Whilst it is true 99% of wine is made to be drunk the same year, at JF Tobias we believe it is also true that less than 0.01% should ever be sold at fine wine auctions.
For a wine to achieve an exceptional price at auction, it must not be openly available on the market. If it is, it will be available at a ‘market price’. Why would you pay more than this price at auction, for a wine easily available for less money elsewhere? It is only the rarest wines that perform well at fine wine auctions.
It is also true that most wines are not as rare as people think. Even First Growth Bordeaux, such as Lafite and Mouton Rothschild, have very active secondary markets, with a ‘market price’ firmly established. Whereas a wine like Le Pin, with a production of 600 cases a year, will perform better, Lafite Rothschild produces 25,000. So when it comes to selling wine for the greatest return, are fine wine brokers or fine wine auctions the best option?
Fine Wine Auctions: Commissions
In understanding whether fine wine auctions or wine brokers offer a better alternative for selling fine wine, it is important to understand how both charge commission. Unfortunately, this is often far from transparent with fine wine auctions.
Auction houses charge both buyers and sellers a percentage of the hammer price. This is known respectively as the buyer’s premium and the seller’s premium (the latter is also referred to as vendor’s premium, vendor’s commission or seller’s commission). These fees in the UK are also subject to VAT.
At a fine wine auction, commision is not simply sellers commision. It is sellers commision, plus buyers premium. Therefore, the sum of the buyers premium and sellers premium is the total amount of commision you will be charged.
Buyers Commission: This is the commission an auction house will charge the buyer of an item, and will be charged on top of the winning bid. This is typically around 20%, and differs with each auction house. At Sotheby’s, it is 21% + VAT.
Sellers commission: This is the commission an auction house will charge the seller. It is typically around 15%, and differs with each auction house, as well as on the quality and quantity of wine being sold. At Sotheby’s, it is 10% + VAT. This will also be deducted from the final selling price.
(Market Price – 21% Buyers Premium) = Winning Bid – 10% Sellers Commision = Total Amount to Seller
It is not uncommon for an auction house to move these commissions, to present them in the best way possible to the seller. At JF Tobias, we have heard of our clients even being offered 0% for larger portfolios. Whilst the sellers’ commission can be changed at discretion, the buyers’ commission will always remain the same. So, while this can sound great, it is not transparent. Fine wine auctions will simply levy the commission elsewhere, on the buyer.
On the other hand, most brokers will simply charge a flat commission, and only once. At JF Tobias, we believe in transparency, and that is why you can read more about the differences between our cash and broking offers here, and our tiered broking commission structure here.
To understand the differences between fine wine auctions and fine wine brokers, we have taken a look at a recent fine wine auction at Sotheby’s, and what these commissions mean in practice.
Fine Wine Auction Results: Sotheby’s ‘The Collection of Perfection’
We have taken the very first lot from a recent auction at Sotheby’s on September 19th 2018: a 12 x 750cl case of Château Lafite 1986, in perfect condition and original wooden casing.
Amazing wine, but not scarce. A quick look online finds 14 merchants with this exact wine for sale. It is fair here to imagine bidders unwilling to pay above the set market price.
If we return to Sotheby’s results, we will see that the price achieved for this case of Lafite includes buyers commission. Now, if we assume a sellers commission of 0% (extremely unlikely except for portfolios of £1,000,000+), then the final total for the seller will be 21% + VAT less than the final selling price.
We’ve broken down what this would mean for the seller in the infographic opposite. You can also read more about this case study, and what happened when JF Tobias sold wine at auction through Sotheby’s, here.
How to Sell Wine for the Greatest Return
If your wines are openly available on the market, it is incredibly unlikely that you will ever achieve a higher price at a fine wine auction. It is much more likely that you will receive far less, with commissions essentially charged twice, against both you and the buyer.
This does also not include related costs. Insurance, cataloguing, and delivery will also all be charged as an extra percentage of commission. Most merchants and wine brokers will cover these charges; at JF Tobias, all the costs of selling your wine are covered by us.
Whilst one of an auctions strengths is often cited as how quickly a large collection of fine wine can be sold, it would not be too hard for a wine broker to do the same, if the wines were sold at least 20% below market; before even taking the sellers commission into account.
Of course, if you have an incredibly rare wine, in a rare format, not openly available on the market, it is possible for you to achieve an exceptional price at auction. At JF Tobias, we will always tell you when this is the case.
At JF Tobias, we believe the right fine wine at auction can certainly deliver exceptional prices. We also know these are the exception. It is more likely that the wine will be sold below market, before the final selling price is deducted a sellers commission. For the greatest return, a fine wine broker is almost always the best option.
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If you are not sure whether your wines would perform well at auction, or would like any further advice or help, please get in touch, and a member of the team will be delighted to assist.
