Buyers whacked again at auction
September 4 2013
I learn via Art Market Monitor that Christie's has again increased its buyer premiums. The threshold at which the additional 25% is charged has increased to the first £50,000. Add VAT to that, and it means that the amount you actually bid in the auction room is sometimes only close 2/3 of the final price. I don't think we'd stand for that in Tesco.
I've said this before here, but every time the buyer's premium increases, it makes it seem more illogical to me that the major auctioneers are working almost entirely for the seller. There's a significant conflict of interest here. By far the greater portion of Christie's fees come from the buyer, and yet as the buyer you get the bum end of the deal - the price can only ever go up.
I'm currently trying to buy a house in London, and am used to estate agents regularly telling fantastical lies. But that's fine, for not only are some estate agents pathologically incapable of speaking the truth, it is also clear to everyone that they're getting their fee from the vendor, so I'd expect them to do all they can to up the price.
However, that's not the case for major auctioneers, where the balance of fees now comes more and more from the buyer. For me, the most grating area is the practice of bidding a single buyer up to the reserve (which is set by the vendor on the auctioneer's advice, and never disclosed to the buyer) by making him or her believe that there is another bidder in the room, and thus creating the illusion that there is a more competitive market for a work than is otherwise the case. If, for example, I was working for a client who had asked me to bid on a lot for them (that is, I had to work in their interest to secure the best price), and I suspected that a picture was about to fail to sell (once you know the signs, they're easy to spot), and thus potentially buyable after the sale for a reduced price, then I would be bound to advise them not to bid, and to let a picture get bought in. But that's not advice you recieve very often in the auction room.
Update - an auctioneer writes:
I agree with you on this one (being an auctioneer), the auction industry is heavily favouring the sellers. Naturally this comes from the notion that it is easier to get someone to buy than to sell, especially in the high-end segment of art and antiques. The fierce competition between the auction houses also promotes the idea that it's better to have it bought in at your own house than sold somewhere else. That makes it the seller's market and since consignors believe a high estimate will bring a high result, they usually go for the highest estimate offered (or lowest commission, everything else alike).
The practice of aftersales has only emerged during the recent years in my country (not being Britain), so previously all BI's were reoffered at the next sale with a revised estimate/reserve. I believe that practice had the best of two worlds. If the piece was offered the market too high, this would be adjusted a few months later until it hit market value or the consignor got bored and withdrew the whole thing.
The aftersales are a nuisance because, as you say, possible clients will gamble that the lot will be BI, and make an offer out of the public market (often on a first come, first served basis). I believe this is bad for the consignor as well as the potential buyers, since it is off-auction and not under any market scrutiny.
And speaking of buyer's premiums, they are as irritating to a buyer as the American sales tax additions are to Europeans used to VAT being included in the price.
Update II - another reader with auction house experience writes:
Firstly Christie's aren't the first to implement this new rate of 25% up to £50,000 they are just following in Sotheby's footsteps. I am not defending Christie's actions in doing so but it problem this highlights is that becasue both are such dominant players there is a fear factor - if one does something the other has to follow. And, so far copying each other seems to have paid off for them both.
Secondly in regard to after-sales:
The market never lies - if someone truly believed in something's worth i believe they would never 'gamble' that it would BI and so I dont agree that this sort of gambling happens. Anyone in trade who 'gambles' on after-sales I presume had no idea they were going to buy the work until after they knew it had BI'd (there will however be some exceptions to this rule)... in which case I find it bizarre that they can suddenly have a customer of theirs believe that are passionate about such a work and believe in it's quality when they previously had no intention of buying it. Further, because the work is never re-offered a fair market value for that artist is never established (and a customer is often duped).
Interesting on the first point, but very odd logic on the second. The market may indeed never lie - but the question is whether an auctioneer bidding someone up to the reserve (by pretending there is a rival bidder in the room) is in fact a genuine market at all.
Update III - our first auctioneer correspondent writes again:
On 'Interesting on the first point, but very odd logic on the second. The market may indeed never lie - but the question is whether an auctioneer bidding someone up to the reserve (by pretending there is a rival bidder in the room) is in fact a genuine market at all':
You have a point here, but to be fair, it is not only the potential buyers that constitute a market. The reserve is the seller's part in the deal. However, one could argue that the most fair practice would be publicly known reserves, as in many of the online action sites these days. That would of course lead to the loss of estimates, but really, would anyone miss them? My guess is that's the direction we're heading.
Faultless logic here - and a good idea.
