Priya Kapoor
The art auction market is a dynamic and exciting place, where the value of a painting is determined by various factors such as provenance, market trends, and bidding strategies. While auctions can capture headlines with record-breaking sales, the mechanisms behind these sales remain somewhat mysterious to outsiders. For instance, the sale of Leonardo da Vinci's Salvator Mundi for a breathtaking $450 million generated buzz worldwide. However, behind the scenes, auction houses take a substantial cut, with sellers often receiving only a portion of the final sale price after commissions and fees are deducted. Artists with high name recognition and consistent careers tend to fare better at auctions, as their reputation and publicity attract buyers. Understanding the intricacies of the auction process is crucial for both buyers and sellers to ensure a successful and well-informed transaction.
| Characteristics | Values |
|---|---|
| Auction houses | Christie's, Sotheby's, Phillips |
| Commission fees | 15% of the hammer price |
| Additional fees | Marketing, cataloguing, shipping, insurance, storage |
| Buyer's Premium | 20% for hammer prices up to $6 million, 10% for amounts above |
| Seller's Commission | 10% up to $500,000 |
| Auction process | Researching the market, understanding bidding strategies, consignment terms, reserve prices, valuation standards, post-sale obligations |
| Provenance | Celebrity-owned collections, prestigious auction houses |
| Consignment process | Submitting artwork for valuation through an online form or email to the auction house administrator |
| Name recognition | Important for artists with little or no auction experience |
| Location | Auction houses in locations where the artist has the highest name recognition and where the work is most collectible |
| Artwork value | High-resolution images are submitted, and a price is estimated; the estimate may change upon arrival and evaluation |
| Restoration | Rare for auction houses to suggest restoration before selling prints; more common in private brokerage sales |
| Record-breaking prices | Works by Claude Monet, Jeff Koons, and Andy Warhol |
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What You'll Learn
Auction houses vs. private sales
Auction houses and private sales each have their own advantages and disadvantages. For sellers, auction houses offer a platform for public sales, allowing them to sell unique, original paintings and benefit from competitive bidding, which can drive up prices. However, auction houses charge seller's commissions, ranging from 10% to 15% or more, plus additional fees for marketing, insurance, and storage. Sellers also have limited control over timing and may face the risk of their artwork not finding a buyer.
On the other hand, private sales provide more flexibility, allowing sellers to sell whenever they want without the costs and overheads associated with auction houses. Private sales can be particularly attractive for selling prints and editions, as they offer a more targeted audience and specialised knowledge. Additionally, private sales through dealers can sometimes fetch higher prices than those offered at auction, as buyers may perceive the asking price at auction as too expensive.
For buyers, auction houses offer the excitement of competitive bidding and the opportunity to acquire unique, historic masterpieces. The spectacle of high-profile auctions can create a sense of demand and drive up prices. However, buyers must be cautious of overpriced artworks and should research the market before participating in an auction. Additionally, auction results may not always reflect the actual amount received by the seller due to commissions and fees.
Private sales, on the other hand, offer buyers a more discreet and less competitive environment. They can also provide high-profile exposure and the potential for record-breaking prices, especially for works with exceptional provenance. However, private sales may not always be suited for unique, historic masterpieces, as they lack the drama and spectacle of auction sales.
In recent years, auction houses have been shifting towards private sales, with Sotheby's and Christie's reporting significant revenue from private transactions. This shift has allowed auction houses to maintain profitability and expand their global networks.
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Auction fees
Buyer's Premium
A buyer's premium is an additional fee charged by the auction house on top of the hammer price (final bid price). It is typically calculated as a percentage of the hammer price and contributes to the auction house's revenue. The buyer's premium rate can vary depending on the auction house, usually ranging from 10% to 30% of the hammer price. This fee is sometimes referred to as a buyer's premium increase cost. In 2024, Sotheby's introduced a flat 20% buyer's premium for purchases with a hammer price up to $6 million and 10% for amounts above that threshold.
Seller's Commission (Vendor Commission)
The seller's commission is a fee charged to the seller, calculated as a fixed percentage of the hammer price. This commission can be as high as 15% of the hammer price, plus additional fees such as marketing, insurance, shipping, and storage. These additional fees may be negotiable or waived, especially for higher-value works. Some auction houses, like MyArtBroker, offer a 0% seller's fee.
Buy-in Fee
The buy-in fee is a charge that the seller pays to the auction house even if their artwork does not sell. This fee covers the costs of listing and marketing the piece.
Loss, Damage, Liability (LDL) Insurance Fee
The LDL fee is an insurance fee that tends to be paid by the seller. However, it is negotiable and can be waived or absorbed by the auction house or gallery.
Artist's Resale Royalty (ARR)
ARR, or Artist's Resale Royalty, is a fee paid to the artist when their work is resold in the secondary market. This fee is applied upon resale by an art market professional.
Bidding Method Surcharges
Different bidding methods may come with varying surcharges. For example, online platform bids may incur an additional percentage fee compared to live or in-room bids.
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Provenance
The amount a painting sells for at auction can vary significantly based on several factors, including its provenance. Provenance refers to the documentation of an item's history of ownership. It is critical when determining the value of an artwork and can significantly impact its price, especially if the piece comes from a prestigious collection. For example, celebrity-owned collections often achieve higher prices because buyers value not just the artwork but its historical association. This was demonstrated at Christie's 2024 auction, where prints from The Collection of Sir Elton John sold for record prices.
The objective of provenance research is to produce a complete list of owners, together with supporting documentary proof, from when the painting was commissioned or in the artist's studio through to the present time. This can include exhibition marks, dealer stamps, gallery labels, shipping labels, and other indications of previous ownership. A simple photograph of the item with its original owner, if they were of high renown, can increase its value by a significant amount. For example, antiques owned by politicians, musicians, artists, and actors tend to sell far past their estimates because of a photograph showing that item with a famous person.
However, it is important to note that provenance does not always guarantee quality. The fact that an artwork has been sold at a prestigious auction house does not automatically make it authentic or valuable. Auction houses typically only guarantee authenticity for five years, meaning scholarly opinions can change. Additionally, when an item's timeline includes undocumented gaps of time, it is possible that it could be a forgery or a stolen piece. Therefore, it is recommended to carefully review and document the provenance of an artwork with the help of an expert in valuations and art before acquiring it.
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Consignment process
The consignment process is one of the most effective ways to sell valuable items, such as paintings. It involves a collector giving their work to an auction house to sell on their behalf. Here is a step-by-step guide to the consignment process:
Step 1: Research and Choose the Right Auction House
Firstly, it is important to research and select an auction house that suits your needs. Not all auction houses are the same; some specialise in high-value fine art, while others focus on collectibles, jewellery, or real estate. Consider the auction house's reputation, expertise, and experience with similar works. In addition, inquire about their tools, specialisation, marketing plans, and insurance coverage.
Step 2: Submit Artwork for Valuation
The next step is to submit your artwork for valuation. This can be done through an online form or email to the auction house's administrator. The administrator will provide an initial estimate, which may change as the auction date approaches. The consignment deadline is usually around a month before the sale, so submitting close to this date may result in quicker feedback.
Step 3: Review the Consignment Contract
Once the auction house accepts your artwork, they will present a consignment agreement outlining the terms of the sale. This is a crucial step, as you need to understand what happens to your artwork if it sells or doesn't sell. Know the fees, conditions, and payout period outlined in the contract.
Step 4: Prepare for the Auction
After agreeing to the terms, the auction house will take over the preparation and marketing of your artwork. They will handle the pricing, photography, detailed descriptions, and lot assignment. They may also produce condition reports, 3D previews, and video walk-throughs for premium items. During this stage, it is essential to follow the auction house's guidelines for artwork drop-off and adhere to their rules.
Step 5: The Auction
Finally, your artwork goes to auction. Depending on the format, this could be a live, in-person event or an online auction. If your artwork sells, you will be notified of the amount, and payment will be made a few weeks after the sale. If it does not sell, you will need to arrange for the unsold artwork pick-up and may be subject to ''BI fees' to cover the auction house's marketing and cataloguing expenses.
It is important to note that the above process may vary slightly depending on the auction house and the specifics of your artwork.
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Bidding strategies
Auctions can be intimidating, especially for beginners. However, with the right strategies, you can navigate the complex world of art auctions with confidence and even get good deals on exceptional works. Here are some essential bidding strategies to help you succeed:
Do Your Research
Before entering the auction process, it is crucial to conduct thorough research on the artwork you are interested in. Understand the market and the specific piece you intend to bid on. Platforms like Artsy offer visibility, but they may not provide specialised knowledge and valuation standards. Seek advice from experts, such as dealers, specialists, and curators, who can guide you in making informed decisions. Additionally, consider using a price database to look up auction records for comparable lots, as this can help you determine the value of the artwork you are bidding on.
Understand Auction Dynamics
Each auction is unique, and bidding styles vary from person to person. It is important to understand the dynamics of the auction room. Observe the behaviour of other bidders, both offline and online. Are they underbidding, or is the sale active with most lots exceeding their estimates? By understanding the auction dynamics, you can better time your bids and make more strategic decisions.
Examine the Artwork in Advance
Take advantage of the preview period offered by auction houses to physically examine the artworks before the auction. This allows you to assess the condition, quality, and aesthetic appeal of the pieces. By examining the artwork in person, you can make a more informed decision and avoid potential drawbacks that may not be apparent from online images.
Know Your Competition
Pay attention to the interest level of other bidders. If there are only a few bids or none at all, it may indicate that the item has some serious issues. Conversely, if there is high interest and active bidding, it could be a sign that the piece is highly desirable. Consider the level of competition when deciding how aggressively to bid.
Bid Strategically
There are different approaches to bidding. One strategy is to wait for 1-2 stakes from other bidders to gauge their level of interest. If you are still excited about the item, place your bid. You can choose to be pushy by bidding right after their bids, demonstrating your determination to secure the lot. Alternatively, you can try to extend the pauses between your bids to hide the fact that you are reaching your limit. However, this may also give your counter-bidder an advantage.
Absentee Bidding
Consider using absentee bidding to avoid getting caught up in the excitement of the auction room. With this method, you can bid the exact amount you calculated and set a top price threshold. This helps prevent overpayment and ensures you stick to your budget.
Remember, auctions are unpredictable, and each situation is unique. By combining these strategies with your own style and experience, you can increase your chances of success in the captivating world of art auctions.
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Frequently asked questions
The average amount a painting sells for at auction varies depending on several factors, including the artist, the medium, the size, the subject matter, and the provenance of the painting. Paintings by well-known artists, such as Leonardo da Vinci or Pablo Picasso, tend to fetch higher prices. For example, Leonardo da Vinci's "Salvator Mundi" sold for $450 million at Christie's in 2017, becoming the most expensive painting ever sold at auction. On the other hand, lesser-known artists or less prestigious auction houses may have lower average selling prices. Additionally, the medium, size, and subject matter of the painting can also impact its auction price.
When selling a painting at auction, there are typically several fees involved, including a seller's commission, marketing fees, insurance fees, and shipping fees. The seller's commission is usually a percentage of the final sale price, ranging from 10% to 15% depending on the auction house. There may also be additional fees, such as a buy-in fee, which is charged to the seller even if the artwork doesn't sell, to cover the costs of listing and marketing.
Yes, one alternative to selling a painting at auction is through a private sale or an online platform like MyArtBroker, which specializes in prints and editions. Private sales can be more cost-effective, as they often have lower seller commissions or no seller's fees at all. Additionally, private sales may offer more flexibility in terms of timing and negotiation.
To determine the value of your painting before taking it to auction, you can submit it for a condition valuation by the auction house or seek a free market valuation from specialist platforms like MyArtBroker. You can also research similar artworks and their auction results using databases such as Artnet Price Database, which contains over 18 million auction records, or consult with art market professionals and experts in the field.
