Auctions, storage and fakes

At a wine auction, bottles are sold in lots: a single bottle, a case of twelve or a mixed group. Bidders raise the price in steps, in the room, by phone or online, until only one is left. When the auctioneer brings down the gavel, the winning bid is the hammer price.

The hammer price is not what the buyer pays. Auction houses add a buyer's premium, a percentage of the hammer price charged to the winner. For wine it is commonly in the region of 20% to 25%. Many places then add sales tax or VAT on top, and shipping is extra too.

Here is a made-up example with round numbers. The hammer falls at $1,000 and the buyer's premium is 25%. The premium is $1,000 × 0.25 = $250, so the buyer pays $1,250 before tax and delivery.

The seller does not receive the hammer price either. The auction house usually charges a seller's commission, also a percentage of the hammer price, and sometimes fees for insurance, photography or a listing in the catalogue. Commission rates vary and big sellers can often negotiate them down. Suppose, again with made-up numbers, the commission is 10%. On a $1,000 hammer price the seller receives $1,000 minus $100, which is $900.

Put the two sides together and something striking appears. The buyer paid $1,250 and the seller received $900. The difference of $350 went to the auction house, which earns its money from both ends. This is fair payment for finding buyers, checking bottles and running the sale, but it means a bottle bought at auction must rise a long way in value before reselling it at auction gets back what was spent.

Remember Buyers pay the hammer price plus a premium of roughly 20% to 25%; sellers receive the hammer price minus a commission, and the auction house keeps the gap.

Wine is alive in a slow, chemical way. Heat speeds up ageing and can cook the fruit flavours. Big swings in temperature make the wine expand and shrink, which can push it past the cork. Light can spoil it, and very dry air can shrink corks and let air in. Good storage is cool, dark, steady and slightly humid, with bottles lying down.

Collectors who plan to keep wine for years often pay a professional warehouse with controlled temperature and humidity. That costs money every year, usually charged per case, and insurance is extra. These are carrying costs: the costs of simply holding something over time. They are easy to forget, and over a decade they add up.

In some countries, wine can be kept in bond, meaning in a government-approved warehouse where duty and tax have not yet been paid. In the UK, for example, a buyer can keep wine in bond and only pay duty and VAT if and when the wine is taken out to drink. Wine that changes owners inside the warehouse never moves at all, which also protects its condition.

Storage matters for price because buyers cannot taste a bottle before buying it at auction. They are paying for confidence. A case that has sat in one professional warehouse since release, with paperwork to prove it, usually sells for more than the same wine with an unknown past. A bottle from a warm flat may still be perfect, but nobody can know that without opening it, and then it is gone.

Remember Cool, dark, steady storage keeps wine sound, costs money every year, and is part of what a later buyer pays for.

Where something rare sells for a great deal, someone will try to fake it. Wine is tempting for fraudsters because the most valuable bottles are old, few people have ever tasted them, and the evidence is destroyed when the bottle is drunk.

The best-known case is Rudy Kurniawan, a collector who sold huge amounts of supposedly rare old Burgundy and Bordeaux in the 2000s. He was convicted in the United States in 2013 of fraud for making and selling counterfeit fine wine, and was sent to prison. Investigators found the tools of the trade in his home: old empty bottles, corks, printed labels and cheaper wines for blending. Among the clues that unravelled his story was an offer of bottles from vintages that, according to the estate itself, it had never produced.

Experts check many things. Do the label paper, ink and printing match how the producer worked in that year? Is the cork branded correctly for that vintage? Does the glass match? Is the capsule the right style? Is the provenance documented? Some producers now add security features such as special codes, tags or etched glass, and some buyers ask for the empty bottles of famous wines to be destroyed so they cannot be refilled.

Simple rules protect buyers. Be most careful with the rarest, oldest, most expensive bottles, because those are the ones worth faking. Be wary when a seller has an unusually large supply of something that should be scarce. Ask for provenance, and prefer sellers who stand behind what they sell. If a price looks too good to be true, ask why.

Remember Fakes target the rarest, oldest bottles; experts check labels, corks, glass and paperwork, and a seller with too much of something scarce is a red flag.