There’s something I’ve always wondered about auction-house estimates: are they
estimating the hammer price, or are they estimating the final sale price, including
commission? The auction house press releases, and newspaper reports in the wake
of the auction, always talk about the latter: they’ll compare the price including
commission to the pre-auction estimate. But last night at Sotheby’s, a Van Gogh
with an estimate of $28 million to $35 million was passed, unsold, after bidding
stalled at $25 million.
Now the auction house’s commission is 20% of the first $500,000, plus
12% of the rest. Which on a $25 million hammer price would mean a total of $3.04
million. Add that to the $25 million hammer price, and you get $28.04 million
– which is above the low estimate. And you surely can’t have
a reserve price above the low estimate. Or can you?