Insights

Art explained: How do art auctions really work?

05 Nov 2018
The art world has never been more global or more accessible. The best estimates put annual art sales at between 60 and 70 billion dollars a year , and transactions happen in galleries, at art fairs, through advisory services, and online. Yet, even highly experienced art lovers find auctions -- which generate about 20% of annual sales -- intimidating. It's also unquestionably one of the most exciting ways to get what you want at a market price.
 
 
Agents speak on their phones with their clients while bidding on at the auction of Leonardo da Vinci's "Salvator Mundi" during the sale at Christie's on Nov. 15, 2017 in New York. The rediscovered masterpiece  sold for an historic $450M, obliterating the previous world record for the most expensive work of art at auction.
 
Agents speak on their phones with their clients while bidding on at the auction of Leonardo da Vinci's "Salvator Mundi" during the sale at Christie's on Nov. 15, 2017 in New York. The rediscovered masterpiece sold for an historic $450M, obliterating the previous world record for the most expensive work of art at auction. Credit: Eduardo Munoz Alvarez/Getty Images North America/Getty Images
 
Let's start with a basic fact: Auctions are public events. Anyone can view what is on sale and choose to participate. When the hammer comes down, the price of an object has been determined by the people who want it, in full view of the world.
But it's critical to do a little homework before you register to bid. Every auction house publishes an online catalog of works several weeks before a sale, so you can scroll through images and take advantage of the enormous amount of information available not only about prices, but about the history of the work and other works available from the same artist, exhibitions and more. 
 
With so much information at your fingertips in real time, it can be hard to decipher what is worth buying and at what price. So, as with any other investment, it's imperative to have the counsel of someone with art expertise to help you before making a decision.
When I was chief executive at Christie's International, the world's leading auction house, I worked with an army of dedicated and incredibly talented specialists whose job was to price an artwork appropriately and to engage and advise buyers before they entered the auction room. Don't be afraid to ask questions such as, "How did you arrive at this estimate?" and "Are there a lot of bidders interested in this work?"
 
A man looks at works by Eduardo Terrazas at the Frieze Art Fair.
 
A man looks at works by Eduardo Terrazas at the Frieze Art Fair. Credit: Leon Neal/Getty Images Europe/Getty Images
 
You can also consult an independent art adviser, who will happily talk you through the online catalog, providing additional information or, better yet, walk with you through the presale exhibition. And you should go stand in front of the art. What moves you on screen won't necessarily move you in the same way in the room, and this subtlety can change your decision. Art is not simply a commodity investment, it's an emotionally charged narrative from its creation to its acquisition, and ultimately to the visceral power of its viewing. 
 
Auction houses are still some of the best places to buy art, but you need price guidance, because the bidding competition in the room can be exciting and seductive. This has always been true. In 1852, a painting by Murillo, The Immaculate Conception, was auctioned in London. The Louvre coveted it, as did the National Gallery, and when the Tsar of Russia's emissary also raised his paddle, a bidding war ensued. The Louvre was triumphant, winning the work for the then staggering price of £24,600. That was the highest price paid for a work of art for more than half a century. Today we are living in the age where records fall more frequently. Only last year another bidding war brought a Leonardo da Vinci painting to a new world record sale of $450 million.
 
Christie's unveil Leonardo da Vinci's "Salvator Mundi" at Christie's New York on October 10, 2017 in New York City.
 
Christie's unveil Leonardo da Vinci's "Salvator Mundi" at Christie's New York on October 10, 2017 in New York City. Credit: Ilya S. Savenok/Getty Images North America/Getty Images for Christie's Auction House
 
The motivation to acquire a work of art is generated much more by the heart than by the mind or by the pocketbook. A first edition of James Joyce's Ulysses is rare; there are only a few thousand. The value is consequently very high for an object of ink on paper that's also "available" in a Penguin paperback. But the true value of this rare object is also inspired by the extraordinary power of the novel itself, a work of ground-breaking originality and genius, and by its place in the world of literature. So, for the first-edition Ulysses the motivation to acquire it is both for the prize of owning an original copy and the association of the dream of reading it.
 
It's the same with a painting; there is only one of each in the world. The owner is the only person who can "read it" every day.
Every piece of art is unique, and in any economic model, rarity and scarcity are key drivers of price. Picasso was prolific, but when a particular 1932 Marie Therese portrait comes up for sale, there is only that one on offer, driving the price. There will be only one person who will own it, to wake up and have their coffee in front of it and experience the emotional resonance of the master's genius. To live with a picture that moves you is what should motivate you to buy a work of art.
So, scan the auction catalogs online, visit the presale exhibitions at the auctions houses, get some advice and counsel and then do what every great collector did when they began: buy something you love. (Just make sure you've measured your wall before you raise your paddle.)