Whether you are new to the world of auctions, or have participated in one before, there is a lot to know. Here are some of the basics of how auctioning works and some information about different kinds of auctions. We’ll also get into the history of auctioning and talk about some truly remarkable transactions of the past. 

What is an auction?

Auctions involve a seller who puts up something of value, and prospective buyers who compete with each other in order to purchase that item. The seller or auction house sets a price to start with and then buyers try to outbid each other, so that the price goes higher and higher. Usually, auctions are held for only an allotted amount of time. 

How do you bid at an auction?

Prospective buyers at auctions must place bids in order to purchase an item. This can be done in different ways. Traditionally, the buyer or their representative might call out a price or raise a paddle to show their intention to place a bid. In other cases, bids may be written and then submitted. When using online auction sites, bidders submit their offers electronically. Sometimes the bidder can see the amounts their competitors are offering, but some auctions are set up so that this is not possible. When the final bid is accepted, after the bidding has finished, it is sometimes referred to as the “hammer price.” This is because in traditional auction houses, the auctioneer bangs a hammer once the final price has been determined. 

How do you sell at an auction?

In some cases sellers consign their item to an auction house, and in other cases post the item themselves, like on various online platforms. When selling an item online, it is important to photograph and describe the item clearly. Sellers usually determine an initial price with the help of an expert appraiser in order to be sure they are getting the full value of the piece they are selling. Mearto appraisal specialists are experts at helping you to understand the value of the item you are selling so that you are able to get the best price at auction.

What is a reserve price?

The reserve price is the amount the seller initially stipulates, or the lowest amount of money they will accept for the sale of the item. In the best cases, competitive bidding will drive the price up. An item may not sell if buyers are uninterested and will not meet the reserve price.

What is commission?

Commission is the percentage that an auction house or website takes from the sale and/or a fee charged on the sale upfront. Commissions vary within the industry. On the popular auction website eBay, sellers pay a small listing fee. They also must pay a percentage of the reserve price (around 7%), as well as an additional commission on the final sale price (around 10%). Large international auction houses like Sotheby’s and Christie’s charge sellers a commission between 10 and 15%.

Buyers also may have to pay a fee to the auction house, usually a percentage of the hammer price. This is called the “buyer’s premium.” 

What are the different kinds of auctions?

There are many different kinds of auctions. In-person antique and collectible auctions allow prospective buyers to see each item in person before placing a bid. Online auctions have become much more popular over the years. They are more convenient to take part in, but you can’t view the items in person. Also, online auctions open the stage to bidders from around the world. This has affected prices and perception of rarity. Whereas previously an auction might be limited to a room full of people, now you might be competing with thousands. Additionally, in the pre-internet days, an item may have seemed exceedingly rare, or conversely, very common. Now that there is so much more information being shared, prices have risen and dropped with more accurate understandings of scarcity.

Another type of auction is a silent auction. Often used for charity functions, in this type of auction, the bidder writes an offer on paper and whoever has written the highest amount wins the item. This way, there is no way of knowing anyone else’s bid, so the element of competition is quite different.

What is the history of auctions?

Auctions have been around since at least the Babylonian Empire. According to historians, it was common practice to sell women for marriage through auctions. During the Roman Empire, auctions were used to sell slaves captured in battle. Auctions were also sometimes held to sell off a person’s belongings if they were too far in debt. In fact, even Marcus Aurelius auctioned off his furniture to raise funds. The most bizarre auction in history, however, happened in 193 AD. This was when the Praetorian Guard, the Roman emperor’s personal security unit, killed the emperor and offered their allegiance (and by extension, the empire) to the highest bidder. The highest bidder did indeed become emperor, but only until a civil war dethroned him shortly after. 

In the 17th and 18th centuries, Europeans held “candle auctions”, in which the bidding closed when the flame died. The unpredictable timing of the auction’s end made it more difficult for someone to wait until the last second to jump in and place a winning bid. 

The first auction house, Stockholms Auktionsverk, was founded in 1674. In the following years, numerous auction houses sprung up around Europe. They published catalogues and held regular auctions, offering works of art, valuable books and more. Later, London became a center for the art trade and home to the most prominent auction houses in the world. Smaller-scale auctions also continued to be held at cafes, taverns and other venues. 

With the rise of the internet, the auction industry changed dramatically. Now, the possible pool of bidders for an item is exponentially expanded. Furthermore, more informed knowledge of scarcity and comparison shopping has produced shifts in prices and expectations. There are now countless online auction sites for all types of items and price points. Along with these newcomers, the traditional auction houses have expanded to online auctions as well. 

Currently, London’s Sotheby’s and Christie’s are considered to be the biggest auction houses in the industry, with sales figures that are often neck and neck. The most expensive item ever sold at auction was Leonardo Da Vinci’s Salvator Mundi, which went for $450 million at Sotheby’s in 2017.

Some useful auction terminology:

Appraisal: An expert’s estimate of how much an item is worth; Mearto appraisers can provide you with an accurate estimate for your item, which is vital for getting its full value at auction

Auctioneer: In face-to-face auctions, this is the person conducting the auction, acknowledging bids and striking the hammer when bidding is completed

Auction block: In face-to-face auctions, this is the display platform where the item being auctioned is shown

Bid: An offer of money for something being sold

Buyer’s premium: A fee that a buyer may have to pay to an auction house 

Commission: A fee paid by the seller to the auction house 

Consignee and consignor: These terms are sometimes used in place of “auction house” and seller”; the consignee is the auction house, and the consignor is the seller, who consigns the item

Hammer price: This is the price when the bidding ends, or the winning bid

Lot: The item or group of items being sold at auction

Reserve price: The minimum price the seller will accept