Auction houses are one of the most powerful pillars of the art market. With hundreds of sales a year producing billions of dollars in revenue, they are by far one of the most popular ways to buy and sell art. Almost anything can be sold at auction, and the sale items usually originate from one of the three D’s of the art world. [1] To be absolutely honest, auction houses and their sales make up a complex and deeply secretive industry. My aim is to simply provide an introduction to this world, since there is no way I can sum up everything involving auction houses in one go. With that being said, let’s dive into auction houses.
The two most well-known auction houses are Sotheby's undefined and Christie’s.[2] Sotheby’s being the oldest, having been founded in 1744 (London). Sotheby’s originally only sold books, but in 1816 the auction house branched out into medals and coins. It wasn’t until 1913 that Sotheby’s began selling works of art. A few years later, in 1917, the auction house moved to their New Bond Street location and remains there to this day. Christie’s was founded in 1766 (London), and sold a variety of art and non-art objects from the moment the doors opened. While Sotheby’s has bounced back and forth between being a public and privately held company, Christie’s for the most part has remained private. This allows Christie’s to keep large amounts of information on revenue and other financial matters out of the public eye. [3]
Both auction houses have a staggering number of international staff who work tirelessly to produce a full calendar of sales each year. Many of these locations include (at the minimum) London, New York, Paris, and Hong Kong. All of this is subject to change over the years due to changes in legal regulations of the transportation and taxation of art. To put it simply, auction houses go where the money is. Major city locations like Hong Kong are strategic. They are city hubs where many of their clients live (or nearby), and are comfortable visiting.
Now for the actual sale process itself. Let us say Jane Doe wants to sell her Monet. Jane visits the auction house where she meets with a sales representative who passes on her work to an in-house specialist who looks over the work to evaluate and ensure the work is authentic. If it isn’t authentic then various other terms will be used rather than ‘by Monet’. Once the specialist has finished their review they give an appraisal of the work. At this point the auction house can discuss the nitty gritty details of Jane selling her art at their upcoming Impressionist sale.
Now that Jane and the auction house have agreed to the terms of her Monet’s sale, the Monet is stored at the auction house and photographed for the printed sale catalogue. In a sale catalogue all of the works being sold are given a lot number, estimate, and typically an image.[5] These catalogues are then sent out to clients who the auction house feels would be interested in buying the art works. These clients can range from private collectors, museum directors, to galleries. You can also go into the auction house itself and buy a copy of the catalogue during the preview. The preview is held usually a few days before a sale, where interested buyers may visit the works and review them before considering bidding. [4] A preview is set up usually in the gallery spaces of the auction house, and all are welcome to come (much like an exhibition space in a gallery). The preview dates and times are usually listed on the sale’s website and/or catalogue.
Once the preview is complete, the art works are taken down and stored within the auction house to ensure their safety before the sale. This is also the time that many interested clients will register to bid during the sale. [6] On the day of the sale, registered bidders will go into the designated sale room, where they can sit. If a bidder is calling in, there will be a row of the auction’s staff sitting off to the side where they will act as an in person representation of the phone bidder. The sale itself can move incredibly quickly, depending on the interest in the lots. The bidding process on a lot ends with the work being sold to the highest bidder, the hammer price. After the sale is completed, Jane collects the hammer price amount her Monet went for (minus the agreed upon seller’s commission the auction house negotiated with her before the sale), and the auction house takes the buyer’s premium from its hammer price, both of which is paid by the highest bidder (see diagram below).
Now that you have a basic understanding of how an object can be bought and sold at auction, I recommend having a look through the Resources section below to dive a bit deeper into the world of auction sales.
There are quite a few terms that are used here that are specific to auctions. I have created a small glossary below, which by no means is comprehensive (comprised from Sotheby's and Live Auctioneers.
Absentee Bid: A method of bidding for those who cannot or do not wish to attend an auction.
Appraisal: The act or process of estimating value.
Buyer’s Premium: The amount above the hammer price that is paid as part of the total purchase price.
Consignor: The person or authorized agent or entity that consigns goods to an auctioneer. The consignor is usually the seller.
Estimate: Each lot is given a low and high estimate, representing the opinion of in house experts about the range in which the lot might sell at auction. Estimates are based on the examination of an item and recent auction records of comparable pieces.
Hammer Price: Price established by the last bidder and acknowledged by the auctioneer before dropping the hammer or gavel to indicate a sale is completed.
Lot: An item or set of items for sale in an auction, lots are normally denoted by a "lot" number.
Provenance: An important part of the authentication process, provenance establishes the chain of ownership back (if possible) to the date an item was created. Provenance can significantly impact the value of an object.
Reserve (Price): The minimum price that a seller is willing to accept for an item to be sold at auction. This amount is never formally disclosed.
Seller’s Commission: A commission paid by the consignor to the auction house, deducted from the hammer price.
1. The three D’s of the art world are ‘Deaccession’, ‘Divorce’, and ‘Death’ (grim right?). Most of the reasons people sell artworks or art objects boils down to one of the mentioned above. In my time in the art world divorce and death tend to be the most common reasons why you see things being sold. It isn’t pretty or nice, but that is the unfortunate way of the world.
2. I realize this is up for debate, but for the sake of keeping things simple I have deemed these two auction houses the most important.
3. There is much debate as to whether or not this gives Christie’s an advantage over Sotheby’s since not disclosing financial information means that Christie’s doesn’t have to announce when they’ve had a bad year.
4. There are also traveling previews where certain lots of a sale will travel the world to high profile clients so they may review the works before bidding. This is usually not open to the public, but that doesn’t always hold true.
5. To register to bid in a sale, one must usually provide a name, form of payment, and way that they would like to bid (e.g. in person, telephone, or online).
6. This is where it becomes a bit complicated, since the person bidding on a work may not actually be the person who ends up with the work. Sometimes collectors don’t want people to know their identity and will bid anonymously or use a mediary to purchase works on their behalf.
Flynn, Tom. The A-Z of the International Art Market : The Essential Guide to Customs, Conventions and Practice. Bloomsbury Business, 2016.
Thompson, Don. The $12 Million Stuffed Shark: The Curious Economics of Contemporary Art. Aurum Press Ltd, 2008.
Thompson, Don. The Orange Balloon Dog: Turmoil and Avarice in the Contemporary Art Market. D&M Publishers, 2017.