. These are becoming increasingly important, as more and more works are being sold to collectors in Asia and elsewhere. The main benefit of buying through a surrogate and over the phone is anonymity for the collector. When taking a famous and very expensive work into a private collection, the buyer’s anonymity protects their privacy and the security of their collection.
What do these prices actually mean?
There’s more to an auction sale than just the hammer price, which is the final bid on the sale. There’s also the buyer’s premium, which is an additional payment that the buyer makes to the auction house. It’s usually between 10% and 20% of the hammer price. When looking at auction reports, it’s important to note whether or not the price listed includes the buyer’s premium or if it’s just the hammer price. Often, auction houses will include the buyer’s premium in their reports to make the sale seem more impressive. Lastly, the buyer must also pay the VAT, or Value-Added Tax. From what I understand, it’s basically a sales tax.
Finally, what do auction sales mean for us as we try to understand the market?
If an artist’s work is being sold at auction, it pretty means that it’s been validated by the arts community as “great art.” That’s why so many of the names that dominate auction houses are already-canonized figures of Modern and 20th Century art. Knowing this can be helpful though when looking at contemporary art. If a contemporary artist is being sold at auction, it means that he or she has made it big, and their career will probably have an enduring legacy in the narrative of art history. Only well-accepted artists are sold at auction because people only sell works at auction when they’re very sure other people will want to buy them. Otherwise works are sold on the private market, which is less risky. Likewise, because selling at auction is risky, it’s a pretty good indicator of how well the art market is doing more generally. When lots of people are selling at auction, it means that they’re feeling pretty confident, and when most of the lots are sold, that feeling is validated. This is why the sales last week were exciting; it lets us know that the art market is doing well right now.