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In Southeast Asia, more people are excited by the thought of buying art and increasingly buying art at auctions. The staggering prices of artwork sold at auctions have also triggered a great deal of auction-related media publicity. Despite the hypes, it is essential to take a simple, conservative and sensible approach before getting involved and buying art at auctions.

The following is a beginner’s guide to paddling your way through an auction as we highlight the terms, steps involved, and what to look out for.

What is an auction?

The simplest definition of an auction is that it is a process of buying and selling goods or services to the highest bidder. The word is derived from the Latin word augēre, which means to “increase” or “augment”.

Auctions have a long history, going back to as early as 500 BC. In Babylon, auctions of women for marriage were held annually, wherein the auctioneer1 would start with the woman considered to be the most beautiful and progress to the least. During the Roman Empire, following the military victory, enslaved people captured during the war were auctioned and the proceeds of the sale went toward the war effort. 

A lot has changed since then and the Internet also led to a rise in online auctions to solicit bids2 for everything from paintings, sculptures, ceramics, jewelry, watches, wine, property, and livestock to second-hand goods.

Why do people buy at auctions? 

An experienced auction buyer will tell you this: Auctions can be great places to buy art. People can find bargains if they are skilled in researching and setting their limits before bidding. Auction houses sell a significant amount of good quality art, fresh from estates and private collections. They also have a wide network of corporations, businesses, museums, and private collectors who possess valuable pieces of artwork sometimes rarely seen in the market but included in their public sales.

Buyers also have a longer time to deliberate over what they see before buying, as auction houses usually announce their sales months ahead via their websites, catalogues and viewing exhibitions. Collectors can take these opportunities to do their research, broaden their knowledge and possibly expand their art-buying horizons.

How to buy art at auctions?

First-time buyers at auctions should stick with established auction houses. They are experienced, organized and equipped with specialists who have researched on the authenticity, provenance3 and details on the artwork and artist. The pieces are also generally good quality work from reliable sources.

You should do as much research on the art and artists you are interested in. One must read up on the history of the artist(s), the work they have produced, and the prices they have been sold for in the past. Information can be derived from websites, art history books, and catalogues from previous exhibitions and auctions.

Prior to bidding for a piece, it is advisable to attend as many auction house previews and spend plenty of time studying the artwork. Check the condition, style, and process the artist had in creating the piece. Auction houses schedule previews in different cities so the buyers can have an opportunity to view the pieces in person. You will feel the impact of the work and observe what others say about it. This is an experience that online websites are not able to offer.

You can also request condition reports4 and the history of provenance (ownership) from the auction house.

After viewing and researching, you must decide on a maximum price you are prepared to spend on a given item. During the actual bidding, having this number in mind will help buyers stick to their budget.

Remember that a buyer’s premium5 (as seen in the table below) and tax will be added to the hammer (final) price6.

Buyer’s Premium - Auction Sales in Hong Kong SAR

Christie's
Hammer Price  < HK$ 1.2 million  HK$ 1.2 million < HK$ 20 million  > HK$ 20 million
% of Buyer's premium  25%  20%  12%
Sotheby's
Hammer Price  ≤ HK$ 1.6 million  HK$ 1.6 million ≤ HK$ 22.5 million  > HK$ 22.5 million
% of Buyer's premium  25%  20% on amount in excess  12% of amount in excess
Bonhams
Hammer Price  < HK$ 1.2 million  HK$ 1.2 million < HK$ 20 million  > HK$ 20 million
% of Buyer's premium  25%  20%  12%


 

Note: This table is only for guidance. Please check with the relevant auction house for the actual figures

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 consignor7 and the auction house that the lot would be sold for

1 Auctioneer – a trained professional who presides over the auction
2
Bid – the amount a prospective buyer signals the auctioneer he/she would pay to buy the lot during bidding
3
Provenance – chain of ownership in the past to the present
4
Condition Report – a written description of the condition of a work prepared by specialists
5
Buyer’s Premium – the amount above the hammer price that is paid as part of the total purchase price
6
Hammer Price – the winning bid for a lot at auction that does not include the buyer’s premium
7
Consignor – owner of a lot who is transferring property to the auction house to act as an agent on his/her behalf for sale

@2022 Chubb. The contents of this document are for informative purposes only. Any advice in this article is general only and does not take into account any specific objectives, financial situation or needs, or the prevailing laws and regulations in the relevant jurisdiction. Please review the full terms, conditions and exclusions of our policies to consider whether they are right for you. Coverage may be underwritten by one or more Chubb companies or our network partners. Not all coverages and services are available in all countries and territories. Chubb® and its respective logos, and Chubb. Insured.SM are protected trademarks of Chubb. Published 07/2022.

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