Collecting 101, Part II:
Auctions - The Engine That Drives the World of Collecting
by
Fine Art Registry®
Art Collecting - Part 2
If you're a collector, no matter what you collect –Barbie dolls, Coke bottles or Picassos – chances are that pursuit of your passion will at some point lead you to an auction. Now, while auction houses and the auction process can seem daunting (believe us, it's constructed that way on purpose), in the end, they are in business and their survival depends on providing service that satisfies their patrons and customers.
We're going to explore the world of the auction house to provide insight on their operations and explore some of their finer (read "less than above board") practices. But, as this series stresses the basics, let us begin there.
First lesson
The word "auction" itself is laden with significance. It comes from the Latin auctio, which means to increase. Hmmm. You might want to keep that in mind when an auctioneer is working his magic and you're tempted to bid your present house on a 19th century dollhouse.
An auction is the process of facilitating the exchange of goods by offering them up for people to bid on, taking their bids and then selling the goods to the winning bidder, usually the person who placed the highest bid.
Our look at auctions will limit itself to the buying and selling of art and collectibles, though it bears mention in passing that the auction process is an important part of how our entire economy functions. Governments auction off bonds to fund themselves, and corporations compete via bidding for everything from logging rights to electricity to portions of the electromagnetic spectrum!
We'll limit our discussion, though, to how you can use auctions to help you enjoy your interest in antiques or art or any collectible.
How an auction works
At its most elementary, an item up for sale is shown to those attending the auction and the auctioneer begins the bidding at a certain figure. A bid is an offered price. In a reserve auction, the seller won't part with the item unless a certain minimum figure, the reserve, is reached in the bidding. If the reserve is not met, the item remains unsold, though the seller still has to pay the auction house for the service. In an absolute auction, the seller agrees to sell the item for the highest bid, even if it's not what he hoped for.
In some auctions, the bidder need not be present but sends in his bid by phone or leaves a sealed bid with the house or auctioneer. Then there are the Internet bids made online for the millions of daily auctions on eBay and other sites. (Internet auctions are their own kettle of fish with an entirely different set of procedures and rules, which we'll be covering in a later article.)
Participating in an auction
If you've never attended an auction, be assured that a good auctioneer can create an atmosphere of good fun (while raising prices) and make the experience extremely entertaining. There are many examples of auctions posted on YouTube that demonstrate the process and will give you some idea of what to expect. Of course, sitting among experienced auction hounds with your own money differs from watching someone in Omaha auctioning off hogs on your computer screen.
An auction house usually publicizes an upcoming sale in local media, on their web site or in specialty magazines. They produce a catalog containing pictures and descriptions of each item (or groups of items, called lots) for sale. The quality of these catalogs ranges from black and white photocopied sheets to glossy four-color print jobs that can cost $30 or more.
The auction house holds viewing times when clients can inspect items up close and these are noted in the catalog. It is a good idea to confirm the viewing times by phone, especially if you will be traveling any distance to attend the auction. If you are serious about an item, be sure to attend the viewing so you can carefully inspect the item, ask questions about it (don't be shy, the house will respect your questions and furnish the information you want), and satisfy yourself you know exactly what you'll be bidding for.
With your homework done, you can decide how much you are willing to bid to win the item. Set yourself a limit which you will not allow yourself to exceed at the sale. You know your financial situation and know what you can afford for the item versus what will give you a serious case of buyer's remorse. Go over this aspect of the auction with your spouse or friend. More than one bidder has let the emotion of the moment overwhelm their good sense.
If you intend to bid only on a certain item, you can find out where your item will come up during the sale and time your arrival accordingly. You will have to register first and provide your account information before being allowed into the saleroom, so be certain to allow for that.
The moment of truth
Once your item comes up for bid, the auctioneer will begin by asking for a certain figure. Some participants will bid by holding up their paddle, issued by the house and numbered so as to keep track of who's who in the auction. Others, familiar to the house, may simply nod. But pay no mind to the myth that a random shift in your chair will suddenly find you the unwitting owner of an item you don't want. The auctioneer always confirms the final bid before he brings the hammer down.
Even if you aren't bidding, the process can be entertaining, especially when valuable items are on the block and highly desired by two or more bidders. A good auctioneer can work the room and drive the price well beyond what anyone expected and, indeed, the spiraling valuation of the art market may have less to do with sober academic investigation and appraisal and more to do with emotional intoxication in the saleroom. Since the auctioneer is paid on a commission of the final hammer price, you can guess which side of the bread his butter is on.
If you won the item
Congratulations! Now, if you have had to pay a significant amount to win the item, hopefully you arranged with the auction house accounts department beforehand so they could confirm with your bank that you had the funds to cover your bid. (Allow the house at least 24 hours to do this.) In addition to the hammer price, you will usually be charged what is typically called a "buyer’s premium", which is a commission on the hammer price, anywhere from 10 to 20 percent, plus sales tax on the premium itself. Those items add up to your final price. There are occasions where you will find an auction house that does not charge a buyer's premium, but they are rare.
It depends on how top tier of an auction you attend. The top of the top, auctions houses such as Christie's and Sotheby's, where you'd go to buy a Rembrandt or an Ingres if one ever came onto the market, are more formal and their fees are higher. Second tier houses are more flexible in their commissions and fees. Below that, at your neighborhood auctions, you may be charged nothing at all.
If you pay in cash, you can simply walk away with the item. Otherwise, you may have to wait until your check clears before the house releases the item to you, a sure-fire inconvenience if you had to travel some distance to the auction. In that case, the auction house will ordinarily store the item for you for free up to a certain date, after which date you will incur storage charges. Should you have to come back to pick up the item, be very certain to look it over with one of the staff present to satisfy yourself that it is in the same condition as when you bid on it.
The auction catalog will lay out the terms and conditions of the sale, and any reputable house will take an item back if you later find out and can prove that what you bought is misrepresented or is a reproduction or forgery.
Selling at auction
If you own items of value, particularly those that are rare or of high quality, selling them at auction may be the best way to realize a good price. An auction house will appraise it for free and let you know what you could expect to gain for it at auction. It is also to their own advantage to see it sell for as high a price as possible.
Assuming that you own a piece but don't know its value, taking it to an auction house is one way to find out, even if you decide not to sell. You can shop your item around by sending photos and a description to different houses and see what they tell you. Be sure to follow this up with a personal visit to an expert so he can examine the item closely and confirm or adjust what you were told. Auction houses will arrange an appointment for you. If you just show up, they may not be able to accommodate you, so call first.
If you decide to sell, find out the charges the house will make for the service. At a minimum, you'll have the auction house commission (the commission is usually a sliding scale depending upon the final hammer price, but expect at least 10%) plus insurance costs while the item is in their care before the sale and any handling charges. These are deducted from the hammer price and the result is what you will walk away with. Determine these up front.
For their part, the auction house will include your item in its catalog with photos, descriptions and estimated value. They will publicize the sale to ensure a good turnout. The bigger houses will alert their network of dealers and collectors as well as their agents in branch offices and contacts in museums of the sale.
Should your item have a reserve price that is not met, you will retain possession of the item but be charged a fee. If your item sells, you will receive your payment when the buyer's check clears. This can take anywhere from 30 to 60 days.
If you've never been to an auction, get a feel for the atmosphere and process by attending a few purely as a spectator, even those disrelated to your field of interest. Auctions have been going on since 500 B.C., as historians tell us. The procedures have become more or less standardized and the experience will serve you well when you decide to become a participant.
This, then, is your ground floor introduction to the world of auctions. Rest assured, we'll be covering much more to help you get real bargains if you are looking to buy at auction and we'll help you navigate some pretty nasty rocks and shoals if you're looking to sell. In our next article, though, we'll look more closely at the straw that stirs the drink in the saleroom: the auctioneer, that fast-talking fellow, part showman, part flinty businessman, around whom the world of auctions, and in no small measure, the world of art and collecting, revolves.
— by Fine Art Registry®
| October 5, 2007 |
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