DEFINITION of Auction House
A company that facilitates the buying and selling of assets, such as works of art and collectibles. An auction house may sometimes refer to the facility that an auction is taking place in, most commonly refers to the company running the auction.
BREAKING DOWN Auction House
Historically, auctions have been used both to sell the assets of those looking to dispose of them, as well as to liquidate the assets of debtors. Auctions took place in many different facilities, as well as in the open-air public spaces. Enclosed showroom auction houses began in the 17th century. The oldest auction house is the Stockholms Auktionsverk in Stockholm, Sweden. It was founded in 1674.
Auctioneers typically have appraised the lot item in question and possess a general idea of its worth. For this reason, he or she ritually begins the proceeding by declaring a suggested opening bid (SOB) that’s low enough to be entice a bidder. After an opening bid, other bids will be submitted. Interestingly, it has been observed that the lower the SOB, the higher the final winning bid will be.
Some of the most famous auction houses are Christie’s and Sotheby’s, and focus almost exclusively on high-end art and collectibles. While most often associated with the sale of famous works of art, auction houses can be used in the sale of all sorts of assets, including commodities.
Different Auction Types
English auction: Currently the most common form of auction use in contemporary society, English auctions witness participants openly bidding against one another, either by shouting out their bid amounts or by electronically submitting their bids. The auction concludes when none of the participants are willing to outbid the latest bid, at which time the highest bitter wins the lot. English actions are unlike others, in that the bidding is overt, so all bidders are aware of the competitive bids.
Sealed first-price auction: In this style of auction, each bidder submits sealed bids and the one who makes the highest offer walks away with the prize. This is considered a restrictive auction, in that each bidder may only submit a single bid.
Dutch auction: Dutch auctions begin with an auctioneer declaring a high asking price and then incrementally lowering that number until a participant agrees to accept the auctioneer’s price. Dutch auctions are so named because they were made famous in Holland, during tulip auctions, which observed this format.