Auction Sales Sample Calculation
A private collector wants to sell an exceptional drawing by Gustav Klimt in 2018. Taking into account the current market environment and based on our experience, we make a purchase offer to the seller of around £235,000. Auction experts also estimate the value of the drawing at £200,000 - 300,000. However, the seller decides not to sell the work directly and brings it to an art auction, where he has to accept the reserve price.
In the 2019 auction, the work was sold to the highest bidder for only £160,000, i.e. well below the lower estimate price. In addition to the so-called hammer price of £160,000, the buyer pays a premium of 25 per cent (£40,000), bringing the actual purchase price excluding tax to £200,000. The seller, on the other hand, receives only part of this proceeds, in this case around £136,000. The difference between the actual purchase price and the payment, in this case £64,000, is the commission for the auction house.
The example makes demonstrates that the sale at auction can be a source of uncertainty for the seller. Instead of £235,000 from a specialist art dealer, the seller receives only £136,000 through the auction of his Klimt drawing, which means he earns just around 60 per cent of the possible purchase price. However, this example is not an isolated case. The statistics show that about one third of the auctioned works of art do not win a bid and that the publication of the auction results leads to a lasting reduction in their value. If one also considers works of art for which the knockdown is below the lower estimated price, a large proportion of the auctioned works ultimately fall well short of the expectations of the seller.
- Source: A. Hausmann (2014) Handbuch Kunstmarkt, article by Felix Ganteführer, p. 372
- Source: A. Hausmann (2014) Handbuch Kunstmarkt, article by Dirk Boll, p. 185
- Calculation with assumption: 15% seller commission and 25% buyer's premium