Evaluating Art Auction Results Pt. 5 – artmarketblog.com

Evaluating Art Auction Results Pt. 5 – artmarketblog.com

2. Percentage of lots sold by value continued

In part four of this series I looked at the second of two methods that auction houses use to calculate the percentage of lots sold by value. As I mentioned in part 4, the method of calculating the percentage of lost sold by value using the knockdown figure as the denominator in the equation is the most popular method but it too has it’s fair share of problems. The figure resulting from the knockdown method doesn’t really tell us that much about the success of the auction and what it does tell us is really of no use to anyone. By using the knockdown figure as an indication of the value of the works of art being auctioned as opposed to the estimate, the auction house is effectively reducing the chances of ending up with a low % sold by value figure even if every work is sold. Let me explain. If you use the estimate as an indication of the value of an artwork (estimate method) then the difference between the hammer price and the estimate could be quite significant which would result in a low % sold by value figure. Let’s say that you sold every single work in the auction but all the works sold for half their estimate. The % sold by value figure would be 50%. However, if you use the knockdown figure as an indication of the value of the works of art in the auction then because every work sold the % sold by value figure for the same auction would be 100%. Can you see the problem.

As I explained in part 4 of this series the knockdown figure is calculated by adding:

1. the hammer price of works that are sold
2. the highest bid for works that receive bids but are passed in
3. the lowest figure reached by the auctioneer before passing in a work that did not receive any bids

Because the hammer price is used as an indication of value for every work sold at the auction a 100% sold by lot rate will automatically result in a 100% sold by value rate regardless of how much the works sold for. Also, because each work of art in the auction is assigned a value regardless of whether it is sold or not the % sold by value figure is going to be considerably higher using the knockdown method for what one would consider to be a poor auction result than if calculated using the estimate method. eg:

hammer price/estimate

5000/8000
6000/9000
8000/13000
3000/5000
9000/15000
0 (unsold)/3000 (passed in)
0 (unsold)/7000 (passed in)
0 (unsold)/6000 (passed in)
0 (unsold)/8000 (passed in)
0 (unsold)/2000 (passed in)

total 31,000/estimate 76,000

Let’s say an auction has ten lots (as above), five of which are sold for a total of $31,000 against a total auction estimate of $76,000. The % sold by value figure would be 41% using the estimate method which would seem fair considering that only half the lots sold and those that did sell were sold for much less than the estimate. Now, calculating the % sold by value figure for the same auction would require that the estimate figures used in the estimate method be replaced with either the hammer price, the highest bid if the work was passed in or the lowest figure reached by the auctioneer for works that receive no bids at all. When these numbers are added in the results look like:

5000/5000
6000/6000
8000/8000
3000/3000
9000/9000
0/2000 (passed in)
0/5000 (passed in)
0/4000 (passed in)
0/6000 (passed in)
0/1000 (passed in)

total 31,000/knockdown 49,000

As you can see, by giving the unsold lots a value the percentage of lots sold by value would increase to 63% using the knockdown method which is considerably better than the 41% resulting from the estimate method. The benefits for the auction house of using the knockdown method as opposed to the estimate method are considerable but the knockdown method doesn’t really tell us as much about the auction as the estimate method does. The % sold by value figure calculated using the estimate method tells us whether the auction house was able to meet it’s own expectations and the expectations of the market whereas the % sold by value figure calculated using the knockdown method doesn’t really tell us much at all. Seriously !!. For an auction where all lots sell the knockdown method compares the sale price with the sale price. With an auction where not all lots sell the knockdown method compares the price people paid for the works that did sell with the price people paid for the works that did sell plus the supposed value (according to the auction house) of those that didn’t sell.

The one downside to using the knockdown method as opposed to the estimate method is that the % sold by lot figure can experience a significant increase from an exceptionally high price realised for a particular lot. If, say, a painting sold by $5 million dollars against an estimate of $1 -$2 million then the sold by value percentage for that particular lot would be 333% if calculated using the estimate method whereas it would only be 100% if calculated using the knockdown method.

In conclusion, I believe that using the:

1. the hammer price of works that are sold
2. the highest bid for works that receive bids but are passed in
3. the lowest figure reached by the auctioneer before passing in a work that did not receive any bids

as representative of the value of a work of art is misleading, deceiving and just plain silly.  I don’t believe that the highest bid received for works that are passed in is indicative of an artwork’s value.  I also have a problem with the use of the lowest figure reached by the auctioneer before passing in a work that did not receive any bids as an indicator of value because no-one knows how low the auctioneer would have had to go before a bid was made. The auctioneer is not going to go too low because the auction house doesn’t want to sell the work for too low a price. The lowest figure reached by the auctioneer before passing in a work that did not receive any bids is therefore not indicative of value if one is using the same philosophy as applied to the lots that did sell and the lots that received bids. In a nutshell the figure doesn’t really tell us the percentage of lots sold by value and it doesn’t really tell us anything about the success of the auction either.

See previous posts in this series here:

Evaluating Art Auction Results Pt. 4 – artmarketblog.com
http://artmarketblog.com/2009/03/04/evaluating-art-auction-results-pt-4-artmarketblogcom/

Evaluating Art Auction Results Pt. 3 – artmarketblog.com
http://artmarketblog.com/2009/02/27/evaluating-art-auction-results-pt-3-artmarketblogcom/

Evaluating Art Auction Results Pt. 2 – artmarketblog.com
http://artmarketblog.com/2009/02/19/evaluating-art-auction-results-pt-2-artmarketblogcom/

Evaluating Art Auction Results Pt. 1 – artmarketblog.com
http://artmarketblog.com/2009/02/12/evaluating-art-auction-results-pt-1-artmarketblogcom/

**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of http://www.artmarketblog.com, writes the art column for the magazine Antiques and Collectibles for Pleasure and Profit and contributes to many other publications.

Dissecting Christie’s Feb 09 Art Auction Pt. 2 – artmarketblog.com

Dissecting Christie’s Feb 09 Art Auction Pt. 2 – artmarketblog.com

A few weeks ago I posted the first half of the results from the Christie’s February 2009 Impressionist and Modern Art auction along with information relating to whether each lot had been sold at auction previously and if it had, when it was sold and how much it sold for. My purpose for doing this is to show that there is always far more to art auction results than the statistics provided by the auction houses will tell you. Just because an auction results in a high hammer total, high percentage of lots sold by value and a high percentage of lost sold by number doesn’t mean that the auction was a complete success. The statistics that the auction houses provides could be masking the fact that a majority of the works sold in the auction had been sold at auction before for a higher amount meaning that the people selling these works were selling at a loss. Although the purpose of the auction house is to sell works of art and not to ensure people make a profit on the works they are selling; the factors that may be beyond the control of the auction house, such as whether a person makes a profit or not, should still be used as a measure of the success of an auction. In the next post in this series I will look at the data I have provided in this and the previous post and provide an analysis of the data.

See part 1 of Dissecting Christie’s Feb 09 Art Auction here:

http://artmarketblog.com/2009/02/17/dissecting-christies-feb-09-art-auction-pt-1-artmarketblogcom/

Continuation of data relating to lots sold at the Christie’s February 09 Impressionist and Modern Art auction:

-Otto Mueller (1874-1930) Sitzender Akt in Landschaft, c.1927: Sold for £769,250 ($1,106,182) against an estimate of £650,000 – £850,000 ($926,250 – $1,211,250). No previous auction sale history

-Gustav Klimt (1862-1918) Dame en face mit plisiertem Kleid (Damenbildnis en face) , c. 1898: Sold for £1,385,250 ($1,991,990) against an estimate of £600,000 – £800,000 ($855,000 – $1,140,000). Previously sold by Christie’s on the 9th of November 2004 for USD$1,000,000 (GBP 524,700) against an estimate of USD$750,000 – 950,000 which represents an increase in price of $991,990

-Marino Marini (1901-1980) Gentiluomo a cavallo, c. 1937: Sold for £769,250 ($1,106,182) against an estimate of £700,000 – £1,000,000 ($997,500 – $1,425,000). No previous auction sale history

-Ossip Zadkine (1890-1967) Torse de femme, c. 1925: Sold for £421,250 ($605,758) against an estimate of £300,000 – £500,000 ($427,500 – $712,500). No previous auction sale history

-Marc Chagall (1887-1985) Les mariés aux deux bouquets, c. 1980: Sold for £541,250 ($778,318) against an estimate of £400,000 – £600,000 ($570,000 – $855,000). No previous auction sale history

-Pablo Picasso (1881-1973) Buste d’homme, 1971: Sold for £1,497,250 ($2,153,046) against an estimate of £1,200,000 – £1,800,000 ($1,710,000 – $2,565,000). No previous auction sale history

-Max Ernst (1891-1976) Temptation of St. Anthony, 1945: Sold for £97,250 ($139,846) against an estimate of £100,000 – £150,000 ($142,500 – $213,750). No previous auction sale history

-Julio González (1876-1942) Le rêve (Le baiser) 4/6, c. 1934: Sold for £577,250 ($830,086) against an estimate of £400,000 – £600,000 ($570,000 – $855,000). Number 5 of the edition of 6 was sold by Christie’s in 2002 for GBP 220,000 against an estimate of GBP 250,000 – 350,000 which represents a theoretical increase in value of GBP 377,000.

-André Masson (1896-1987) Le météore, 1939: Sold for £169,250 ($243,382) against an estimate of £120,000 – £180,000 ($171,000 – $256,500). No previous auction sale history.

-Joan Miró (1893-1983) Femme entendant chanter le coq aux éclats violets, 1972: Sold for £892,450 ($1,283,343) against an estimate of £500,000 – £700,000 ($712,500 – $997,500). No previous auction sale history.

-Paul Delvaux (1897-1994) Faubourg, 1956: Sold for £277,250 ($398,686) against an estimate of £200,000 – £300,000 ($285,000 – $427,500). Previously sold by Sotheby’s in 1975 – price unknown

-Francis Picabia (1879-1953) Geminis, 1936: Sold for £385,250 ($553,990) against an estimate of £120,000 – £180,000 ($171,000 – $256,500). Previously offered for sale at Christie’s Paris in May 2008 but failed to on an estimate of EUR 250,000 – 350,000. Previously sold by Sotheby’s in 1975 – price unknown.

-Joan Miró (1893-1983) Personnage, 1976: Sold for £481,250 ($692,038) against an estimate of £280,000 – £380,000 ($399,000 – $541,500). Previously sold by Sotheby’s in February 2004 for GBP 172,000 against an estimate of GBP 150,000 – 200,000 which represents an increase in price of GBP 309,000.

To be continued…..

**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of http://www.artmarketblog.com, writes the art column for the magazine Antiques and Collectibles for Pleasure and Profit and contributes to many other publications.