This week sees the start of an estimated $2 billion auction binge of modern and contemporary art in New York. One person who is hoping that art buyers won’t be all spent out at the end is the London and Munich dealerKonrad Bernheimer, part of whose family’s collection, built over 150 years by four generations of art dealers and representing very different kinds of taste, goes under the hammer at Sotheby’s in London later this month.

Valued at £5.2 million to £7.7 million, it is, unlike the New York sales, redolent with the history of the art market, of grand 19th-century aristocratic taste, musty German castle attics, and the destruction wreaked by the Nazi rampage through Jewish art collections.

As background to the auction catalogue, which comes out this week, an English translation of Bernheimer’s family history has just been published. Candid, humorous, insightful and tragic at the same time, it has already piqued the interests of film-makers, who see some dramatic potential on the lines of The Sound of Music or The Hare with Amber Eyes.

The Bernheimer dealing dynasty began in the 1860s with a humble market stall in Munich selling textiles, which, within 25 years, was transformed into a purpose-built, six-storey, neo-Baroque “Palais” for antiques and interior décor, supplying such legendary castle-builders and collectors as King Ludwig the Second of Bavaria and Randolph Hearst.

After the First World War, the business survived the abolition of the monarchy, the devaluation of the mark and the Great Depression, but was eventually unseated by the Nazi’s anti-Semitic purge. On Kristallnacht, November 1938, Otto, the head of the Bernheimer family, and his sons were taken by the Gestapo and sent to Dachau concentration camp. The Bernheimers were, however, rescued by the Mexican government because Otto was its honorary consul in Munich.

Germany’s foreign minister, Joachim von Ribbentrop, was told that if Bernheimer and his family were not released from Dachau, the Mexicans would imprison prominent German citizens. Eventually Hermann Göring, a client of Bernheimer’s, stepped in and proposed a no-alternative deal whereby the Bernheimers could go to Venezuela on the condition that they buy his niece’s ailing coffee plantation.

In 1945, Otto bravely returned to Munich to revive the Palais Bernheimer, and was later joined by his young grandson, Konrad, with his Venezuelan mother and two sisters, but not by their father, Kurt, who had died in Venezuela. Konrad only discovered when he was writing his memoir that his father had been suffering from dementia and depression brought on by Gestapo torture, and had committed suicide.

By the time he was old enough to run the business, Konrad had decided to expand into Old Master paintings, and opened a gallery in London that was the centre of the Old Master market. He then sold the Munich Palais and bought a medieval Bavarian mountain castle in Marquartstein as a family home and repository for the family’s collections, meanwhile renting a small gallery in Munich.

By 1991, he had hit the big time with the purchase at Sotheby’s of a magnificent Bernardo Bellotto painting of a German castle for £3 million, which he sold later to the National Gallery of Washington for $9.5 million. In 1992 he became a member of Tefaf, the most important fair in the world for Old Master paintings, and in 2002 bought Colnaghi, the oldest Old Master dealership in London.

Now he is 65, Konrad Bernheimer has decided to downsize his empire. He is closing his Munich gallery and selling Marquartstein Castle with many of its contents, which he had taken with him from the galleries and workshops of the Palais Bernheimer.

The more recently acquired Old Master paintings are conspicuously not looking for big profits. For a portrait of ill-matched lovers by Lucas Cranach the Younger – a favourite artist – Bernheimer paid eight times the estimate in 2010. It is now estimated at £150,000, or half its purchase price. Another favourite artist, Jan Brueghel the Elder, is represented with a shimmering small landscape bought 15 years ago for £1 million, now conservatively estimated to fetch at least at £800,000, and a boldly coloured flower painting, bought eight years ago for $577,000, and now estimated at £200,000.

Even though he concedes that the Old Master market has been shrinking in terms of both supply and demand for some time, Bernheimer still “fully believes” in it. He is continuing his interest in Colnaghi, and is relocating it from Bond Street to larger premises in the slightly cheaper St James’s district, where he will be partnered by the Spanish dealership, Coll & Cortes.

The Bernheimer name, however, will live on through two of his four daughters; Blanca has a gallery in Lucerne dealing in photography, while Isabel opened a gallery in Berlin this summer, dealing in contemporary art. A new chapter in the family’s history is beginning to unfold.