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The Auction World's Buy-Ins and Post-Sales

This story begins where most end: The sale of American and European art at Chicago's Leslie Hindman auction house was a success, generating $1,326,000 in revenues, 78 percent of the 396 lots finding buyers.
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This story begins where most end: The sale of American and European art at Chicago's Leslie Hindman auction house was a success, generating $1,326,000 in revenues, 78 percent of the 396 lots finding buyers. The largest single hole in terms of sales was the failure of 11 of the 14 Pop Art sculptural furniture pieces by Louis Durot to sell, which were estimated in the $2,000-6,000 range. However, that was quickly remedied just a day after the sale, Hindman said, as "we got a bunch of calls" for the Durot's from collectors who for one reason or another did not participate in the bidding or were not even there, and that precipitated calls to the single consignor of the Durot's, who was eventually convinced to lower the reserve price by 10 percent. As a result, "we sold them all."

That's kind of typical in the fine art auction business, where between 20 and 30 percent of the objects up for sale don't sell. However, sales take place after the sale, a mopping-up activity that represents a distinct if unspoken auction market. This activity is not talked about publicly, because "buy-ins" -- that's the auction world's term for lots that don't sell -- suggest failure on someone's part, presumably the auctioneer. Maybe, the "reserve" -- another auction world term, the unstated price below which the consignor refuses to sell the object -- isn't achieved by the bidding and, perhaps, the price was too high to begin with. Perhaps, the artwork isn't so good or isn't in good condition. Possibly, the artwork and price are fine, but would-be collectors didn't remember to put bids on it.

On the other hand, auctioneers like to talk about high prices achieved, new world records. Where should someone sell his or her painting? Why, the auction house, where you can make millions! Huge prices for some objects obscure the fact that many others go begging, and what do we do with them?

The days after a major sale are often quite busy ones for auctioneers, making sure that sold lots are shipped to the new owners and that the consignors are promptly paid, as well as looking ahead to the next sale. However, during this period, they also are making calls to consignors of pieces that didn't sell (explaining what happened during the auction and what steps to take next) and fielding calls from dealers and collectors who are expressing interest in the buy-ins. "We usually take a week or so to let all the offers come in," said Jennifer Wright, specialist for Old Master drawings at Christie's. The result is "a dozen or more after-sales. I think that's true for all departments here."

At Phillips de Pury, post-sale activity generally results in half of the buy-ins being sold, said Aileen Agopian, the London-based auctioneer's director of contemporary art in New York. "It can turn a so-so sale into a very successful one."

Dealers form a significant pool of post-sale buyers, according to New York City dealer and former Sotheby's department head, David Nash. "You see dealers scurrying around, looking for leftovers," he said. "I've done some of that myself." Some dealers regularly call auction houses for a buy-in list, so they know what's available. Another Manhattan gallery owner, Nick Acquavella, noted that "buy-ins present an opportunity to buy, and I've done it lots of times." At times, he has been an underbidder at auctions, "letting it buy in and seeing if I can get it after the sale." At other times, he may sense from the catalogue pre-sale estimates that certain lots won't sell, because "the prices look ridiculous. So, I'll wait until something buys in and make an offer, or just ask 'What will the guy take for it?'"

Auctioneers hasten to add that not all buyers in the post-sale period are scavenging for bargains, and not everything sells below the reserve. Some buyers are traveling or sick the day of the sale, or something else came up.

The auction world prides itself in its transparency but, following a sale, deals are made in quiet by all parties: Consignors of bought-in lots, especially those with reserve prices, may owe the auctioneer money -- called a "buyback" -- for various fees, such as for catalogue photography, outside expertise, insurance and shipping, which provides them with a strong incentive to lower their reserve or bottom price in order to sell the object. For instance, Bonham & Butterfields in San Francisco assesses "an unsold property fee equal to 5% of the reserve," which is in addition to catalogue illustration fees ($200 per lot for color and $150 per lot for black-and-white), the cost of shipping and an insurance fee of one-and-a-half percent of the reserve. The expense may well compel consignors to take a small loss rather than a larger one. In general, the "three d's" that bring a large percentage of consignments to auction -- death, debt and divorce -- often encourage a willingness to be flexible.

The post-sale wheeling and dealing is part continuation of the sale ("post sales have a very practical purpose in the art world," Nick Lowry, president of the New York-based auction house Swann Galleries, stated) and part client services (helping consignors get rid of stuff, keeping them happy), and all about moving merchandise. Certainly, most collectors and dealers are aware that an artwork that is bought-in, or unsold, at auction is viewed as having a problem, such as being in poor condition or being of little interest among collectors. The lot, in auction parlance, is "burned," and may be more difficult to sell in the future. "There is a shadow on artworks that have been bought-in," Gene Shannon, president of Shannon's, said, "and a post-sale lessens the scarlet letter somewhat." Auctioneers themselves may agree to reduce their commission to help lower the object's cost, because "I'd rather make something than nothing," Richard Wright, president of the Chicago-based Wright Auction said, "and we need to recoup our costs."