Selling at auction is a little different from selling at a gallery, an art fair or in a private sale.
In the latter, the seller starts with the highest price and negotiates down to make a sale. At auction the opposite is true - bidding starts at the minimum acceptable price and the auctioneer helps negotiate the price up.
What is an auction estimate?
The estimate is for potential buyers and indicates the price range in which the object is expected to sell. Lots in an auction are always presented with a low estimate and a high estimate based on standard bidding increments.
The high estimate is generally 50% higher than the low estimate. For example: £1,000 -1,500 or £20,000 - 30,000.
What is a reserve?
The reserve is the minimum price an object can sell for at auction. It is also known as the 'minimum price' or 'starting price'. This is usually set at the low estimate or below. As agreed with the seller, the auctioneer will never sell the object lower than this price.
Pricing - How are estimates and reserves decided?
Auction estimates and reserves are agreed by the auction house and the seller of the auction lot.
The estimate is based on previous selling prices for the artist, or prices achieved for similar artwork by similar artists. However, low estimates and starting bids achieve higher sold results than auction lots listed with high estimates and starting bids (see What sells well at auction).
The reserve is either at or below the low estimate - never above. This figure is usually 15-30% lower than a gallery or private sale price for the object. However, setting an auction estimate and reserve is an art form in itself.
Set an estimate too high and bidders will be put off and look to bid on a different lot. But setting an attractive starting price, below the artwork’s normal valuation, helps entice collectors into bidding. Once engaged in bidding, the thrill, passion and competition to own the artwork often sends the final result higher than the original gallery price.
The final sold prices of artworks that start with attractive estimates and reserves always out perform other lots with higher reserves. You can learn more tips for getting the best results here.
Unique characteristics of each object also influence an object’s value. Among other things, these include its size, condition, subject matter, medium and any notable history of the object (provenance). For instance, why did a fairly standard dress from the 1960s sell for $4.8 million at auction? Because it was Marilyn Monroe’s.
Why does an artwork at auction start at a lower price than a gallery?
In a gallery or private sale, the buyer is paying a premium for the privilege of having no other competition in their purchase.
Gallery sales also have long no fixed deadline. They offer the work at the highest price they can and if no buyers commit they start negotiating the price down to make the sale.
In an auction the opposite is true, bidding begins at the minimum the seller is happy with and the auctioneer then negotiates the sale up by taking competitive offers from multiple bidders.
Is the reserve public knowledge?
In a live auction the reserve is not shared publicly and is kept confidentially between the seller and the auctioneer.
In a Timed Auction (also known as a Silent Auction or Online Auction) the reserve is indicated online by the 'starting price' (see How to Bid). This disappears once the auction has finished, all that remains is the original estimate (see example here).
Does every lot have a reserve?
On some rare occasions, auction lots are offered with no reserve – meaning that the bidding could start at £1.
Why does bidding sometimes start below the reserve in a live auction?
In a live auction, sometimes the auctioneer will start the bidding lower than the reserve. This is to encourage people to join the bidding and gain momentum in the auction. They will then move the bidding price up to the reserve to make the sale. Only once the reserve is reached can the auctioneer sell the object.
What are the bidding increments?
Bidding increments generally move up in bids of roughly 10%, for example: £10,000 - £11,000 - £12,000 - £13,000. You can learn all about the industry standard bidding increments in our article here.