How do you buy at a luxury auction?

You buy at a luxury auction by registering with the house before the sale, reading the catalogue entry and the condition report for the lot you want, fixing a maximum bid worked backwards from your all-in budget, bidding in the room, by telephone, online or through a written absentee bid, and then paying and collecting within the deadlines in the conditions of sale. The decision is made before the sale, not during it: once the hammer falls on your bid you have bought the lot, at that price, as it stands.

There is no negotiation after the event and, in most places, no cooling-off period. This article follows the buyer's process in order. Conditions of sale differ from one house to the next and the law differs by country; where a legal rule is stated, its jurisdiction is named, and all of it is general information, not legal or tax advice.

What are the steps of buying at auction, in order?

Buying at auction takes seven steps, and five of them happen before the sale starts: register, read the catalogue entry, examine the lot, set a limit, choose a way to bid, then bid, then pay and collect. A buyer who starts at step six has skipped everything that protects them.

How do you register to bid, and what will the house ask for?

To register to bid you open an account with the auction house, prove who you are, and agree to the conditions of sale; for expensive lots the house may also ask for a bank reference, proof of funds or a deposit before it gives you a paddle. Registering is also the moment you accept the contract terms that bind you if you win.

Identity comes first. An individual is asked for a government-issued photo identity document and proof of address; a company or a trust is asked for its formation documents and for the people who own or control it. An adviser bidding for a client will be asked who the client is. In the United Kingdom this is a legal duty and not a preference: according to HM Revenue and Customs, a business that trades in works of art or acts as an intermediary in their sale must register as an art market participant when a transaction, or a series of linked transactions, reaches 10,000 euros, and must apply anti-money-laundering controls to it.

Financial standing comes second. A first-time bidder, or a client bidding well above their past purchases, may be asked for a bank reference, a recent statement or a deposit. The most valuable lots often require a special registration with a deposit paid in advance. A deposit is returned if you do not buy, and set against the invoice if you do. Ask the amount, the date it must arrive in cleared funds, and how long a refund takes.

Register early: checks on a company structure can take several working days, a deposit has to arrive in cleared funds before the sale, and a registration still pending when the lot comes up means you do not bid.

How do you read a catalogue entry?

A catalogue entry gives five things: the description and attribution, the estimate, the provenance and literature, the condition where it is stated, and the symbols next to the lot number, which point to facts about tax, guarantees and ownership. Each is written in a house vocabulary explained in the notes at the back of the catalogue.

The estimate is a range, low and high, within which the specialists expect the hammer price to fall. It is an opinion, not a price and not a valuation for insurance. It is stated without the buyer's premium and without tax. The reserve, the confidential minimum below which the lot will not be sold, is not printed; conditions of sale commonly state that it will not exceed the low estimate.

The attribution is where a single word changes the price. For pictures in particular, houses use a ladder of phrases that runs from full confidence to none. The wording below is the convention in general use; each house prints its own definitions, and those are the ones that bind it.

The same care applies outside pictures. "Signed" and "bears a signature" are different statements, the second declining to say who wrote it. In a watch entry, look for what is said about the originality of the dial, hands, movement and case; in jewellery, whether a stone's description rests on a laboratory report. Silence on a point a specialist would normally mention is a reason to ask.

Symbols next to the lot number usually signal that the house has guaranteed a minimum price to the seller, that a third party has committed in advance to bid and stands to be paid if someone else buys the lot, that the house owns the lot in whole or in part, that the lot is sold without reserve, that it carries a particular tax treatment or a resale royalty, or that it contains protected-species material. A guarantee or an ownership interest does not make a lot a bad purchase; it tells you that someone other than the seller has money riding on the result, and that the party who committed in advance may be bidding against you. Read the key for every sale, because the marks are not standard between houses.

What do the condition report and the viewing tell you?

The condition report is the house's written description of a lot's physical state, supplied on request, and the viewing is your chance to test that description against the object. Lots are sold as they are, and conditions of sale normally say the report is an opinion given for guidance, not a warranty.

Ask for the report on every lot you are serious about, in writing, and keep it. A useful report states what has been restored, replaced, relined, repolished, repainted or repaired, and what has not been examined: a picture not taken out of its frame, a watch whose case was not opened, a car that was not driven. If the report is thin, ask specific questions and for more photographs; a written answer becomes part of your file.

Then view the lot during the public viewing days before the sale. For a purchase of any size, bring or send an independent professional: a conservator for a picture, a watchmaker for a watch, a gemmologist for a stone, a marque specialist for a car. The cost of that visit belongs in your budget as a fixed cost whether or not you end up buying.

Check the saleroom notices as well. Corrections made after the catalogue was printed, such as a changed attribution or a newly found repair, are posted in the room and online and announced by the auctioneer before the lot is offered. The announcement overrides the printed entry, and a bidder who was not listening is still bound by it.

How do you set your maximum bid from an all-in budget?

You set a maximum bid by starting from the total you are prepared to spend, removing the fixed costs, dividing out the tax and the buyer's premium, and rounding the result down to the nearest bid the auctioneer can call. The number you carry into the sale is a hammer price, well below your budget.

The buyer's premium is the percentage the house adds to the hammer price, usually on a sliding scale that falls as the price rises, and tax is commonly charged on the hammer price and the premium together. Take the rates from the conditions of the sale in question. The worked example uses illustrative figures: an all-in budget of $150,000, a flat premium of 25%, tax of 7% on hammer price plus premium, and fixed costs of $2,500, made up of $1,600 for shipping, $400 for transit insurance and $500 for the independent examination before the sale.

Take the fixed costs off the budget: $147,500 remains. Divide by 1.07 to remove the tax: $137,850.47. Divide by 1.25 to remove the premium: $110,280.37. That is the highest hammer price the budget can carry. Assume the auctioneer is moving in steps of $10,000 at this level, so the bids that can actually be called around it are $100,000, $110,000 and $120,000.

The limit is $110,000. Every hammer dollar costs this buyer $1.3375, which is 1.25 multiplied by 1.07, so one more step of $10,000 adds $13,375 to the bill, not $10,000. When the bidding stands at your limit, "one more" is a decision to go $13,000 over budget.

What are the ways to bid, and how do they differ?

There are four ways to bid at a luxury auction: in the room with a paddle, by telephone through a member of the house's staff, online through the house's live bidding platform, and by absentee bid, a written maximum left with the house before the sale. All four are equally binding; they differ in how much you see, how fast you can react and what can go wrong.

An absentee bid is executed as cheaply as the other bidding and the reserve allow. It is not a commitment to pay your maximum. In the worked example, leave a limit of $110,000 and suppose the last competing bid in the room is $90,000 in a part of the scale where steps are $5,000: you buy at $95,000, and your all-in total is $129,562.50, not $149,625. If two absentee bids are left at the same amount, conditions of sale generally give priority to the one received first, which is a reason to submit early.

How do bidding increments work?

Bidding increments are the steps by which the auctioneer raises the price, set out in a table in the conditions of sale and varied at the auctioneer's discretion. They decide which amounts can be bid at all.

The steps widen as the price rises. When bidding slows, the auctioneer may accept a split bid, half the usual step, or refuse one. An absentee bid left at an amount that falls between two steps is normally rounded down to the step below.

Increments also create the problem of footing. Bids alternate between you and your competitor, so only every second step is yours. If your limit is $110,000 and steps are $10,000, you can bid $110,000 only if the bid at $100,000 is your competitor's; if the $100,000 bid is yours, they bid $110,000 and your next opportunity is $120,000, above your limit. Some bidders authorise "plus one", a single extra increment to break that kind of tie. Do the arithmetic first: in the worked example it turns a $149,625 purchase into a $163,000 one.

Before the reserve is reached, the auctioneer may place bids on the seller's behalf as far as the conditions of sale and local law permit. In the United Kingdom, the Sale of Goods Act 1979 allows the seller or one person on the seller's behalf to bid only where that right has been expressly reserved, which is why conditions of sale state it.

What does the fall of the hammer commit you to?

The fall of the hammer commits the highest bidder to buy the lot at the hammer price, plus the premium, taxes and charges set out in the conditions of sale, with no right to reconsider. In the United Kingdom, the Sale of Goods Act 1979 states that a sale by auction is complete when the auctioneer announces its completion by the fall of the hammer or in another customary manner, and that until then any bidder may retract a bid.

A bid is an offer, and the hammer is its acceptance. After it, you are the buyer on the conditions you accepted at registration. The same Act treats each lot as the subject of a separate contract, so three lots won are three purchases.

What you have bought is the lot as described in the catalogue, as corrected by any saleroom notice or announcement, in the condition it is in. A fault you would have found at the viewing is not a ground to cancel, and neither is a total higher than you expected. The matters that can undo a sale are narrow, chiefly the house's authenticity warranty and a misdescription serious enough to count under the governing law. If there is a dispute about who bid last, the conditions let the auctioneer reopen the bidding at once, in the room.

Can you cancel an auction purchase in the United Kingdom?

In the United Kingdom, a purchase made at a public auction cannot be cancelled under the consumer cooling-off rules, even when the buyer bid by telephone or online. The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 give a consumer 14 days to cancel most distance contracts, but the part of the Regulations that creates that right does not apply to contracts concluded at a public auction.

The exclusion turns on a definition. The Regulations define a public auction as a method of sale in which a trader offers goods to consumers through a transparent, competitive bidding procedure run by an auctioneer, which consumers attend or are given the possibility to attend in person, and in which the successful bidder is bound to purchase. A sale with a saleroom open to the public meets that definition, and a consumer following it on a screen is still bidding at a public auction.

A sale that nobody can attend in person is a different matter. The definition comes from the European Union's Consumer Rights Directive, whose recitals say that a public auction implies the possibility to attend in person and that the use of online platforms for auction purposes should not be considered a public auction. An online-only timed sale run by a trader may therefore carry a cancellation right for a consumer buyer, subject to the Regulations' other exceptions.

A second United Kingdom rule concerns used goods. Under the Consumer Rights Act 2015, a person buying second-hand goods at a public auction that individuals have the opportunity to attend in person is not treated as a consumer for most of the Act's rules on goods, which include the statutory standards of quality and description. The Act keeps a small number of protections in place, on delivery and the passing of risk among them. In practice the buyer's remedies are those written into the conditions of sale, which also name the law that governs it.

What happens after you win: payment, collection and storage?

After you win, the house sends an invoice, and you have a fixed number of days to pay in cleared funds, then a further fixed period to remove the lot before storage is charged. Ownership normally passes only when the house has been paid in full, while the risk of loss or damage can pass to you earlier, on a date the conditions name.

The invoice shows the hammer price, the buyer's premium, the tax due on each, and any resale royalty or other charge marked against the lot; delivery and insurance come on top. The house expects payment from the registered buyer, in the currency of the sale, and may cap card payments. Have the funds and your bank's approval for a large transfer in place beforehand.

Collection has its own clock. A lot stays with the house free of charge for a short period, after which the conditions allow a move to a third-party store, a handling fee and a daily or weekly storage rate. These charges accrue per lot, and a shipper collecting for you needs your written authorisation.

Insurance should start when risk passes, not when the lot arrives. Give your insurer the lot description and the date in the conditions before the sale. If you cannot pay or collect on time, tell the house before the deadline. Conditions of sale give the house strong remedies against a buyer in default, including interest, cancellation, resale at the buyer's expense and a refusal of future bids.

What do you need to export the lot?

To take a lot out of the country where it was sold, you may need an export licence for cultural property, a permit for protected-species material, and customs declarations at both ends, and obtaining them is the buyer's responsibility unless the house agrees otherwise. Conditions of sale almost always add that a refused or delayed licence does not cancel the sale or extend the payment deadline.

Three checks belong before the bid, not after it. First, cultural property: many countries require a licence to export objects above a certain age or value. In the United Kingdom, the government's guidance states that a licence is needed to export objects of cultural interest from Great Britain to any destination outside the United Kingdom, under a system administered by Arts Council England. Second, protected species: materials such as ivory, tortoiseshell and certain woods are controlled under the international convention on trade in endangered species and under national laws that can be stricter, and a lot carrying the relevant symbol may not be movable to your country at all. Third, import: your own country may charge duty or import tax on arrival, and that cost belongs in the budget behind your limit.

What does the auction house's authenticity warranty cover?

An auction house's authenticity warranty is a contractual promise that, if a lot proves within a stated period not to be what its catalogue heading said it was, the house will cancel the sale and refund the price paid. It is the buyer's main remedy after the hammer, and it is narrower than its name suggests.

Read four limits in the conditions before you rely on it. The first is what is warranted: usually only the heading of the entry, often the text printed in bold or capitals, and only to the extent it is unqualified. A work catalogued as "attributed to" or "circle of" is sold as exactly that. The second is who is protected: generally the original buyer named on the invoice, while they still own the lot, and not a later purchaser. The third is time: a fixed number of years counted from the sale date, with a duty to notify the house promptly once you have grounds for doubt. The fourth is proof and remedy: the house can ask for written opinions from recognised experts at your cost, the lot must be returned in the condition in which it was sold, and the refund is the purchase price, without compensation for lost value, interest or expenses.

The warranty also generally excludes cases where the description matched the accepted opinion of scholars at the date of the sale, or where the problem could only have been found by a method that was unavailable then or would have damaged the object.

The unqualified name in the heading is what the house stands behind; the rest of the entry is yours to verify before bidding. Keep the catalogue, the saleroom notices, the condition report and the paid invoice for as long as you own the piece, because the next buyer or insurer will ask for them.