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How to Speak Auction

You're in your seat. You have your paddle. The auctioneer clears his throat and lays his gavel on the podium. The auction is about to start. It is a passionate battle waged in a sometimes-foreign language, and it could be your treasure at stake! Making sure you understand important terms before you're in the heat of the moment is definitely a safe bid. As usual, buyer beware!

by David Rago

Photograph of an auction in progress

Absentee Bid

A bid placed by a buyer who is not attending the sale in person. The bidder might have attended the preview, or may simply be responding to an online or print catalogue. These absentee bids, which detail the lots in which the bidder is interested as well as the extent to which he is willing to bid, are executed on behalf of the bidder by the auction house. As a rule, these bids are rendered without the passion that auctions usually — and are intended to — instill. In other words, they tend to be saner, more rational, bids. And, as a result, they also tend to be less than successful in winning an item. Absentee Bids are also known as Order Bids, Left Bids, or Book Bids (e.g., "I have a bid of $500 in the book.").

As Is

When a lot is auctioned "As Is," it means that the owner isn't guaranteeing anything about the condition of the piece being sold. Therefore, the responsibility is yours and yours alone to determine the condition of such pieces before you decide to bid on them.

Buyer's Premium

A commission that is immediately added by the auction house to the hammer price of each lot as it sells. All auction houses that charge these fees schedule them clearly in their catalogues prior to each sale. In truth, it is a way of splitting the commissions earned by the houses so as not to discourage consignors with higher fees up front. For example, a house might charge a consignor 15% and the buyer 20%, instead of charging the consignor an alarming 35%. These are often also referred to as "points," where "20 points" indicates a premium of 20%.

Condition Report

These can be obtained over the phone or online, and they are prompted by requests from prospective buyers about the fitness of a given lot. Some auction houses, especially specialty firms, have such extensive condition reports printed in their catalogues that it often precludes the need to ask for them. But especially if an auction is "as is," buyers should try to get a condition report from the auction house.

Consignment Contract

A certificate given by the auction house to the consignor, the purpose of which is to clearly state all terms of sale, including fees.

Consignor

The owner of a lot or lots being sold at an auction; the seller. Also known by the auction house as "the boss," because the consignor is paying the house a commission to serve as her agent in selling property.

Hammer Price

The winning bid on a lot being auctioned; that is, the price of the item when the auctioneer's hammer falls.

Live Bid

A bid by someone who is in the room where the auction is taking place, bidding live. While it can also mean that someone is participating "live" via the phone or the Internet, the term usually represents someone who has taken the time and trouble to personally inspect the material offered, and intends to take the fight to the auction block in an attempt to win the lot. If you want an item badly, this is the best way to meet your "enemy" head-on and win.

Lot

Either an individual item or a group of items that are sold at one time (thus, a one "lot") at the fall of the auctioneer's hammer. For instance, while one auction house might sell a single Rookwood vase, another house might also choose to offer an entire tea set as a single "lot" instead of breaking the teapot, sugar bowl, and creamer into three individual offerings.

Minimum Value/Reserve Price

The low estimate shown in a catalogue. The low estimate is an important figure because it is usually reflective of where the reserve price on a given lot has been placed. For example, at most auctions, the reserve price is no higher than the minimum value. If a lot is estimated at $1,000 to $1,500, then the reserve price is probably between $800 and $1,000. In nearly all cases, the higher the estimate, the higher the reserve. If a lot does not meet the reserve during auction, there are several things that could take place. The lot is either returned to the seller, sold to a buyer at a lesser price (which is reached by the house cutting their buyer's premium, sold to a buyer because the consignor has agreed to lower the reserve, or a combination thereof. In our case, lots that remain unsold are either returned after 30 days or later auctioned in another specialty sale at no more than 65% of the reserve/estimate from the previous sale.

Original Purchase Price Paid

A term referring to what the consignor of a lot to be auctioned paid for the item when he first bought it.

Seller's Premium

Like the Buyer's Premium, this is the commission charged to the consignor to assist in paying for the auction house's cost in selling an item. In nearly all cases, the seller will also be paying an insurance fee (usually 1.5%), photo fees (averaging about $400 to $500), shipping costs, and in some cases, storage costs.

Telephone Bid

Increasingly, telephone bidders are the source of much of the competition at an auction. Some people are on the phone for a single item, while other very serious buyers might request an "open line" so that they can bid on numerous pieces throughout a sale. If you ask for an open line, you are expected to be aggressive. Generally, these bids are a considerable amount of trouble for the auction house to arrange, expensive in phone and employee costs. People who ask to be on the phone and who subsequently stop bidding somewhere near the low estimate of a lot tend to make few friends at auction houses.

Value/Price

Appraisals are based on track records for similar pieces, recent market trends, and inside information concerning specific buyers, museum exhibitions, new books and research, etc. Value is always, at best, a moving target. There are also situations where an appraiser must determine the value of a unique piece. Ideally, auction estimates should be placed at no more than a high wholesale level. For example, if a piece is worth $1,000, the estimate should be no more than $800 to $1,200, with a reserve price of about $700. People might pay more at auction than an object is normally worth, but they won't respond well if they're told that they have to begin at that level. Wise auctioneers start lower and let the market determine the auction value of a lot, at least on that day, at that place and time.

Without Reserve

Even a lot being auctioned "without reserve" actually always does have some kind of a reserve price. For example, if a lot is estimated for $1,000 to $1,500, it might ordinarily have a reserve price of $800 to $1,000. But if that same lot is auctioned "without reserve" and with the same estimate, it still isn't ever going to sell for a dollar. The auctioneer will set a starting point, somewhere between $100 to $500, where that lot will be initially offered. Thus, auction houses can announce that lots are being sold "without reserve," whereas in actual fact, it means such lots are just being sold with reserve prices much lower than where they would normally be placed.

posted on 01.26.05


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