Some auction results can’t be trusted.
For example, at the time this post was written, the top 8 past sale results from a LiveAuctioneers search for “Marvin Cone” are clearly fake (i.e. it is painfully obvious they are not original Marvin Cone paintings). Whether these works actually sold to unwitting buyers or if the sales results themselves are fake depends on the situation.
There are over 5,000 auction houses who list their sales through LiveAuctioneers. Many are obviously reputable, but others – not so much. Some of the worst offenders consistently post entire auctions worth of fake or manipulated sales.
Why does this happen so often? Platforms lack oversight. The volume is enormous. One-of-a-kind items are nearly impossible to regulate. Fake sales still generate profit for the platform. And seller intent is hard to prove. But, with enough experience, you can recognize the red flags that indicate questionable auction house practices. They include, but are not limited to:
• Repeatedly listing obvious fakes as “authentic”
• Selling the same item over and over again
• Obtaining consistently inflated results way above market norms, or “bargain” results way below market norms
• Inaccurate or poor cataloging
• No true brick and mortar location
• Shady provenance, consistently dealing with problematic categories, and/or consistently representing significant works when not a major auction house
So, why do it?
- To bait naive buyers – They aim to lure in uninformed buyers to purchase “fake” items,
- To attract unscrupulous buyers – who knowingly buy the fake work to later sell it as “real” to a private buyer.
- To inflate perceived value – By posting an inflated sale price, they can later resell the same piece, using the “proof” of the previous sale as justification for the higher price.
- To build a false reputation – They aim to create an illusion of credibility through a high volume, high value history of sales, though experienced buyers can see right through it.
- To manipulate the bidding environment – Throwing fake or overpriced items into the mix, hoping something sticks and results in a higher sale than deserved.
To add to the confusion, even reputable firms can inadvertently generate misleading data due to the structure of the auction business itself.
For example, in some cases the low estimate may be set above or close to the reserve price. In these situations, the auctioneer may act as an agent for the seller and bid the item up to the reserve price. If the reserve is not met, the item may still appear to have “sold” in some public records, even though no true market transaction occurred.
Or, it could be the result of the ever-increasing problem of non-paying bidders. Many public auction databases will still record the item as sold even if the buyer never completes payment. As a result, sales data can reflect transactions that were never fully executed in the real market.
Bottom line: Auction results provide a necessary basis for value, but only if you know what you’re looking at. Appraises must sort through countless comparables, and asses which ones are most appropriate. This doesn’t just mean in relation to the comparable property – we must also make an educated assessment as to the validity of the sale. Not every publicized sale reflects an actual transaction. Always work with a qualified appraiser to decode the data.
Interested in researching past auction sales? Learn more at the following article: Conducting Your Own Market Research.
