The 25 Auction Terms Every Art Collector Needs to Know

For anyone new to collecting, auctions can be an enigmatic part of the market.

Auction houses are some of the art world’s most storied and recognizable institutions. With a history dating back to the 17th century, art auctions facilitate the sale of artworks through competitive bidding. Because their sales and results are public, they often play a significant role in illustrating art market trends.

The traditional image of an auction house—grand theaters of paddle waving and hammer raising—is still a common feature of the art world. But the eye-popping sales figures that often make headlines are not the full picture: Alongside these headline-grabbing sales, day auctions offer works at accessible price points, providing approachable entry points for new collectors.

Auctions take place both in person and online. Live auctions take place at an auction house such as Christie’s, Sotheby’s, or Phillips. Online auctions mirror this process digitally, with bids placed via platforms that allow anyone, anywhere, to take part. Many online auctions run concurrently with in-person events.

But auctions can often be intimidating to approach. Often populated with crowds of experienced collectors and advisors, in-person sales can present a bit of a learning curve once you’ve been handed your paddle and directed to the main event. One of the main reasons for this is the barrage of specialized terms used by auction houses, which can often cause confusion to the uninitiated, whether they are bidding in person or online.

Should you find yourself among the attendees at a major auction house or bidding online at home, you’ll need to know the basic lexicon to keep up with a fast-paced sale.

Here, we share 25 auction terms that every art collector needs to know before attending their first auction.

An appraisal is a formal evaluation of an artwork’s potential worth. An expert assesses the work based on factors like condition, authenticity, provenance, and market trends to reach a figure that represents its fair market value (see below). It can also be used to calculate an artwork’s insurance value and for issues such as estate planning.

Think of it like any valuable asset—a car, a diamond necklace, or a summer home. An owner of a painting might seek an appraisal to understand its value for insurance purposes, as well as set a sale price and ensure they have adequate coverage in case of loss or damage. If a collector wants to live with or sell their art, they often want to understand what’s at stake.

Plainly put, a bid is an offer of money for an item at an auction.

The bidding process begins when the auction house presents an artwork for sale, and participants signal their offers by placing bids. In person, this is indicated by raising a paddle. Online, it can be compared to placing a bid on eBay, except it’s done in real time and, often, in a fast-paced environment.

At in-person auctions, bidders can also participate without being physically present by placing an absentee bid, where they submit their maximum offer beforehand. There are also phone bids, where the collector instructs someone at the auction to bid on their behalf up to a specific limit.

Let’s say an artwork starts its bidding at $10 million. The auction kicks off with a bid in the book from an in-person bidder at $10.5 million. Then, a phone bid of $11 million shortly before a third absentee bid raises the price to $13 million. Each bid attempts to outmatch the others until the highest bid remains the only offer in play, marking the end of the bidding for that artwork.

When bidders remain silent, and no offers meet the minimum price, an artwork is bought in. This means that the piece does not sell.

This “reserve price” is the lowest price the seller is willing to accept for the lot. If a work is put up for auction with a reserve price of $50,000, for example, and the highest bidder only reaches $45,000, the lot would not be sold.

Winning bidders are often expected to pay a buyer’s premium. This fee is paid on top of the hammer price (see below) to the auction house for its services.

For example, if a painting sells for a hammer price of $10,000 and the buyer’s premium is set at 20%, the buyer will owe an additional $2,000 to the auction house, bringing the total payment to $12,000.

For every artwork an auction house offers for sale, it will catalog information about it to present to would-be bidders and browsers. This involves detailed descriptions of the artwork, its history, and other relevant notes of interest such as major exhibitions that it may have appeared in.

For example, an auction house would begin to catalog a painting by detailing its title dimensions, medium, date, and a brief description of its themes. It will also include its notable history and provenance (see below).

A commission agreement is a contract that details the financial arrangements between a seller and an auction house. This contract specifies the fees the seller agrees to pay upon the sale of the artwork.

A consignor (see below) might enter into an agreement to pay a 15% commission to the auction house if their artwork sells. This contract typically covers not only the commission rate but also other potential fees for services like storage, insurance, and cataloging. If a piece sells for $100,000, for instance, the consignor would owe the auction house $15,000 as a commission.

In short, the consignor is the person selling an artwork at auction. Rather than selling an artwork directly, a consignor is putting it into the care of a third party, usually an auction house. A collector might consign a painting from their private collection to an auction house, entrusting it to manage the sale and maximize the painting’s market value.

The condition report is a detailed report, often written by a specialist, that gives you the history and current status of the physical condition of the artwork.

The condition report should include any restorations and surface irregularities, so a new buyer can understand the artwork’s physical appearance and integrity.

In the art auction catalog, the designation line refers to a short description that identifies the person or entity selling the artwork (i.e. the consignor). This line appears at the top of each entry.

Often, consignors do not want to be named. For instance, an artwork sold by an anonymous American collector might read: “Property of a Distinguished American Collector.” This description can give some background for curious browsers without disclosing the owner’s full identity.

Before each auction, the auction house provides an estimate, which is an informed prediction of the value of an artwork. Usually presented as a range, this estimate is based on factors like the artist’s previous auction results, market history, the condition of the work, the provenance, and sales by comparable artists.

How lots perform against their estimates is one of the most closely watched parts of an auction.

Fair market value is what an item could realistically sell for in an open market, typically determined during an appraisal.

As well as taking into account factors such as provenance and significance, fair market value considers the current demand for an artist’s work in the market but taking into account factors such as auction results.

The last chance to bid before an item is sold is known as a fair warning. An auctioneer might call out “fair warning” before surveying the room. If no one in the crowd raises the current bid, the artwork in question will be sold to the highest bidder.

Flipping art is a practice that is not so different from other markets, such as real estate. It’s the practice of buying and reselling artwork for a profit, often within a short period of time, taking advantage of market demands.

For example, someone may purchase an artwork at auction only to “flip” it a few years later to capitalize on increased demand. Flipping is one of the most controversial practices in the art market and continues to be a topic of debate among commentators.

The gavel, the quintessential tool of the auctioneer, is a small hammer that helps conduct the auction. With a decisive strike of the gavel on the podium, the auctioneer “hammers” to signal the end of bidding, sealing the price of the work in question.

A guarantee in an auction setting ensures that an artwork sells for at least a pre-specified minimum price. This guarantee can be offered by the auction house itself, known as a “house guarantee,” or through a partnership with an external party such as a collector, gallery, art advisor, or investor, termed a “third-party guarantee.”

Guarantees have been a fixture of the art market’s top end for decades. For example, the notable Scull Collection sale at Sotheby’s in 1973 was secured with a house guarantee, ensuring the artworks would sell for a minimum agreed price.

The concept of a third-party guarantee was first prominently used in 1999 when Sotheby’s arranged for a backer to support the sale of a Pablo Picasso painting, guaranteeing a minimum price through external financing.

The highest bid once an auctioneer strikes the gavel on their podium is the hammer price. This sum is calculated without any fees imposed by the auction house.

In an auction, the lot refers to an item or group of items offered for sale as a single unit. One lot can consist of a set of sculptures or a single painting. Each lot is assigned a lot number, which serves as its identifier during the auction.

One of the most critical components of the value of a painting is its provenance. Provenance refers to the history and ownership record of an item, tracing it back to its origin

For instance, Titian’s infamous Rest on the Flight into Egypt (ca. 1508), which sold for £17.56 million ($22.17 million) at Christie’s London in July 2024, offers a prime example of a storied provenance. The painting, which was previously owned by dukes, archdukes, and Holy Roman Emperors, was stolen twice—first by Napoleon in 1809 and again in 1995 from the Longleat estate in Wiltshire. The painting was miraculously recovered in 2002 in London, found in a plastic bag without its frame.

The reserve, also known as the reserve price, is the lowest price that a seller will accept for an item.

If bidding fails to reach this threshold, the item is bought in (see above), meaning it does not sell and remains with the seller. Reserves are closely related to guarantees (see above): When an auction house or a third-party guarantee is in place, it means that the lot will sell for at least the reserve price.

Suppose a painting has a reserve set at $100,000. If the highest bid only reaches $90,000, the painting will be passed over—or bought in—because it did not meet the reserve price. This ensures the seller does not have to part with the artwork for a price that they deem less than acceptable.

The seller’s commission is the fee that a seller pays to the auction house as a percentage of the hammer price for the service of successfully selling their property. This commission is typically negotiable, especially for high-value lots, and does not include other sale-related expenses like photography and shipping.

For example, if a painting were to sell for $1 million at an auction and the commission rate agreed upon is 20%, then the seller would pay the auction house $200,000 as the commission fee. This percentage serves as compensation for the auction house’s efforts in marketing, presenting, and facilitating the sale of the artwork.

A sell-through rate is the percentage of lots from an auction that are sold. For instance, if 90 lots from a 100-lot auction are sold, the sell-through rate would be 90%.

Sell-through rates can serve as indicators of demand for a given part of the art market. They can also reveal trends, such as fluctuations in buyer interest. However, this can only tell part of the story. If an evening sale has a 100% sell-through rate, for example, one might think the sale was a success—when in reality, the works might have all sold for below their low estimates.

The underbidder is the second-highest bidder for a lot in an auction.

Picture this: You bid $500,000 on a work, feeling confident, only for someone else to swoop in with a $600,000 bid that you do not match. You are then the last bidder to drop out of the sale, becoming the underbidder.

Valuation is an assessment of a lot’s value, often prepared by the staff at an auction house. Conducted by an expert, valuations differ from appraisals in that they are used for different purposes, such as insurance planning, or collateral loans. Unlike appraisals, they are not used to calculate auction estimates.

A white glove sale is an auction house’s dream scenario. This term—which refers to the white gloves worn by auction staff to handle artworks—is granted to a sale where every single item on the block finds a buyer. In November 2023, for example, Sotheby’s sold all 31 lots in its M. Fisher Landau sale, including works by Agnes Martin, Mark Tansey, and Picasso.