Questions about the May auction season abound, as always—no one knows whether the market will continue to contract or whether we’ve seen the bottom and tallies will rise. As I’ve said before, this season is different. It’s rare to see one market end while a new market has yet to gather force—especially during a period of economic strength and stability. Art buyers have plenty of money to spend. They’re just not sure what to spend it on. 

Meanwhile, discretionary sellers have little incentive to offer their works into an uncertain marketplace. And that’s where a little financial engineering comes in. After all, auction houses use their market expertise to make money for clients while managing their own risk profiles, too. The essential tool for creating enticing markets while managing downsides is known as the auction guarantee—especially the third-party guarantee, or the “irrevocable bid,” as it’s known at Sotheby’s. These are the houses’ attempts to lock in a buyer at a floor price, which could either smooth the path of a work to the block—or lure a higher bidder out of the woodwork.