Thirty years ago, the auction house or dealer with the largest library of books on art and antiques wielded great power to shape the trade and profit from it. Their extensive resources allowed them to secure the best consignments and attract top bidders through their expertise.
The internet changed everything and opened digital libraries of resources that leveled the playing field. In short order, the physical libraries became obsolete and the one who learned how to search and index price comparables and historical data on the web gained a considerable edge in the market. Knowledge means power even though the source of the knowledge changed from books to the web.
Yet, despite this seismic shift and the greater availability of auction comparables to provide accurate auction estimates, auction houses continue to estimate lots with ranges that are too wide and often too high. Why? This widespread industry practice benefits neither the auction house, the buyer, nor the seller.
The Problem with Wide and Aggressive Estimates
Many reputable, investment-quality auction houses use aggressive and overly broad estimate ranges, which create multiple problems:
- Inaccuracy and Lack of Confidence: When an estimate range is too wide, it signals that the auction house may not fully understand the market value of the object. Buyers and sellers alike may lose confidence in the house’s expertise.
- Discouraging Bidders: Potential buyers, seeing aggressive estimates, often assume a high reserve and move on to other auctions. With so many sales happening weekly, they may not take the time to investigate further.
- Poor Marketing Strategy: A well-marketed auction should produce highlights—lots that sell well above estimates. However, when estimates are too wide, the number of standout sales declines, leading to less effective publicity for the auction house.
A well-vetted auction should have estimates that do not exceed a 20% range of the average estimate. For example, if a painting has a conservative average estimate of $10,000, the range should be $8,000–$12,000. The minimum opening bid should follow industry standards—half the low estimate ($4,000 in this case).
Conservative estimates attract more bidders and result in higher prices, especially when paired with high-quality cataloging, detailed descriptions, and numerous high-resolution images.
The Risks of Low Estimates with Wide Ranges
On the other end of the spectrum, auction houses that set excessively low estimates with broad ranges also create problems:
- Lack of Buyer Confidence: Estimates starting at $1, for example, fail to provide a useful price framework for inexperienced bidders, who may avoid participating.
- Risk of Underselling: If an auction is poorly marketed and lacks high-quality images, the number of bidders may be insufficient to drive prices to fair market value. A painting with a $500 average estimate, for instance, could sell for just $10 or $25—disastrous for both the seller and the auction house.
The Hidden Dangers of High Reserves
Another significant issue is the use of reserves above the industry standard (50% of the low estimate). Historically, some auction houses used reserves as a safeguard against poor marketing efforts, but this approach has backfired in several ways:
- Buyer Distrust: Experienced bidders recognize when auction houses use reserves as a protective measure. This leads to skepticism, lower bids, and in some cases, a complete avoidance of the auction house.
- Long-Term Reputation Damage: Auction houses that consistently use high reserves risk developing a negative reputation, which can be difficult—if not impossible—to repair.
The Most Detrimental Outcome: Unsold Lots
A poorly organized auction with aggressive estimates and high reserves often leads to one of the worst possible outcomes—unsold lots.
When an auction house fails to sell a unique work of art, the impact is lasting. Unlike mass-produced items, a unique painting or sculpture that goes unsold carries a stigma in the market. Collectors and investors remember these failed sales, making it difficult for the work to regain its value in future auctions.
This is especially damaging when the work has a high estimate. A painting that fails to sell at auction often must remain off the market for years before being reintroduced with any hope of achieving its original estimated value. This can be financially devastating for consignors, particularly those with significant investments tied up in art.
Despite these risks, many auction houses continue to assign high reserves and aggressive estimates to secure valuable consignments. While the auction house may forfeit a commission on unsold lots, the consignor bears the greater loss—often having to re-offer the work at a much lower price. In some cases, a painting that was originally estimated at $10,000 may sell for less than half of that when it reappears at auction.
Conclusion
The first sale of a unique work of art or antique is critical—it should achieve the highest possible price. The best way to ensure this is by setting conservative estimates with a tight range and a reserve no higher than half the low estimate.
Auction houses that adopt this approach will not only secure stronger sales results but will also build trust and long-term success with both buyers and consignors.