Wine auctions around the world, such as this one in Germany, attract hundreds of bidders, making it difficult for collectors to buy lauded wines at a fair price. Photo Credit: Tomas er
Buying or selling wine at an auction isn’t a decision to make lightly; although most auctions are staffed by knowledgeable experts who check bottles for authenticity, there’s still a risk when you buy or sell wine at auctions. For starters, many of Rudy Kurniawan’s wines were sold through auction houses, which is one reason he got away with selling fake wines so easily. At the time, wine industry veterans thought of auction houses as infallible, and they were shocked to discover that even esteemed auction houses had been duped by Kurniawan. In addition to fraud risk, major auction houses don’t allow bottle returns. If you buy a bad bottle, you can’t get your money back from the auction house, and you can’t go to the winery for a refund either, since you technically never bought the bottle from the winery.
Despite these two issues, the vast majority of auction houses are safe for buyers, especially if collectors want to buy the rarest wines in the world. Yet auctions are not always the best places to buy and sell wine from a market standpoint. Some collectors should skip auctions entirely in favor of trusted retailers, depending on auction fees and on the type of wine the collector is looking for.
What You Can Expect to Pay in Fees at an Auction
The amount of money that wine auctions charge sellers depends on which type of auction the seller chooses. These choices indirectly impact how much buyers pay at auction. There are three primary ways that most auctions make money on wine sales.
Fixed Fees
One type of auction is a fixed fee wine auction, in which fees range from zero to 18 percent of the final bottle bid. Some auction houses don’t charge a fee to wine sellers, while others charge the highest fee possible. With fixed fees, the rarity of the bottle and its final bidding price aren’t considered, since the seller and the auctioneer decide on a fee before the bottle ever goes to auction. Whether the bottle sells for $100, $1,000, or $10,000, the auction house charges the same percentage fee off of every bottle in the seller’s lot. This clearly will matter to sellers, but it matters to wine buyers too. If an auction house charges 18 or even 20 percent in commission for the sale of a bottle, the seller is more likely to start the bottle’s bid at a higher price than he might with an auction house that doesn’t charge fixed fees. Buyers end up paying more than they should in this scenario.
Sliding Scale Fees
Sliding scale wine auction fees are better for buyers and sellers than fixed fees. With this fee structure, the auction house bases its fees purely on bottle quality, bottle rarity, and the final price that the bottle nets during the auction. A bottle that’s worth $1,000 on the market will have a completely different fee associated with it than a bottle that’s worth $10,000. The more noteworthy and rare the wine lot is, the less likely that the auction house will charge a fee at all. That’s because auction houses want to maintain a reputation for selling the finest bottles on the market. In order to attract business from collectors who have the best wine bottles, they will often waive the fee entirely.
Many sliding fees are determined after the bottle has sold at auction. If the wine lot made less money than the seller and the auction house expected, an auction house might waive the fee; if the wine lot made significantly more money at auction, then the auction house will typically take a 6 percent cut from the final profits. This fee structure makes it more likely that the rarest bottles will sell at a reasonable price, since auction houses aren’t driving the prices up beforehand with fixed fees. To find out whether you are being charged too much for a bottle, use this wine price database, which lists suggested prices for the wines most commonly sold at auctions.
Insurance
Insurance fees aren’t based on bottle sales at all, but on a guarantee of bottle quality. Many auctions charge sellers and buyers a 1 percent insurance fee, which covers the bottles for damage. When auctions charge sellers an insurance fee, the 1 percent comes from the bottle’s estimated market worth before it is sold; when auctions charge buyers an insurance fee, the 1 percent comes from what the buyer paid for the bottle at the end of the auction. Insurance covers bottle damage at the auction’s warehouse facility before the wine is sold, and many auctions also offer insurance to buyers after the bottle is sold, which covers the bottle en route to the buyer’s home from the warehouse. These types of fees can offer buyers and sellers peace of mind when they buy and sell through wine auction houses.
Do You Need an Auction House?
Collectors of Exceptionally Rare Wines Should Use Auction Houses
Collectors who find the most benefit in auction houses are those who only invest in the rarest, most legendary bottles in the wine world. While nearly all bottles of Yquem or Lafite are highly sought-after on the market, they are not necessarily “legendary wines” in this sense. Legendary bottles are those that are impossible to find in online wine stores, such as authentic Thomas Jefferson bottles or bottles that were discovered in a shipwreck. If you’re a collector who only buys vintages that have fewer than 100 bottles left in the world, an in-person or online wine auction is the perfect way to buy exceptionally rare wines, in addition to legendary wines. What makes auctions the best choice for these collections? Well, the auction fees for legendary or exceptionally rare wines are typically low or nonexistent. Auctions want to be synonymous with near-priceless historically-significant wines. In addition, these wines are almost never found in online wine stores; you’ll only find them in major wine auctions.
In some cases, collectors can get an absolute steal on exceptionally rare bottles when they shop through a wine auction house. For example, in 1996, a case of 1945 Mouton-Rothschild sold for $81,700; later that same year, another case of the same wine sold for $51,750 at auction. When you buy wine at auction, you’re taking a gamble, hoping that your auction will be the one that sells the bottles for less than expected.
For Other Types of Wine, Consider Retail
What if you don’t invest in legendary wines? Wine auctions could be useful, but more often than not, online wine stores are going to be your best option. If you insist on buying wine from an auction, go for wines that are from lesser-known regions or choose wines in unusual varietals. Popular regions like Burgundy, Bordeaux, or Napa Valley will attract more bidders, driving the bottle prices up at auctions. For the same reason, it’s usually a bad idea to bid on any wines that received a score of 90 or higher from Robert Parker. A very high score will often start a bidding war, which means that you will pay far too much for the bottle if you win the bid. Bid on mixed lots whenever you can, whether you’re attending an auction or bidding on bottles online. The highest bidders are often going to save their money for complete wine lots, which means you can get an incomplete set for a steal.
The bottom line is that, for most collectors investing in non-legendary bottles, competition is simply too great for the best wine vintages. Collectors who want the best bottles should go with online wine sellers like Vinfolio instead. Bottles sold by Vinfolio are based entirely on actual market value. Bottles sold by private collectors on Vinfolio’s marketplace are based on whatever the collector wants to charge for the bottle; however, Vinfolio includes a suggested market price as well, comparing the collector’s price to the current market value. This prevents buyers from spending too much on bottles from private collections.
The risk of bottle fraud is also lower when you buy wine online through Vinfolio, since experts inspect every bottle for damage and authenticity before listing the bottle on the website. If you’re concerned about your bottles arriving safely, Vinfolio offers white glove service to Bay Area customers, and keeps all of its wines stored in a temperature-controlled facility. When you want to invest in an exceptional vintage of DRC, or Robert Parker’s favorite bottle of Abreu, wine auctions can’t compete with the prices offered by online wine sellers.
Whether you are starting your high-end wine collection or adding to an established portfolio, Vinfolio is your partner in buying, selling, and professional storage. Contact us today to get access to the world’s best wine.
