For many collectors wine is a significant asset. Every auction house offers a slightly different approach to selling so the decision about where to sell must be considered carefully. Asking the right questions on the front end will help lead to a positive experience and an improved financial return for your cellar. Here are several key things to keep in mind during this process:
- Hammer vs. aggregate: When discussing a potential consignment or looking at historical auction data, it is important to know the difference between the hammer price and the aggregate price. The hammer price refers to the final price that is stated during an auction (i.e., going once, going twice, sold!). The aggregate price is the hammer price plus the buyer’s premium, which ranges from 19.5% to 22.0% in our business. Here, for example, both the hammer and the aggregate are listed. In press releases, however, the price listed is almost always the aggregate. Because the buyer’s premium percentage can vary, it is important to look at hammer data to get an apples-to-apples comparison. Evaluating hammer numbers will help you more accurately determine what you will net through a consignment.
- Percentage to low: This may be the most important question you ask when preparing to sell your wine. Percentage to low figures tell you what prices the auction house actually achieves, as opposed to the pre-sale estimated value. When speaking with my clients I always equate this to the real estate market: the listed price on a house is often very different than the actual selling price. A high estimate can look good on paper, but where does that auction house statistically hammer? Some houses come in close to the low estimate while others consistently hammer at the midpoint of their estimates. Let’s say house A estimates a wine will sell at $1,000-1,500 and its historical percentage to low is 125% (100% being the low estimate and 150% being the high estimate). Compare House A to House B, which estimates the wine will sell at $1,200-1,800 but its percentage to low is just 100%. The hammer for house A will be $1,250 while the hammer for house B would be $1,200. A higher estimate does not guarantee a higher hammer.
- Sell through rate: If a wine does not meet the mutually-agreed-upon reserve price, then it will “pass” and go unsold. Sell through rate is a measure that looks at the percentage of wines that sell at or above the reserve amount. If your wine goes to auction and does not sell, it creates a headache for you and delays your ability to recoup your investment. Ask each potential house the following questions: What is your sell through rate? What happens if my wine passes? Will it go into the next auction? Will I be charged a fee for passed lots? Will my wine be sold at set prices privately? Finding a house with a high sell through rate is advantageous as it reduces the headache of dealing with unsold lots. Additionally, it means the house has accurate estimates. Too many unsold lots mean the auction house has inflated estimates and/or does not have a broad and vibrant bidding base.
- Fees: Commission or “seller’s fee” is the percentage the auction house takes off the hammer price. But commission is not the only expense that an auction house may charge. Read through the contract carefully and ask if there are any “hidden fees” about which you should be aware. Who is covering the cost of insurance? Who is responsible for the shipping expense? Can the auction house remove wines for tasting without your consent? Are there inspection fees? An auction house might offer 0% commission but if they charge 1.5% off the hammer for insurance then the effect to the seller is the same as charging commission. Ultimately, the most important factor to the seller is the hammer price. Any fees associated with your consignment will be derived from that number. The best way to get a high return is to find an auction house that has data to support a history of strong hammer prices.
- Payouts: Not all consignors ask the question but it is important to know the terms of your contact. When will you receive your payment for auction or retail sales? Will you be paid in full or will you be paid in periodic installments? Again, wine is often a significant part of a collector’s financial portfolio; you need to know you are going to be paid promptly.
An auction house should have the numbers and data to back up its appraisals and the house should also take care of you. Find a house that will get you top dollar and treat you and your collection with the respect it deserves. It also never hurts to ask the auction house for a referral.
Additionally, there is plenty of public data available about House performance (company web sites, news articles, etc). Wine Spectator is also a great source for auction performance (information can be found here).
HDH is always willing to provide a complimentary appraisal for your wines. Email us at email@example.com with your list of wines or give us a call at 312.379.8712 to discuss any of the questions listed above in more detail.