Last month I gave some basic advice on ‘retailing a work of art yourself’. This month we will explore another option -- offering it at auction. This process consists of consigning an item you own to one of the thousands of auction rooms throughout the world and letting them sell it on a specific day at a specific time. While this may sound like a very clean way to sell a work, you really need to understand the inner workings of the auction room. The following will leave you with some food for thought.
To begin with, not every auction room will reach the same buyers. You also need to understand all the jargon and fees involved: estimates, reserves, insurance, photography, commissions, buy-in, etc. I will give you a brief explanation of each:
Estimate - this is the range of price that the auctioneer feels the work will sell between. Estimates are usually quoted as follows: $4,000 - $6,000 or $80,000 - $120,000. This does not mean that the work is actually going to sell in that range; it is just the auctioneer’s “guestimate”.
Reserve – when you are quoted an estimate, you can then instruct the auctioneer to place a reserve on the item … a price below which you will ‘not’ sell the work; however, this reserve must be below the low number of the estimate.
Insurance – the fee you will pay to have the auction room insure your work of art. This is normally between 1 & 1.5% of the mid estimate price – so on a work that is estimated at $40,000 - $60,000, you would expect to be charged for $50,000 of insurance (approximately $500). Now here is the interesting part … if the work actually sells for more than the estimate … let’s say $100,000 … your insurance fee would be based on the actual selling price (approximately $1,000); however, if the work was lost or damaged before the sale, you would have only been able to collect on a value of $50,000!
Photography – as many of you know, most auction rooms provide prospective buyers with a catalogue … which they must pay for. However, the seller must also pay to have their works illustrated in these catalogues … and charges can run as high as $1,000 for a full page color photograph.
Seller’s Commission – the fee you must pay the auctioneer when they sell your work of art. Depending on the value of the work and the auction room you choose, this fee can run as high as 20% of the ‘hammer price’.
Hammer Price – the amount the work sells for at the auction (not including the buyer’s and seller’s commissions).
Buy-In (Bought-In) – the term used for a work that fails to sell at an auction. You also need to realize that the value of some works will be affected if they are bought-in at a major sale … the phrase that is commonly used for this is: ‘the work has been burned’!
Buy-in Fees – did you realize that if the auction room puts an item up for sale and it fails to find a buyer, the owner is still liable not only for the insurance and photography charges, but for a Buy-in Fee – this usually runs 3% - 6% of the reserve price?
Withdrawal Fee – you also need to know that once the auction room has a signed receipt from you they can charge you 20% of the mean estimate if you decide to withdraw the item from their sale before the auction takes place.
Buyer’s Commissions – this is the fee the buyer must pay to the auction room. As many of you probably know, over the past 10 years this fee has risen from a flat 10% to a graduated percentage that can start as high as 20% on the first $100,000 and 10-12% on anything above.
Other Expenses – another interesting charge. Should the item you are selling require authentication from a noted expert, the auction room will charge you a 20% service charge for all services performed by others and paid for by the auction room. So, if the work of art you are looking to sell needs a photo-certificate and that expert charges $500 for that certificate, the auction room will charge you an additional $100.
Non-payment – so, your item sold at the sale and the buyer decides that they made a mistake and do not want the item, what now? There are many options open to the auction room, but one that they will often take is to just cancel the sale and returned the work to you.
Timing is also a big issue. An auction takes place on a specific day at a specific time, and normally regardless of what happens. If, on the day before a sale, there is a major upheaval in the financial world, or bad weather hits, most sales will still go on … these events can, and most likely will, have a huge impact on the prices realized for the items offered on that day. You may find that many desirable works will not sell just because of ‘bad timing’.
Placement in the viewing hall is also important. Many of you who have attended auction previews will know that items are placed at different levels throughout the exhibition hall. I am also sure that many of you have noted that some of the works are actually hung 10 or 15 feet above the floor – did you ever wonder how that affected the price of the work? If your item is not properly displayed in the central exhibition hall, it runs the risk of being missed by a number of the people who come to preview the sale … and this will have an impact on the selling price. Let’s face it; if you are offering a fairly minor work at a large major sale the odds are, that your work will not have a ‘prime’ exhibition location.
Now that I have explained most of the terms and costs, the next thing to keep in mind is that the auction process can be a long one. Works of art are usually consigned 2 – 6 months in advance and then the seller is normally paid 35 days after the sale.
In the end, the auction process can work for certain items, but with the creation of the Internet there is now a convenient way to find many of the potential buyers for a specific work thereby cutting out the auction room middleman. Next month I will discuss selling or working with a gallery.
Copyright 2003 Rehs Galleries Inc.