There is a new tool around to make it more visible what it actually costs to buy art in auction houses, and the tool is free for anyone to use.
Auctiolator, which is a mix of the words auction and calculator, does what it promises. It helps you crunch a few numbers.
When you buy a work of art at an auction house, your highest winning bid, i.e. the hammer price, is only part of the cost. There is buyer’s premium, VAT, and Artist Resale Right to pay on top of your highest bid.
With auctiolator, auction goers know exactly what they are going to pay. Auction houses, on the other hand, benefit from buyers reaching more informed buying decisions which are not over-cautious out of fear of bidding and paying too much.
Getting to grips with the auction fees
Charging additional fees on top of the hammer price is standard practice across the industry.
It is by no means a clever way of hiding costs from you. No simply it comes down to two reasons:
1 it is easier that way, and
2 it is a long held tradition.
It is easier to understand a fee like buyer’s premium when you consider that the auctioneer performs the role of being the agent for the consignor. The cost of the auction house staff + VAT is being passed on to you, the buyer in the form of a buyer’s premium.
Buyer’s premium is a tradition that dates all the way back to Roman auctions during the reign of emperor Augustus. While you can change any tradition, however old, some things are just best left untouched.
Are you a math genius or a guesser?
As an auction goer, you soon develop some sort of rule of thumb that adds a fraction like a 1/5 or a 1/4 to the hammer price. That is tactical pragmatism during any fast-paced auction. But that way you can only make fairly imprecise estimations on the fly.
To reach a higher level of accuracy you either have to be a Nobel Prize winner in applied mathematics or you need to do be quite nimble with a conventional calculator in the heat of the moment. E.g. you would need to do several calculations of this ilk:
I bid £220,560 so for the first £50,000 I pay 24% extra on top of the hammer price, for the next 50,001 to 200000 i pay 20%, and then the remaining 20,560 there’s 12% to pay. Then there’s VAT on the total from the three previous price bands. If you think the work is done, then think again because the work qualifies for artist resale right which again is in more than one price band though this fee is VAT-exempt. By the time you’ve worked out the total cost, the bidding has already increased with several increments 110% of the previous bid.
That is not an ideal scenario if you are bidding against someone who wants a work of art as badly as you.
If you entered the auction with a budget in mind, you could be over-cautious and stop bidding well before you ought to, and if you throw caution to the wind, you end up over-extending yourself with dire consequences.
Armed with more accurate calculations, you can go right to the limit of what you can afford which ought to increase your chances of winning the bidding process.
To this end, Xamou Ltd has produced the auctiolator, which allows you to work out what an auction lot ends up costing you.