Why Auction Prices Aren’t the Whole Story: A Closer Look at Art Market Value
When people think about the art market, auction houses often dominate the imagination. Headlines proclaim record-breaking sales. Videos of bidding wars circulate widely. And databases like Artnet and AskART make auction results one of the most visible forms of pricing information available to collectors, advisors, and the public. But while auction data is often the easiest to access, it is not always the most relevant or reliable when determining the value of a specific work of art.
In practice, the art market is multifaceted. Appraisers, dealers, collectors, and fiduciaries all engage with several different types of market activity, including retail sales through galleries, private sales, artist studio placements, institutional acquisitions, and yes, auctions. Understanding when and how each of these markets comes into play is essential to forming a credible opinion of value.
This post explores the limitations of auction data, the strengths of private and dealer sales, and how a qualified appraiser determines the most appropriate marketplace when conducting a valuation.
The Auction Market: Public, But Incomplete
Auction sales are public by design. Catalogs are published in advance, bidding occurs at a scheduled time, and results are made available shortly after a sale concludes. This level of transparency offers several advantages. For appraisers, auctions provide concrete figures that can serve as comparables in certain valuation assignments. For collectors, they offer a window into market behavior and demand.
That said, auction data must be interpreted with care.
Not everything goes to auction. Auction houses tend to be selective. Only works expected to perform well or that fill a gap in a curated sale are accepted. As a result, the auction market doesn’t reflect the full range of an artist’s work or the diversity of demand.
Results can be distorted by circumstance. Many factors influence how a work performs at auction: the estimate range, the lot's placement in the sale, the promotional effort behind it, the time of year, competing sales, and collector sentiment at the time. A strong piece with minimal exposure may sell for less than expected, while a more modest work with the right conditions could exceed estimates.
Not all results are relevant. For certain artists, the auction market is thin, and available sales may be outdated, atypical, or not truly comparable. Using auction data in these cases can result in skewed valuations.
There is often more behind the scenes. Some works are withdrawn before the sale. Others sell privately after failing to meet their reserve. Increasingly, auction houses broker private sales outside of the auction room altogether. These transactions are not always published or included in sales databases, further limiting the usefulness of public records.
The Role of Private, Dealer, and Studio Sales
Many works of art, especially those by mid-career or established contemporary artists, are more commonly sold through galleries or private dealers. These transactions are often discreet and do not appear in publicly accessible databases. However, they tend to provide stronger insight into an artist’s real market trajectory.
Dealer relationships influence placement. Galleries work closely with collectors, curators, and estates. They may place important works with institutions or key clients, often bypassing the public market entirely. These sales are not speculative. They are carefully negotiated and supported by deep knowledge of the artist’s career and collector base.
Price control and stability. Unlike auctions, which introduce uncertainty and allow prices to fall below expectation, dealers have more control over pricing. This is especially important when maintaining an artist’s market over time. Galleries typically establish and enforce pricing tiers to reflect career milestones, scarcity, and demand.
Primary vs. secondary market dynamics. For living artists, the primary market, or rather first sales made directly through the studio or representing gallery, can be the most accurate representation of current value. The secondary market (sales occurring after the first sale of the work) may occur through private dealers, but often follows patterns shaped by the artist’s gallery representation.
Documentation and provenance. Dealer sales often include condition reports, artist correspondence, and provenance records, all of which support long-term value. This kind of transactional history is sometimes missing from auction purchases.
Appraising Art: Selecting the Right Market
In valuation practice, the appraiser must identify the appropriate market based on how and where similar works are most commonly sold to the public. This is a critical requirement under IRS and USPAP standards when determining fair market value.
For certain categories of property, auction sales may be most common, especially in cases where artists are no longer represented or where there is no active gallery presence. However, for many artists, especially contemporary ones, retail sales through galleries or private dealers represent the dominant market.
Appraisers consider several factors when determining market selection:
Frequency of comparable sales. Are there recent sales of similar works? If so, in which venues are they taking place?
Consistency of pricing. Are prices more stable through dealers or through auction? Are there large fluctuations?
Accessibility to the public. Would a typical collector or interested party be more likely to acquire a similar work at auction or through a gallery?
Intended use of the appraisal. For insurance, the relevant market is replacement, usually retail. For estate or donation purposes, it is fair market value, often private sales or auction, depending on availability.
Common Pitfalls in Relying on Auction Data
While auction prices can be helpful for context, there are several ways they can mislead:
1. Using the high hammer price as a baseline. Outlier results should not be used as a benchmark. Just because a single work sold for an exceptionally high figure does not mean others will perform similarly.
2. Overlooking premiums and commissions. Auction data may be reported as a hammer price, not the final amount paid by the buyer. The buyer’s premium can range from 20 percent to 30 percent, significantly altering the total value exchanged. For the seller, commissions and fees reduce net proceeds.
3. Misidentifying comparables. A work of a similar medium or size may not be truly comparable if it differs in date, subject matter, condition, or provenance. This is especially true when artists have wide-ranging bodies of work.
4. Ignoring the silent majority. The majority of the art market is not visible. Works sold privately, placed with institutions, or handled within estates often go undocumented. Assuming auction results reflect the entire picture leads to an incomplete analysis.
Why This Matters for Collectors and Fiduciaries
If you are managing an estate, preparing a charitable donation, insuring a collection, or considering a sale, understanding how the art market actually functions is critical. Auction houses may generate attention, but they do not necessarily define value.
Qualified appraisers take a holistic view. They consult multiple sources, verify private sales when possible, and weigh the relative strength of different market venues. This ensures that valuation conclusions are not only defensible but also appropriate for the intended use of the appraisal.
Final Thoughts
Art markets are complex, and no single transaction—public or private—tells the full story. Auction data plays an important role, but it should be treated as one data point among many. Dealer sales, studio placements, and private transactions often offer stronger signals of demand and value, especially for works by actively collected or institutionally supported artists.
A credible appraisal is not built on visibility alone. It requires careful judgment, market knowledge, and a deep understanding of how artworks are actually bought and sold. For collectors, fiduciaries, and professionals, recognizing the limits of auction data is essential to making informed, responsible decisions.
