Four distinct monetary figures can be associated with a single auction lot, and although they can appear in close proximity, each one means something different. An estimate is a projection of a potential price range; a reserve is a protected level below which a consignor will not accept a result; the opening bid marks the beginning of active live bidding; and the hammer price is the amount at which bidding ultimately closes. Confusing these terms can produce faulty bid preparation, unreliable catalog descriptions, and an unpleasant surprise at bill time. Differentiating these four numbers will make a catalog easier to read, as well as a mock auction easier to bid.
An estimate typically comes in two amounts, low and high, such as $300 to $500. An estimate does not promise a lot will sell in the range. It also does not mean the lot can be sold only at that range, for example, a consignor may not be willing to accept $250. An estimate is intended to help a bidder know where an auction house has placed a lot based on the available information. The outcome at auction may depend on the level of demand, condition, attribution, provenance, or competitive bidding. A lot can sell below the low estimate, sell above the high estimate, or remain unsold.
A reserve is a minimum price level that the consignor and auction house agree upon for a lot, if a lot has or allows a reserve at a specific auction. If bidding does not meet the reserve level, the auctioneer may not sell the lot and instead may choose to pass it. The reserve amount is not an additional estimate or sale target. An estimate indicates an expected price range; a reserve affects only the ability of the lot to sell. Since the rules vary from one auction to the next, prospective bidders must understand how their auction house works (by reading its terms) rather than assuming that every lot has a reserve, or that the reserve amount is provided.
An opening bid is the initial price at which the auctioneer invites the next competitive bid. An auctioneer may announce that price, a mobile bidding platform may enter it automatically, or it may be the result of prior absentee bidding placed before the live auction. The opening bid may or may not indicate where the reserve is located, nor where the hammer price is likely to be. For instance, a lot estimated at $500 to $700 may have an opening bid of $250. An opening bid of $250 does not necessarily indicate that a buyer will pay $250, because other bidding will occur and it may still be above where a lot could sell, while the reserve may still need to be met.
The hammer price is the bid amount accepted by the auctioneer when he or she sells the lot with the fall of the hammer. The hammer price is the outcome of bidding on the bid sheet, but it is not typically a buyer’s complete cost of purchasing. It may be necessary to add a buyer’s premium, tax, online bidding fee, shipping fee, credit card payment, or shipping fee, and sometimes collection fee. If a hammer price is $600 and a buyer’s premium is 25%, that amount results in a subtotal cost of $750 prior to any fees and other charges. That is the reason a bidder should think in terms of maximum buy price, not in terms of hammer price.
A way to explore these numbers, and to reinforce their meaning, is to list the estimate, reserve, opening bid, and hammer price, each in a separate column. Use one sample lot, and give each number a different value. Write a sentence describing the purpose or meaning of each number. Include a buyer’s premium and total cost. Create a second example in which bidding does not reach the reserve, then list each of these numbers in a second column and mark the lot as passed. A small table helps a reader connect the terms to catalogers, bidders, auctioneers, and auction clerks, and their respective actions.
Prior to entering a bid on a lot, real or simulated, ask what value the estimate, reserve, opening bid, and hammer price represent. Are these figures a guidance range, a minimum price at sale, a start for bidding, or a closing level? Afterward, review the terms of an auction to identify additional charges, such as buyer’s premiums. With those distinctions clear, a catalog is easier to read, a bid sheet is easier to read, and a maximum buy price is established.