Buying Art at Auctions

4 Steps to Buying at Auctions

4 Steps to Buying at Auctions

Step 1: Registration

A buyer needs to register for a sale by providing their name, address, identification number and payment details, no later than 48 hours prior to an auction. First-time buyers must also provide their credit information.

On the day of the auction, registered buyers must present their identification card and sign the registration form in order to receive their paddle. Some auction houses such as Sotheby’s provide their regular buyers a Sotheby’s Identification Card to facilitate the registration process for future auctions.

Step 2: Bidding

There are four ways to bid1, which are simple and straightforward:

(A) Bidding in Person

After buyers successfully pick up their paddle, the real fun begins. They enter the salesroom and wait for the auctioneer1 to commence the sale.

During the auction, each auction item (called a Lot) will be presented. The auctioneer2 will announce the starting bid and bids will then start being made, with the price going up in increments. Anyone interested to bid would have to raise their paddle and the auctioneer will announce the new value and paddle number of the bidder.

The auctioneer will continue to take bids until there is only one bidder remaining. At this point, he will bring down the gavel and announce the price and the number of the paddle that has won the bid.

You can always feel the rush of excitement when the values go up and up and the loud noise from the hammer is heard. Sometimes, when there is an unexpected price achieved or an exciting exchange of bids for a ‘star lot’, one can hear the audience break out in applause at the end of the bidding.

(B) Absentee Bidding

If a buyer is unable or does not wish to attend the auction, he/she can register and place an ‘absentee bid’ at least 24 hours before the sale. The auction house staff will then bid on that item on their behalf.

A buyer can monitor the progress of their bid by viewing the results on the auction house website or by making contact with the auction house.

(C) Bidding By Telephone

A buyer who is unable to attend or does not wish to attend an auction can also bid live via a telephone call with an auction house staff.

The absentee form must also be filled at least 24 hours before the auction as the number of telephone lines available is limited and arrangements must be made if the buyer’s native language is not the same as at the auction sale location. For the latter, auction house staff who can speak the buyer’s language is engaged to conduct the bidding on a live telephone call with the buyer.

Note: The auction house reserves the right to record the conversation.

(D) Bidding Online

Bigger auction houses such as Christie’s and Sotheby’s now provide real-time video and audio capabilities that brings the excitement of the salesroom right to your desktop, so buyers can bid from the comfort of their homes and from anywhere in the world.

A buyer is required to register 2 days prior to the sale.

Once the auctioneer strikes the hammer, this signifies the acceptance of the highest bid and the conclusion of a contract of sale between the seller3 and the buyer. The auctioneer has the sole discretion at any time to refuse any bids, to withdraw any lots for sale (including after the fall of the hammer) if he believes that there may be an error or there is a dispute, and therefore, can take any action as he believes is reasonable.

Step 3: Payment

Immediately after the sale, the buyer must pay the full amount due (comprising of the hammer price4, buyer’s premium5 and any applicable taxes) within the deadlines set by the auction house. Payment can be made by cash, cheques, credit card, banker’s draft and telegraphic transfers, in the currency where the sale was conducted. If the payment is made in another currency, the auction house will charge the buyer the currency conversion costs. The buyer will not be able to acquire the title of a lot until all amounts due are paid fully and cleared by the auction house. Only then will they release the lot to the buyer.

Step 4: Collection and Shipping

It is the buyer’s responsibility to collect their purchases and pay for all the delivery, shipping and insurance costs. The auction house may assist to arrange the packing, shipping and insurance cover.

Buyers must note that certain items may be prohibited for export/import to some countries, due to protection laws under the CITES (Convention of International Trade in Endangered Species) and may require special permits for this to be transported. Examples of such items include ivory, tortoiseshell and whalebone.

If a buyer fails to either pay the full amount or collect the item before a deadline, the auction house is entitled, at its absolute discretion, to exercise any or its rights or remedies such as charging interest, cancellation of the sale, re-sale of the lot or in extreme cases, commence legal proceedings. The auction house may then reject any bids made by or on ‘behalf of” such a defaulting buyer at future auctions.

Additionally, if the buyer does not arrange collection of the item within the number of days set by the auction house, the lot items will then be stored at the auction house storage facilities or with a third party. The costs will have to be taken up by the buyer and the release of the item can only be made after full payment has been made for storage, handling, insurance and other costs involved.

 

Definition of Terms
Pre-Sale Estimate – low and high estimates made by the specialists on the range which the lot might sell at an auction
Reserve Price – undisclosed minimum price agreed between the consignor3 and the auction house that the lot would be sold for

1 Bid – the amount a prospective buyer signals the auctioneer he/she would pay to buy the lot during bidding
2 Auctioneer – a trained professional who presides over the auction
3 Seller/Consignor – owner of a lot who is transferring property to the auction house to act as an agent on his/her behalf for sale
4 Hammer Price – the winning bid for a lot at auction that does not include the buyer’s premium
5 Buyer’s Premium – the amount above the hammer price that is paid as part of the total purchase price

'4 Steps to Buying at Auctions' is part of a 2-part series article on Buying Art at Auctions. Read Part 1: 'When the Hammer Falls' to find out why it is essential to take a simple, conservative and sensible approach before getting involved and buying art at auctions.

'4 Steps to Buying at Auctions' is written by Regina Baxter, Regional Fine Arts Specialist & Business Development Underwriter, Personal Risk Services.

© 2016 Chubb. All rights reserved.

No part of this article may be reproduced in any written, electronic, recording, or printed form without written permission of Chubb.

Disclaimer - The content of the above article is not intended to constitute professional advice. Although all content is believed to be accurate, Chubb Insurance New Zealand Limited (Chubb) makes no warranty or guarantee about the accuracy, completeness, or adequacy of the content of this article. Users relying on any content do so at their own risk.

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