Art Auction Primer

Choosing an auction - 2

The most obvious consideration in choosing an auction house is the commission they charge the seller, and to a certain degree the commission they charge the buyers. In most cases, the seller's commission will be between 10-25% depending on the sales price of the piece. The lower the price, the higher the commission rate. For very desirable pieces, selling well above six figures, the selling commission may be negotiated even lower, since the major auction houses charge substantial buyer's premiums. Obviously, the seller is more concerned with the seller's commission rather than the buyer's commission, but if a buyer knows that 25% is going to be tacked on to their cost, it has a constraining influence on their bidding decisions.

Besides the selling commission, the seller can also expect other charges from the auction. The seller can be charged for insurance, storage, art and photography charges, advertising, and some auctions charge even a fee if the piece does not sell. This last fee, called a buy-in fee discourages sellers from putting high reserves on their work. It is not a happy seller who walks away from an auction without a sale, and with a significant fee to boot.

Before a seller consigns work, all of these additional charges should be shown on the consignment agreement, and discussed before the auction. Unfortunately, this is not always the case leaving the seller with some unpleasant surprises. Again, if the work is desirable, some of these charges can be negotiated and at times omitted. All auction house consignment agreements include verbiage that protect the auction house against any legal actions initiated by both the buyers and the sellers.

For art sellers, the right of rescission is often overlooked and in some ways the most important. The right of rescission allows the auction to rescind any sale into the future. When an auction exercises that right, the buyer is returned his money and the seller is returned his art. Rescission rights offer some protection to buyers and also provides the auction protection against any legal action initiated against them by either the seller or the buyer. Some rescission provisions include time limits as short as a few days while others may extend for five years or indefinitely. Rescission places the seller under a cloud of uncertainty. Although rescission rights are included in most consignment agreements, they are subject to negotiation.  

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