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The Bidding Blitz
Brushstrokes and Bankrolls in Art Auctions
There is an extraordinary amount of money. There are uber famous artists. There are collectors and dealers with a roster of secret clientele. Paddle-wavers are there to see and be seen. Callers with agents are secretive or anonymous. But after you get through the hype, what really goes on at these cultural jams? Let’s delve into the mysterious world of art auctions.
An art auction is an event where artworks are sold to the highest bidder. It serves as a platform for artists, collectors, galleries, and art enthusiasts to buy and sell art pieces. During an art auction, a range of artworks, including paintings, sculptures, photographs, and other forms of artistic expression, are presented for bidding.
The auction typically takes place in a designated venue, such as an auction house or an art gallery, and is conducted by an auctioneer who facilitates the bidding process. Interested buyers participate by placing bids on the artworks they desire, with each bid increasing the price. The bidding continues until there are no further bids, and the highest bidder wins the artwork.
Here's a general overview of how artwork is priced at auctions:
There is a Pre-Auction Estimate. Prior to the auction, the artwork is assigned a pre-auction estimate by specialists and experts. This estimate is based on factors such as the artist's reputation, the artwork's historical significance, its condition, and recent sales of comparable pieces. The estimate usually includes a low and high range, indicating the expected price range for the artwork.
We begin with a Starting Bid. The auctioneer starts the bidding at a predetermined amount, often below the low end of the pre-auction estimate. Bidders then have the opportunity to place bids in increments above the starting bid.
Most art has a Reserve Price. The auction house and the seller agree beforehand what the minimum sales price of a piece of art will be. If the reserve price is not met, the seller does not have to sell the art. The auctioneer will usually start the bidding below the reserve price, and will continue encouraging bids until there is no more advance in the bidding.
Next we get into Competitive Bidding. Interested buyers at the auction place bids on the artwork, with each bid increasing the price. The auctioneer facilitates the process by announcing each new bid and encourages further bidding. Bidders may continue raising their bids until there is no higher offer. Auctioneers are professional salespeople. They are good at working with audiences and engaging the room. They use language that is specific and engaging so that bidders are eager to make another move.
The Hammer Price is the final bid accepted by the auctioneer, signaled by the fall of the auctioneer's hammer or another form of acknowledgment. The hammer price is the winning bid and the price the buyer is obligated to pay for the artwork.
It's important to note that the hammer price may not be the final price paid by the buyer. Auction houses typically charge additional fees, such as Buyer's Premiums, which are a percentage of the hammer price. These additional administrative fees are typically 10-30% and are set by the auction house. When they say a painting sold for $1 million, understand that the buyer will actually be paying $1.1M-$1.3M.
Let’s not forget about the Seller’s Fees either. The seller signs an agreement with the auction house before the sale outlining all the fees. They could range from 10-25% and cover research, marketing, insurance, shipping, and other administrative fees. There are additional fees if the art is sold above the high estimate or if other contingencies happen.
And how much of the sales price does the artist get? Zero. Artists make money when they sell their art directly. This is called the primary market. The first person to own the art is the primary buyer or owner. If the owner chooses to resell the art, this is called the secondary market. Auction houses are part of the secondary market. Artists don’t sell their art directly to auction houses. Auction houses just facilitate sales between owners.
Is the Art Worth the Price?
Determining the right price to pay for art is a complex process, and it depends on several factors. Here are some considerations:
1. Artistic Value: Appraisers assess the artistic quality, uniqueness, historical significance, and critical reception of the artwork and determine a fair price for it. Artworks by renowned artists or those with significant contributions to the art world tend to command higher prices.
2. Artist's Reputation: The artist's career, market demand, and previous sales records determine how well respected they are. Popular artists could have a large fan base as well, but it’s sales and artistic quality that matter. Established artists with a strong track record of high sales prices may warrant higher prices.
3. Art Market Trends: Stay informed about current trends in the art market, including artists in demand, emerging styles, and collector preferences. Market demand and the availability of similar works can influence the price.
4. Condition and Authenticity: Evaluate the condition of the artwork and ensure its authenticity. There are many consultants who can help with researching provenance and determine authenticity. Works in excellent condition and accompanied by proper authentication tend to have higher values.
5. Provenance: Consider the artwork's history of ownership and exhibition. Pieces with notable provenance, such as previous ownership by renowned collectors or inclusion in prestigious exhibitions, may command higher prices.
6. Comparative Sales: Analyze recent sales of similar artworks by the same artist or similar artists. Comparing prices achieved for similar pieces can provide insights into market value.
7. Expert Advice: Consult art specialists, appraisers, or art advisors who have expertise in the specific artist, genre, or period of the artwork you are interested in. They can provide professional insights and help assess the fair market value.
Ultimately, determining the right price to pay for art is subjective and depends on your personal interest, budget, and long-term investment goals. It's essential to conduct thorough research, educate yourself about the art market, and seek expert advice to make an informed purchasing decision. But remember Rule #1- buy art because you love it, not for its investment value.
Here’s a fantastic list of art auction definitions. Auction houses want you to know this information. They love to inform the public. After all, the more people who know and understand the art world, the more people will come to auctions and bid on art. Regardless of whether you’re headed to the next Christie's event or you’re perusing eBay, it’s wise to know the lingo and feel at ease when you walk in the door or open the browser tab. Happy bidding.