Selling at auction is a little different from selling at a gallery, an art fair or in a private sale.
In the latter, vendors start with the highest price and negotiate down to make the sale. At an auction the opposite is true - bidding starts at the minimum acceptable price and the auctioneer helps negotiate the price up.
What is an auction estimate?
The estimate is for potential buyers and indicates the price range in which the object is expected to sell. As such, lots in an auction are always presented with a low estimate and a high estimate.
The high estimate is generally 50% higher than the low estimate. For example: £1,000-1,500 or £20,000-30,000.
How are estimates set?
Auction estimates are agreed by the auction house and the seller of the auction lot. The estimate is based on the previous selling prices for the artist, or the prices achieved for similar artworks by similar artists.
The unique characteristics of each object also influence the estimate. Among other things, these include its size, condition, subject matter, medium and any notable history of the object. For instance, why did a fairly standard dress sell for $4.8 million? Because it was Marilyn Monroe’s.
What is a reserve?
The reserve is the minimum price for an object at auction. This is usually set at the low estimate. As agreed with the vendor, the auctioneer will never sell the object lower than this price.
How are reserves set?
In auctions, the reserve can be anything from 15-30% lower than the gallery or private sale price for the object.
In a gallery or private sale, the buyer is paying a premium for the privilege of having no other competition in their purchase. In these situations, the vendor will start with the highest price they can ask and then negotiate down to make a sale.
In an auction the opposite is true, bidding begins at the minimum the vendor is happy with and the auctioneer then negotiates the sale up by taking competitive offers from multiple bidders.
The reserve is never higher than the low estimate but setting an auction reserve can be a bit of an art in itself.
Setting an estimate too low can lose confidence in the work, setting it too high and bidders are scared off. But an attractive starting price helps entice collectors into the auction. Once at the auction, the thrill, passion and excitement to own the work often sends the final result higher than the original gallery price.
Does every lot have a reserve?
On some rare occasions, auction lots are offered with no reserve – meaning that the bidding could start at £1.
Why does bidding sometimes start below the reserve?
Sometimes the auctioneer will start the bidding lower than the reserve. This is to encourage people to join the bidding and gain momentum in the auction. They will then move the bidding price up to the reserve to make the sale. Only once the reserve is reached can the auctioneer sell the object.
What are the bidding increments?
You can learn all about the industry standard bidding increments in our article here.