Part One: How Do Auctions Work?
By Chuck DeLaney
Not long ago you read in Designer Monthly of the fascination our peripatetic
bon-vivant-about-town, David Dannenbaum found watching the auction of the
Israel Sack collection of fine American antiques at the prestigious
Sotheby's auction house in New York City.
the author of our Old Stuff & Whatnot, L.L.P. column describes the elegant
and interesting people that frequent the high-end auction halls such as
Sotheby's and Christie's. These are the two most prestigious auction houses
in America, and the world's masterpieces of fine art and antiques are often
sold during hushed bidding at these well-known institutions. Bidders
discretely raise paddles as the price for each treasure rises.
To be sure, there have been reports suggesting that even these illustrious
auction houses do not always play fair. Indeed, not long ago the head of
Sotheby's, Alfred Taubman, was found guilty of price fixing with Christie's
in a federal trial.
But let us step away from the pinnacle of high-end auction houses in
Manhattan and take a look at the bigger picture. Every week there are
hundreds of auctions held all across America, where you can find treasures
of all sorts, frequently make purchases at very low prices, and have a lot
of fun in the bargain.
That's what these articles are about. How you can locate auctions in towns
and rural areas across the country where you can buy antiques, furnishings
and accessories that you would love to own. Now, you may wonder, if the most
prestigious auction houses are not above price fixing, what about auctions
in general? That will require a little explanation. First we'll discuss what
auctions are, then take a look at how they work, and in the next installment
I'll tell you how to locate auctions and how to do your research and bid on
the items that interest you.
First, let me start with my bias. I love auctions. I've furnished two homes
and purchased numerous gifts and investment items buying at auction over the
past fifteen years. I have gotten a lot of terrific deals, been burned once
or twice, and had a lot of fun in the bargain. I should add that a good
auction is almost like theater - there's suspense, drama, and often comic
relief. I've spent many an evening at a country auction without purchasing
anything, but having a good time in the bargain.
I promise that if you study this article and follow the rules that I'm going
to list, you can come away with treasures at a local auction and never get
burned. Does that sound interesting? Read on.
What is an Auction?
Webster's defines an auction as simply "A sale of property to the highest
bidder." The word stems from the Latin verb "auctio" which means "to
Auctions are used to sell many things in addition to antiques and art. All
around the world there are auctions of commodities such as tobacco, fish,
cattle, racehorses, and just about anything else where there's a market of
multiple people interested in buying the same thing. That's the key to an
auction - a bunch of people who are interested in buying the same object,
and taking turns offering bids on the object. The right to buy that object
will go to the highest bidder.
This is not the way many goods are bought and sold. If you go into the store
to buy a soda, you're the only customer at the moment and there's a set
price, a list price if you will. Shopping for a piece of jewelry? Chances
are you're the only person interested in a given item in the jeweler's case,
and while you may be able to bargain a bit, it's just you and the jeweler.
Now imagine you're at an auction and there's a great oak Mission-style
rocker that you actually think was made by one of the masters. Somebody else
in the audience thinks it's a pretty rocker that would look good in their
living room, but they don't know anything about Mission furniture and its
history. There's also a dealer in the crowd who knows the same thing about
the chair that you do, and a collector of Mission furniture who's determined
to add this rocker to her collection.
You are all willing buyers. There's only one chair. Who gets it? The highest
bidder. What is the chair worth? Well that's up to you potential buyers to
work out among yourselves, with the help of an auctioneer. You will
determine the value, or "market value" of that rocker at this auction, in
this part of the country at this time.
Now, I have an amateur's interest in real estate, and in that field you
frequently run up against the term "fair market value. "Well, what is fair
market value? The most common legal definition is that fair market value is
the "price at which an item is exchanged between a willing seller and a
willing buyer in an arms-length transaction when neither party is under
duress to sell or to buy."
What better way to determine fair market value than an auction with an
object offered by a willing seller and a bunch of willing buyers?
Now, people who are cynical about auctions will suggest that sometimes a
buyer pays more than fair market value because the auctioneer is in cahoots
with people who appear to be buyers but who are actually working for the
auctioneer to push prices up above what they should be.
Is this possible? Sure it is. Can you avoid this trap? Yes you can. We'll
discuss how you can protect yourself in the second installment. First we
must cover some basics.
How Auctions Work.
Where does the stuff come from?
For weeks or more before an auction, the auction house assembles
merchandise, that is, items that will be sold at the next auction. These
items, sometimes called "merch," come from a variety of sources.
Some items may have been purchased outright by the auctioneer, with the
intent to resell them at auction. It is common in some parts of the country
for an auctioneer to buy "a house. "This usually happens when the
inhabitants of a home have died, and the surviving family and heirs select a
few cherished items for each to keep. Then they seek to reduce the rest of
the furniture, furnishing and possessions into cash to put into the estate
of the deceased.
The auctioneer inspects the home, makes a few mental calculations based on
what he/she thinks is the value of the major furniture items, and then
offers one flat price for the entire contents. If a deal is struck (willing
buyer/willing seller) the auction house clears out everything and takes it
to the auction house or to some storage facility.
From there, the material may be sold "as is." Or items may be cleaned,
polished, and repaired. Lesser items, such as old magazines, inexpensive
glass and china ware, may just sit in boxes. Sometimes these boxes are sold
as a single item, not surprisingly called a "box lot."
Other items that will go into the auction find their way to the auction
house via a variety of routes. Sometimes collectors put specific pieces up
for auction. Often the auction house will sell these "on consignment,"
meaning that the owner agrees to allow the auction house to sell one or more
items with an agreement that the auction house will keep a percentage of the
sale price of each item. Sometimes consigners will set a minimum "reserve"
price. If the bidding does not reach that minimum price, the lot will not be
As items come into the auction house, there's a lot of work to be done.
Items must be assigned numbers, called "lot numbers." Lists, and perhaps a
catalog, must be prepared recording the items that will be sold, giving
brief descriptions of each item (hopefully these descriptions are accurate)
by lot number. Generally this list will also indicate the order in which the
lots will be sold.
In very informal "country" auctions, there may be no list whatsoever.
Instead the auctioneer will just point to an item or hold it in his hand and
auction it on the spot.
As merchandise is prepared for the auction, it is often put into an area
near the stage or podium from which it will actually be sold when auction
time rolls around. Most auction houses have viewing times before the actual
start of the auction. This is when you can inspect the items that will be
sold. It is very important that you do this.
In fact, inspecting items that are offered for sale is the first step in
protecting yourself against bidding too much for an item. We'll get to that,
and much, much more, in next month's installment.
Reprinted with permission from the Sheffield School of
Design web site at