Auction Meaning
Auctions are a way of buying and selling goods or assets by offering them up for bid, and then selling them to the highest bidder. Auctions can be held in person, online, or through a combination of both.
Here is a general overview of how auctions work:
The auctioneer or the seller selects the items to be auctioned and sets a minimum bid price, known as the reserve price.
Potential buyers inspect the items and place their bids on the ones they are interested in. In an online auction, this is typically done through a bidding website or platform. In a live auction, bids are usually made by raising a hand, calling out a bid, or using a bidding paddle.
The auctioneer starts the bidding at the reserve price and increments the bid price in predetermined amounts until there are no more bids. The auctioneer may also use tactics such as setting a minimum bid increase or using a “buyer’s premium” to encourage higher bids.
The highest bidder wins the auction and is required to pay for the item at the winning bid price, plus any applicable fees or taxes.
There are different types of auctions, such as sealed bid auctions, where all the bids are submitted at the same time and the highest bidder wins, and Dutch auctions, where the price of the item is lowered until a bidder accepts the price. Auctions can be used to sell a wide range of items, including art, antiques, collectibles, real estate, and other personal property.
What Are Auction Estimates
Auction estimates or pre-sale estimates are estimates of the value of an item that is being offered for sale at an auction. Traditionally auction estimates are typically provided by the auction house. Auction estimates are not set in stone and are not guaranteed. They are traditionally an educated guess based on factors such as the condition of the item, its age and rarity, and its desirability in the market. The actual selling price of an item at an auction may be higher or lower than the estimate, depending on the demand for the item and the number of bidders interested in it.
Auction estimates are not to be confused with appraisal values, which are estimates of the value of an item as determined by an appraiser. Appraisal values are typically based on more detailed and rigorous methods, such as comparison to similar items that have recently sold.
The marketing of property at below-market price points to potential buyers, many of whom are active dealers in the industry, well below the estimated range of achieved selling prices, is another recent use of auction estimates. As a result, getting properly below market is appealing to bidders looking to acquire valuable and rare art and antiques for a discount price.
Such marketing-oriented pre-sale estimates can also be effective for some auction houses as they ensure that all property brought to auction is sold. They can additionally market low bought-in rates at sale as a success and obtain additional fees garnered through performance fee commissions for lots that sell above the pre-sale estimate.
what Is A Reserve At An Auction
Auction estimates are estimates of the value of an item that is being offered for sale at an auction. Auction estimates are typically provided by the auction house or the seller, and they are used to give potential buyers an idea of the expected selling price of the item.
Auction estimates are not set in stone and are not guaranteed. They are simply an educated guess based on factors such as the condition of the item, its age and rarity, and its desirability. The actual selling price of an item at an auction may be higher or lower than the estimate, depending on the demand for the item and the number of bidders interested in it.
Auction estimates are not to be confused with appraisal values, which are estimates of the value of an item as determined by an appraiser. Appraisal values are typically based on more detailed and rigorous methods, such as comparison to similar items that have recently sold, the cost of replacement, and the income that the item generates.
What Are Order Bids At An Auction
An order bid, also known as a “commission bid” or “absentee bid,” is a bid made on behalf of a bidder who is unable to attend the auction in person. Order bids allow bidders to participate in an auction remotely, by giving the auction house or an auction representative the authority to bid on their behalf up to a specified amount.
To place an order bid, the bidder typically submits a written or online request to the auction house, stating the maximum amount they are willing to pay for an item. The auction house or representative will then place the bid on the bidder’s behalf during the auction, up to the maximum amount specified in the order bid. If the item is sold for a lower price, the bidder pays the final selling price. If the item is sold for a higher price, the bidder pays the maximum amount specified in the order bid. Order bids can be useful for bidders who are unable to attend the auction in person, or for those who want to avoid the stress of bidding in real-time. It’s important to note, however, that order bids are not always successful and the bidder may not win the auction even if their bid is the highest.
What Are Bids
At an auction, a bid is an offer to buy an item at a specific price. Bids are made by potential buyers during the auction, and the highest bidder wins the auction and is required to pay for the item at the winning bid price, plus any applicable fees or taxes.
Bids are usually made by raising a hand, calling out a bid, or using a bidding paddle. In an online auction, bids are typically made through a bidding website or platform. The auctioneer or the seller sets a minimum bid price, known as the reserve price, and the bidding starts at that price. The auctioneer then increments the bid price in predetermined amounts until there are no more bids. The auctioneer may also use tactics such as setting a minimum bid increase or using a “buyer’s premium” to encourage higher bids.
Bids are typically made in increments, which are predetermined amounts that the bid price increases each time a new bid is made. The size of the increments depends on the value of the item being auctioned and the current bid price. Bids can also be made in the form of an order bid, also known as a “commission bid” or “absentee bid,” which is a bid made on behalf of a bidder who is unable to attend the auction in person.
Are Auction Estimates The Same As Market Value
Auction estimates are not the same as market value for art, antiques, collectibles, coins, furniture, jewelry, household items, and other personal property. Auction estimates are estimates of the value of an item that is being offered for sale at an auction, and they are typically provided by the auction house or the seller. Market value, on the other hand, is the price that an item would sell for on the open market.
Auction estimates are used to give potential buyers an idea of the expected selling price of an item at an auction, but they are not set in stone and are not guaranteed. The actual selling price of an item at an auction may be higher or lower than the estimate, depending on the demand for the item and the number of bidders interested in it.
Market value, on the other hand, is determined by the demand for an item and a variety of other factors, such as its condition, age and rarity, and desirability. The market value of an item may be higher or lower than its auction estimate, depending on these and other factors. It’s important to note that auction estimates are not the same as appraisal values, which are estimates of the value of an item as determined by an appraiser using more detailed and rigorous methods. It is also becoming more common that auction estimates are not based on previous sales but on an ideal lower value that may be more suitable to the advantage of the auction.
Is Selling At Auction Risky
Selling at auction can be a risky endeavor, as the final selling price of an item is not guaranteed and may be lower than the seller expects. Auctions are typically used to sell items that are difficult to value or that have a wide range of potential buyers, and the final selling price of an item at an auction is determined by the highest bidder.
There are a number of factors that can affect the selling price of an item at an auction, such as the condition of the item, its age and rarity, and the number of bidders interested in it. The selling price of an item at an auction may be lower than its market value if there is not enough demand for the item or if there are too many similar items being offered for sale at the same time.
Sellers should be aware of these and other potential risks when selling at auction, and should carefully consider their expectations for the selling price of the item. It’s also a good idea for sellers to research the auction house and the market for the type of item being sold to get a better understanding of the potential risks and rewards of selling at auction.
Is An Auction Estimate A Fair Representation of value
Generally speaking, it depends. The world is comprised of thousands and thousands of auction houses, some of which were set up yesterday and some of which have been around for centuries. Auction houses are vital to the liquidity of the global art market. They, in many respects, are the New York Stock Exchanges of the art, antiques, and collectibles world. They are clearing houses for extremely advanced and sophisticated assets that, given their extreme illiquidity, can be very complicated assets to sell in other given markets.
All auctions use different methods of determining their pre-sale estimates, which can vary substantially. The important consideration alone is not if auction estimates are a fair representation of value but if the client awareness of the value of their assets and can make a credible decision as to whether or not they are willing to risk that amount of lost equity potential to sell their property at auction. A great example is, would you be willing to give an auction house your Picasso Madoura vase, worth $15,000-$20,000, and let them start the bidding at $1500 with a $3000-$5000 estimate? Most clients would say no, but would they even know the true potential value of the vase? Most consigners at auction are not professional appraisers or art dealers and do not know the true value of their property. This also works in reverse for the client that pays $40,000 for the same vase at an art gallery, not realizing the piece maybe only be worth $15,000-$20,000 and would further get an estimate of only $3000-$5000 with bidding starting at $1500. Most clients in that predicament would prefer to donate for charitable donation and bypass auctions altogether.
Another great example is the Chinese painting market. Would a client be satisfied with accepting an $800-$1200 estimate for a painting worth $1,000,000?Perhaps a client would laugh, but this is also something that has happened more than once. The biggest question is why was that the pre-sale estimate? In most cases, the auction houses that perform such devaluations very well know the true value of the client’s property, but for matters that will be discussed, they benefit from the client taking substantial risks.
What Is The Difference Between An Auction Estimate And An Appraisal
An appraisal is an expert evaluation of the value of a property, such as a piece of art, a collectible, or a piece of jewelry. It is usually performed by a professional appraiser who has expertise in the field and is often hired by the owner of the property. The purpose of an appraisal is to determine the fair market value of the property, which is the price that it would likely sell for in the open market.
An auction estimate, on the other hand, is an estimate of the value of a property that is being offered for sale at an auction. Auction houses provide estimates for the items they are selling to give potential buyers an idea of what the item might sell for. However, the actual selling price of an item at an auction can vary significantly from the estimate, as it depends on the level of interest from potential buyers and the final bid that is placed.
Many auction houses claim to offer what they call a free appraisal on the value of client property. These free appraisal offerings from auction houses are generally in no way appraisals nor, in many cases, an accurate representation of the property’s market value. These “appraisals” normally reflect the lowest price their buyers will pay, sometimes to estimates that are disingenuous. It is similar to a pawn shop telling you what they are willing to pay for your items. The price the pawn shop offers to pay you is not what the item is worth, it is what they are willing to pay you for it, and as every pawn shop is a business, their goal is to pay the least amount of money possible. The prices paid by pawn shops can be very similar to the prices presented by auction houses as pre-sale estimates, that being the prices their buyers are all but too willing to pay. Having an appraisal on hand from a qualified appraiser can at least provide some market intelligence to help the client decide where to sell your property and if they want to sell it at all.
Free Antique Appraisals Online
Some auction houses offer free antique appraisals online through their websites or social media platforms. These appraisals are generally less detailed and accurate than appraisals done by professional appraisers and generally offer no formal value beyond the auction houses’ scope of taking in property for sale. Auction houses often use the premise of free appraisals as a marketing tool, and they are not completely unbiased. The appraised value offered by the auction house for free often represents not the property’s market value but the auction estimate, which in many cases is the least amount of money the auction houses clients are willing to pay for an item or below. In some cases, auction estimates and their associated free appraisals reflect whim prices, akin to placing a $500 value on a house worth hundreds of thousands, with the auction houses hoping to see how the item fairs once the frenzied bidding begins. In many instances, the free appraisals auction houses offer are not market value but simply a pre-sale estimate for marketing purposes to buyers. It’s worth noting that these online appraisals are usually intended to be general estimates and not appraisals and normally do not consider all factors that could affect the item’s value. The appraisal process offered by a professional appraiser will be more accurate and provide an unbiased opinion of the piece’s value based on legitimate comparables and market data. This is not to again state that all valuations through auction houses are illegitimate. Some such offers are legitimate and provide the best expertise in the world, but navigating these landscapes to arrive at an educated and carefully considered valuation without knowing who to turn to and what to ask is fraught with pitfalls for the inexperienced.
Are Auction Estimates Accurate
It depends. There are many auction houses worldwide, and even within a given auction house, some departments are better at accurately presenting pre-sale auction estimates than others. Some auction estimates are dead on regarding presenting a qualified pre-sale estimate; these qualified pre-sale estimates align with previously and recently found sold examples for pieces that are alike. This example, however, can confuse many clients, as in some instances, auction houses will attempt to use the sale results of pieces of dubious authenticity to correlate a pre-sale estimate to an authentic piece.
Such a practice of disingenuous correlation is not appropriate, but it is often done in the market. There are many examples in the art market of paintings labeled as having been painted by a particular artist that are, in fact, not by the artist. Yet these sold examples are used to correlate paintings of true authenticity for a pre-sale auction estimate, like taking your painting of the Mona Lisa done in art school and using that as a basis to estimate the real one by Leonardo Divinci. On the surface, they are both paintings of the Mona Lisa. The same is done with countless antiques in the market of varying periods. That is why in some instances, a painting by a particular artist can sell for $5000, and an almost identical painting by the same artist can sell for $500,000. One is fake, and the other isn’t. However, if one checks the comparables, all one would see from a quantitative perspective is the artist’s same and sale price. This is why qualitative analysis is imperative to properly understand pre-sale auction estimates and how to analyze them for future sales against the actual pieces and not just the title, medium, and sale price.
Are Auctions A Good Way To Sell
Auctions can be a good way to sell items, especially if the auction house is marketing your property well with a proper reserve based on previously sold prices at similar auction houses. However, there are also some potential downsides to consider. The biggest potential downside is that you may not get as much money for the item as you would if you sold it through other means, such as a fixed-price sale on an online marketplace with a greater time potential.
The potential for this is exponentially higher when the auction estimates do not reflect its value based on previously sold items, not previously sold estimates. In many cases, auction houses may use previous estimates to estimate future property even if the item sells well above the pre-sale estimate. It is common to see lots sold at auction that sell well about their estimate to be re-sold at auction 5-10 years later for the same estimate as the time prior—leaving very little incentive for clients to wish to pay more than the pre-sale estimate for any lot, even though in many cases the pre-sale estimate is well below the actual value of the item. While some consideration is addressed to the potential need to pay fees to the auction house or platform where the auction is being held, these fees can be below the fees of many marketplaces or private dealers and are not the biggest hindrance to selling your items at auction.
Selling at more established auction houses is also generally considered far better than selling at smaller, less established auction houses. Larger auction houses may also have dedicated staff specializing in one category alone. Many of these specialists have advanced degrees in that particular field and rival the knowledge of museum curators. It may also depend on the type of items you have. In many instances, smaller auction houses are a fine choice; however, for more specialized items, it may be advised to conduct more due diligence into your item and research the best place to sell it before making a decision.
online auction
An online auction is a type of auction that takes place on the internet. In an online auction, potential buyers can place bids on items for sale through a website or mobile app. Online auctions can be used to sell a wide variety of goods and services, including consumer products, real estate, and business assets.
There are several types of online auction formats, each with its own set of rules and procedures. Some common types include:
- English auction: also called an open ascending price auction, is a type of auction in which the auctioneer begins with a low asking price and raises it incrementally until the highest bid is reached. Bidders can submit new bids at any time.
- Dutch auction: The price starts high and decreases until a buyer accepts the current price.
- Reverse auction: this is where a seller posts a job or project online and receives bids from different buyers.
- Private auction: Only select bidders are allowed to bid on the item.
Online auctions have become very popular in recent years due to the convenience and accessibility they provide to buyers and sellers. They also allow for a much larger potential market as bidders can participate from any location with internet access. It is also important to note that even in the face of the popularity of online auctions, bidders are still slow to adapt to them over conventional auction bidding in the format of a live auction for higher-tier property. Online auctions also take place over a significantly longer period of time than traditional live auctions, and it is common for bidders to lose the impulsive energy of a bidding event over the course of several weeks during the online auction sale. While auction houses have raced to adapt to these types of sales from a technology standpoint, the actual sale results from many of these endeavors are mostly less than spectacular at the present moment, and auction houses are generally looking at online auctions as a place to test client property that, in some respect, they may find to be expendable. If an auction house is interested in taking your property contingent on it being part of their online-only sale, that may be a sign they are not particularly enthusiastic about its prospects, and under such circumstances, it may be advised to opt for another auction house that is willing to put your property in a live traditional auction event.
What Are The Disadvantages Of Auctions
Selling at auction is not necessarily a bad idea, but it may not be the best option in all cases. Whether selling at auction is a good idea depends on your specific situation, including the type of item you are selling, your goals, and your available resources. Price uncertainty with auctions is the biggest drawback, especially if items are not properly estimated. The final price will depend on the competition among buyers, which can be difficult to predict, or if not enough people show up to attend and participate in the auction. Other issues can also affect the outcome of auctions, such as global health emergencies, war, political upheaval, and weather.
Some market categories can be considered more stable, like old master paintings, which normally have no qualms about placing real market values on property for sale; however, this type of category, like others, requires absolute experts in the field to determine the quality of your items. Incorrectly assessing an old master painting at auction can cost clients millions of dollars in lost sale potential. A case in point is the Salvator Mundi painting attributed in whole or in part to Leonardo da Vinci which sold at a small auction in New Orleans for $10,000 only to later sell for $450,000,000 at a major international auction house. As a seller, you have limited control over the auction process and the final sale price. You do not have the opportunity to negotiate with potential buyers or make counteroffers. Items going unsold at auction can also be problematic for client property. Once an item has been seen in the market and goes unsold, it can be perceived as “burned” and may only be sold at a significantly later time or at a very steep discount. Again, whether auctions are a good option for you will depend on your specific situation and goals.
Commission Rates at Auction
Commission rates at auctions vary and can depend on a number of factors, including the type of auction, the type of item being sold, and the reputation and reputation of the auction house or platform. In general, commission rates for auctions range from about 5% to 25% of the final sale price, although rates on the lower end of this range are less common. Some auctions charge a flat fee, while others charge a percentage of the final sale price. Some auctions also charge additional fees, such as listing fees, photography fees, insurance fees, or charges for marketing the item. Property pre-sale estimates also play a role in the outcome of client commission rates as auction houses have built performance fees into their commission agreements with sellers that allow them to charge more if items sell over the pre-sale estimate. This incentive structure has seen more auction houses underestimate the property to almost guaranteed sale levels. This outcome can also lead to the perception that the market for a particular category is out of control when the pre-sale auction estimates are 5-10 times below even the normal pre-sale auction estimated prices.
Bought-In Rates
Bought-in rates or BI rates refer to the percentage of items that do not sell at an auction. An item is considered “bought-in” if it fails to meet the reserve price, which is the minimum price at which the seller is willing to sell the item.
Bought-in rates can vary widely depending on the type of auction, the items being offered for sale, and the demand for the items. Some auctions may have very high bought-in rates, with many items failing to sell, while others may have very low bought-in rates, with most items selling for at or above the reserve price.
Bought-in rates can be an indicator of the overall demand for the items being offered at an auction, as well as the quality and condition of the items. A high bought-in rate may indicate that there is not enough demand for the items or that the reserve prices are too high, while a low bought-in rate may indicate that the items are in high demand and are selling for prices above the reserve.
Many auction houses market the quality of their marketing endeavors and audience participation based on the BI rate of the sale. With low BI rates being ideal. However, non-professionals rarely understand what these numbers and percentages mean or why an auction might have such a low BI rate. The biggest reason is that low BI rates normally indicate that all the lots were exceptionally under-market.
Getting Items Appraised Before Sending Them To Auction
Getting items appraised before sending them to auction can be a helpful way to get a better understanding of the potential value of the items you wish to sell and to set realistic expectations for the selling price. Appraisals are estimates of the value of an item as determined by an appraiser, using methods such as comparison to similar items that have recently sold, the cost of replacement, and the income that the item generates.
There are a number of benefits to getting items appraised before sending them to auction, including:
- Setting a reserve price: An appraisal can help sellers determine a realistic reserve price for their items, which is the minimum price at which they are willing to sell the items.
- Protecting against underselling: An appraisal can help sellers avoid underselling their items by setting a reserve price that is based on the item’s value.
It’s important to note that market value appraisals are not the same as actual market value and that the final selling price of an item at auction may be higher or lower than the appraisal value. However, getting items appraised before sending them to auction can still be a helpful step in the process of selling at auction to ensure your assets and the equity you have in your assets are properly protected and fairly represented in the marketplace.
