Auction houses work as agents for the seller: you consign an item under a written contract, the house markets and sells it through competitive bidding, and it takes a cut from both sides of the deal. Sellers pay a negotiated commission on the hammer price; buyers pay a “buyer’s premium” added on top of their winning bid. The sale becomes a binding contract the instant the auctioneer announces it, usually with the fall of the hammer, and the Uniform Commercial Code sets the ground rules that govern what happens before and after that moment.
Consigning an Item
The process starts with an evaluation. You bring the house detailed photographs from multiple angles, any certificates of authenticity, and records of past ownership. That ownership trail, called provenance, matters for two reasons: it supports the value the house assigns, and it confirms you actually have clear legal title to sell. From there, the house prepares an estimated price range based on comparable past sales.
If you move forward, you sign a consignment contract. It sets out the item’s description, your warranty that you own it, the commission rate, and the reserve price, which is the confidential minimum below which the item will not sell. Vague or incomplete descriptions are the source of most later disputes over identity or condition, so accuracy here is worth the extra time.
Most consignment contracts include a withdrawal penalty if you pull the item after signing. These commonly run from a flat charge up to 15 percent of the item’s estimated value. Houses may also bill separately for professional photography, insurance, catalog placement, and marketing, and those charges are typically disclosed at consignment.1Christie’s. Understanding Auction Fees
Guarantees on High-Value Lots
For expensive lots, some houses offer the seller a guarantee: a contractual promise that the item will sell for at least a specified minimum. If bidding falls short, the house itself, or a third-party guarantor who has placed an irrevocable bid, buys the work at the guaranteed price. Guarantees reduce the seller’s risk, but they can also cool the room, because bidders may hesitate when they believe a work has effectively been pre-sold. Third-party guarantors holding irrevocable bids may also keep bidding live during the sale.
What the House Charges
Auction houses earn on both sides. Sellers pay a commission, negotiated during consignment, as a percentage of the hammer price. Rates vary by expected value and category, and higher-value lots usually get lower percentage rates.
Buyers pay the buyer’s premium, calculated as a percentage of the hammer price and added on top of the winning bid. At the major houses, the premium follows a tiered structure that decreases at higher thresholds. As of late 2025, Christie’s charges 27 percent on the first $1.5 million of the hammer price, 22 percent between $1.5 million and $8 million, and 15 percent above $8 million.2Christie’s. How to Buy at Christie’s – Financial Information Sotheby’s follows a similar structure, with a 28 percent premium on the first $2 million of the hammer price.
Beyond the premium, buyers may also owe sales tax, import duties, and shipping costs. The final invoice issued after the sale totals the hammer price, premium, taxes, and any fees.1Christie’s. Understanding Auction Fees
Bidding and When the Sale Is Final
The auctioneer runs the sale, taking bids from the floor, by telephone, and through online platforms. Bids move in set increments that scale with price. A lot in the $1,000 to $2,000 range might climb by $100 per bid, while a lot above $100,000 could jump by $10,000 or more. The exact schedule is published in the catalog or conditions of sale.
With Reserve Versus Without Reserve
Under the UCC, every auction is presumed to be “with reserve” unless the house explicitly states otherwise.3Legal Information Institute. UCC 2-328 Sale by Auction In a with-reserve auction, the seller has set a confidential minimum, and the auctioneer will not sell the lot unless bidding hits that number. If the top bid falls short, the item is “bought in” and stays unsold. In a without-reserve auction, once the auctioneer calls for bids, the item cannot be withdrawn as long as a bid comes in within a reasonable time, meaning it will go to whoever bids highest at any price.
When the Hammer Falls
A sale is legally complete the moment the auctioneer announces it, typically by dropping the hammer.3Legal Information Institute. UCC 2-328 Sale by Auction That moment creates a binding contract between the house, acting for the seller, and the winning bidder. If a bid comes in while the hammer is falling, the auctioneer can either reopen bidding or declare the item sold under the bid the hammer was already accepting.
Until the auctioneer announces the sale, any bidder may retract a bid. Retracting does not revive the previous bid; the auctioneer resumes from wherever the bidding floor sits at that point.3Legal Information Institute. UCC 2-328 Sale by Auction
Shill Bidding
The UCC also restricts a seller from secretly bidding on their own item. If the auctioneer knowingly takes a bid on the seller’s behalf, and the house has not disclosed that seller bidding is permitted, the winning buyer can either void the sale or claim the item at the price of the last good-faith bid before the tainted one.3Legal Information Institute. UCC 2-328 Sale by Auction This rule does not apply at forced sales such as foreclosure auctions.
After the Hammer: Payment and Pickup
The house issues a final invoice to the winning bidder covering the hammer price, buyer’s premium, and applicable taxes or fees. Payment is due promptly, within a window set by the house. Title generally does not pass to the buyer until the house has received payment in full. Nonpayment can lead to legal action, resale of the lot, and a ban from future bidding.
Once payment clears, collection is on the buyer. Houses set a pickup deadline, commonly 30 calendar days from the auction date. Miss it and storage fees start. At Sotheby’s, late collection triggers a one-time handling fee of $150 to $200, depending on size, plus a daily charge of $6 to $10.4Sotheby’s. Late Collection Fees Houses generally do not pack and ship directly but will point you to approved third-party carriers.
If the Item Turns Out to Be Wrong
If you buy something and later discover it was forged or significantly misdescribed, your main remedy is rescission: unwinding the sale and getting your money back. Major houses publish limited warranty policies in their conditions of sale, typically giving buyers a set window, often several years, to claim that a lot’s authorship was materially different from what the catalog stated.
The standard is narrow. Catalog language is graded, and a work “attributed to” an artist carries less certainty than one listed under the artist’s full name. You generally must show that the catalog description was materially incorrect, not just that experts disagree. For honest errors, rescission rather than additional damages is the typical outcome. The specific timeframes and procedures vary by house and are spelled out in the conditions of sale, so read those terms before you bid.
Taxes You’ll Owe
Selling for more than you paid produces a capital gain subject to federal income tax. For most assets held longer than a year, the long-term capital gains rate tops out at 20 percent. Collectibles, including art, antiques, coins, and similar items, are the exception: gains are taxed at a maximum federal rate of 28 percent.5Internal Revenue Service. Topic No. 409, Capital Gains and Losses If you held the item a year or less, the gain is taxed as ordinary income.
You report the sale on your return whether or not the auction house sends a form. Online platforms that process payments may be required to issue Form 1099-K when gross proceeds cross the reporting threshold. For 2026, that threshold is $600 in total payments.6Internal Revenue Service. General Instructions for Certain Information Returns (2025) Receiving a 1099-K does not change what you owe; it means the IRS also has a record. Keep your original purchase price and costs of sale (commissions, restoration, shipping) on file, because they reduce your taxable gain.
Buyers may owe sales tax depending on the item and where they live. Most major houses and online platforms now operate as marketplace facilitators, collecting and remitting sales tax on your behalf, but the obligation ultimately falls on the buyer. Verify that tax was properly charged rather than assuming it was handled.
Legal Protections Around the Sale
Agreements among bidders to suppress prices, known as bid rigging, are a federal felony under the Sherman Act. Individuals face up to $1 million in fines and 10 years in prison; corporations face fines up to $100 million, and in some cases fines can be raised to twice the gain or loss involved. Victims can also sue civilly for up to three times their actual damages.7U.S. Department of Justice. Price Fixing, Bid Rigging, and Market Allocation Schemes
Anti-money laundering rules are still developing for this market. The Anti-Money Laundering Act of 2020 expanded the Bank Secrecy Act’s definition of “financial institution” to include persons trading in antiquities and directed FinCEN to write implementing rules.8FinCEN. FinCEN Notice on Antiquities and Art As of early 2026, FinCEN has not finalized comprehensive AML rules specifically covering auction houses that deal in fine art, as opposed to antiquities. Banks are still required to file suspicious activity reports on transactions linked to art or antiquities that raise red flags, and major houses have voluntarily adopted know-your-customer procedures for high-value lots.
More than half of U.S. states require auctioneers to hold a state license before conducting sales. Requirements vary widely, from written exams, coursework, and a surety bond to little more than a registration fee. Where surety bonds are required, they protect bidders and consignors if the auctioneer mishandles funds. If you are consigning high-value property, confirming the auctioneer is properly licensed in your state gives you a path to recover losses if something goes wrong.
One Boundary for International Buyers
Winning a lot does not automatically mean you can ship it across borders. Items containing materials from endangered species, such as ivory, tortoiseshell, certain exotic woods, and coral, are regulated under the Convention on International Trade in Endangered Species (CITES). Federal law makes it illegal to export or import a CITES-listed specimen without the proper permits, and the permit type depends on how the species is classified.9eCFR. Title 50, Part 23, Subpart B – Prohibitions, Exemptions, and Requirements Catalogs typically flag lots that may be affected, but the responsibility for obtaining permits sits with the buyer.