Just as there are things you must know before buying art at auction, there are also things you must know before selling art at auction. The better informed you are about what to expect when you sell your work at auction, the better position you will be to maximize your returns and fulfill your investing goals.
What you need to know:
The Sellers’ Premium
Auction houses make money from both the buyer and the seller of an artwork. For the buyer, a Buyers’ Premium is applied to the hammer price achieved at auction. At the same time, the seller can be burdened with numerous fees, including valuation fees, withdrawal fees, transaction fees, and marketing fees.
On top of all the above, the most significant fee you are likely to incur is Sellers’ or Vendors’ Premium. Essentially, the Vendors’ Premium is calculated as a proportion of the sale price. Vendors’ Premiums can be negotiable if your collection is worth it for the auction house.
A vendors’ premium is typically between 10-40%, depending on the auction house.
Sotheby’s, one of “the big three” (along with Christie’s and Phillips) charges a 10% Sellers’ Premium. Smaller auction houses generally have higher commission rates to make up for dealing with less expensive artworks. For this reason, it can be preferable to seek out the service of a big auction house.
The valuation process
Auction houses perform valuations to help achieve fair and accurate prices at auction. Sometimes, they may charge a fee to perform this service. In rare cases, they may have to contract third-party appraisers for unique items.
However, auction houses usually waive this fee. Except in cases where you withdraw from the auction, or if the artwork does not meet its reserve price at auction and you choose not to enter the artwork into the next auction (generally at a lower reserve).
In saying this, you should have final say about the reserve price you want to achieve. Do not rely solely on the auction house to set this price. As an art collector, you have a rate of return that you are interested in achieving. Furthermore, you will likely be actively researching the current going rates for artists you collect and should have a good idea of the value of your collection. Auction houses can be working off imperfect information when estimating the value of artwork. It would be best to negotiate with the auction house as to what prices you wish to achieve at auction before agreeing to consign your artwork to them for sale.
On top of paying for the valuation fee noted above, pulling your artwork from the auction may also result in a ‘Withdrawal fee’.
Some auction houses stipulate that you cannot withdraw your artwork once it has been assigned and advertised, while others may charge you a hefty fee to do so. The fee is typically calculated as a flat rate or as a percentage (e.g., ~20%) of the reserve price you set. No collector wants to get caught in this situation, so be entirely sure that you want to sell the artwork before committing to do so.
An unsold fee, often called “buy-back” fees, can be incurred if your artwork does not sell at auction. Typically, the Unsold fee is 5% of the reserve price. Some auction houses like Sotheby’s will avoid this fee by placing your artwork/s into an online “buy now” listing, a future auction, or seek a private sale.
Selling your artwork/s through an auction house can seem unappealing due to the numerous fees that eat into your returns. Yet, selling via an auction house can often mean getting a higher price for your artwork than selling privately or through a resale dealer.