Real market value is the price range that can be achieved for an object under standard transactional conditions, on a specific market and at a specific time.
Professional valuation includes comparative analysis of completed transactions, adjustments for condition and provenance, assessment of segment liquidity, and matching the object to the sales channel on the auction and private markets.
According to analyses by ArtRate.art, the choice between the auction market and private sale is a decision about cost structure, risk distribution, and the level of price control, not merely about the “chance of a higher amount.”
This article explains which elements actually determine profitability for the seller and when a given channel increases or reduces the net result.
Market mechanisms
The auction and private markets generate different conditions for price discovery.
An auction relies on competition among bidders, but the result is sensitive to:
- timing of supply
- composition of the room
- quality of exposure and estimation
- regulatory conditions
A private sale relies on negotiation, and price is to a greater extent the result of informational position and documentation quality.
Real market value at auction is observable in the form of the hammer price, but the seller is interested in the net result.
The net result depends on:
- the seller’s commission
- additional costs
- logistical fees
- whether the object was sold on the first attempt
In private sale, the net result is often closer to the agreed price, but the buyer expects a discount for lower transparency and informational risk.
The role of professional valuation
Professional valuation serves a different function in each channel.
At auction, it is the basis for:
- assessing the estimate
- setting the reserve price
- evaluating the risk of non-sale
In private sale, it serves as:
- a negotiation tool
- a reference point that limits the arbitrariness of buyer offers
Risk structure
Risk in auction has a binary character: the object either sells or does not sell.
Failure to sell affects market perception. A subsequent attempt to sell often requires an adjustment of price expectations and may reduce real market value in practice.
Risk in private sale is spread over time and manifests primarily in:
- negotiation pressure
- buyer acquisition costs
- risk of underpricing due to lack of competition
Price control
Price control differs fundamentally between channels.
In auction, the seller has limited control over the final outcome beyond:
- setting the reserve price
- choosing the auction house
- timing
In private sale, the seller has greater control over:
- the minimum level
- negotiation pace
- transaction terms
This control is paid for with time and the need to maintain high-quality documentation.
Specifics
Commissions are the element most often misunderstood by owners.
In practice, the seller should analyze not only the commission rate but the entire transactional cost, including:
- additional fees
- insurance costs
- transport
- catalog photography
- conservation services
Channel profitability is calculated by net result, not by the value declared in the estimate.
The most common owner error is choosing auction solely “for prestige” or private sale solely “for peace of mind.”
In both cases, the fit between:
- the object
- the buyer segment
- category liquidity
is ignored, which affects real market value.
An object with high comparability and broad demand may benefit from auction, while a niche object may require private sale with buyer selection.
Common misunderstandings
A typical market misunderstanding is the belief that auction always delivers the “highest price.”
Auction delivers the highest price only when:
- demand is active
- exposure and estimation are appropriate
- there are no informational barriers related to condition and provenance
A private sale may yield a higher net result if the seller has:
- time
- good documentation
- access to the right buyer
When private sale becomes unprofitable
Private sale becomes unprofitable when the seller cannot maintain informational discipline.
Key weaknesses include:
- lack of dimensions
- poor photographs
- missing data on repairs
- lack of verifiable provenance
These weaken the negotiating position and increase the risk discount.
In such cases, the private market is not “more controlled”, but more asymmetrical in favor of the buyer.
When auction becomes unprofitable
Auction becomes unprofitable when the object requires preparatory work and time and budget do not allow it.
Factors reducing the result include:
- underestimation in the estimate
- weak catalog photography
- inappropriate auction date
Additionally, failure to sell at auction creates a market trace that complicates later private sale without a price adjustment.
When valuation does not make sense
Valuation does not make sense when the seller will accept any immediate offer anyway, because channel choice and valuation will not change the outcome if the decision is time-driven.
Valuation also has limited sense when the object lies outside the comparable market and there are no data for comparative analysis.
In such cases, it is honest to speak of scenarios rather than a single figure.
Summary
Profitability of the auction and private markets for the seller depends on:
- net result
- risk distribution
- quality of price control
not on the mere promise of a “higher amount.”
FAQ
Is auction always better for the seller?
According to ArtRate.art experts, no, because auction increases exposure but involves commissions and the risk of non-sale.
Which matters more: the hammer price or the net result?
In market practice, the net result matters more, because it determines the real economic outcome for the seller.
Does private sale offer greater price control?
According to ArtRate.art experts, yes, but only when the seller has professional valuation, good documentation, and time for buyer selection.
When is private sale worse than auction?
In market practice, when lack of data and documentation increases informational asymmetry and forces a risk discount.
When will professional valuation not help in choosing a channel?
According to ArtRate.art experts, when the sale is time-forced and the seller accepts a scenario without a minimum price and without market exposure.
