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These are two articles from Caldwell Gallery and FADA
written to help further your understanding of the process of buying and selling art
G.B. Tate & Sons endorses these publications and offers them as a public service

Written by:  Calwell Gallery (Member FADA)
Buying and Selling Works of Art

With all of the mystery surrounding the marketplace for fine art and antiques, many custodians of family heirlooms feel anxious when making decisions regarding the sale of these items. At The Caldwell Gallery, we take pride in helping the owners of fine art and antiques acquire an understanding of the art market and their role as sellers. This knowledge helps owners feel comfortable with the process of selling in today's marketplace. We hope the following guidelines help clarify the basic choices available to sellers of fine art and antiques. If you have questions regarding this process, please don't hesitate to ask us.

What is a fair price for my item ?

To arrive at this answer, one must understand that a knowledgeable buyer of art and antiques expects the following when he or she makes a purchase:

1. To receive a written guarantee of authenticity and conveyance of clear title.
2. To make a purchase from a knowledgeable and reputable dealer.
3. To purchase items which are in original condition, or which have received proper conservation if such treatment is necessary.
4. A history of the work (provenance) from the time of its creation to the present date, including all ownership, exhibition, and publication records.
5. The willingness of the dealer to repurchase or accept in trade the same work at some later date. This is a sign of the dealer's belief in the piece, and an avenue for collectors to upgrade their collections in future.
6. The ability of the dealer to substantiate, through research and market information, the value of the piece at the price which is being asked.

It is the business of a knowledgeable dealer to understand how both subjective and objective factors influence the fair market price for an item. The subjective quality of an item is its inherent beauty - how strongly does it "speak to us". Each individual draws his or her own conclusions regarding subjective criterion. Objective criterion include the importance of the artist or maker, the desirability of the subject matter or form, the size, condition, and history of a piece, and the currently available market indicators for that particular type of item. When all subjective and objective criterion are properly weighed the current fair market value can be accurately reached for both the wholesale level, which is what sellers can expect to receive, and the retail level, which is what buyers are asked to pay. The next step is to understand the differences between dealers and auction houses, and decide which is right for you.

Selling Through Dealers or Auction Houses:

In order to understand the differences between selling through a dealer or through an auction house, a careful comparison of all time and expense factors must be made. It is our belief that selling privately through a qualified and reputable dealer is the best way to achieve maximum returns. Selling privately avoids the many inherent risks and costly expenses associated with selling at auction. Although auction houses tout their abilities to achieve high prices for their consignors, the evidence paints a vastly different picture in which "over promise" and "under deliver" are the most likely results. Let's examine auction house estimates, as well as the expenses an owner incurs when selling through auction.

Auction Estimates:

A seller must understand that auction estimates are just that - estimates. Many auction houses routinely provide sellers with aggressive estimates of the sales potential of their item in order to "get the material in the door". Once the piece has been sent to the auction house, these estimates are revised downward to levels at which the auction house actually feels they can make a sale. Remember, auction houses make money regardless of their sales performance , including when an item is unsold and returned to the consignor.

Auction Expenses:

The following list of auction expenses are paid by the seller, whether the item is successfully sold or returned if unsold:

1. Any shipping charges to get the item to the auction house.
2. The buyer's premium and commission to the consignor, which usually total 25%.
3. Illustration charges for reproduction of the work in the catalogue. This is about $900 for color, $450 for black & white.
4. Insurance charges of 1% of the median of the estimate.
5. Buy-back charges if an item fails to sell of 5% charged to the owner.
6. Return shipping costs if item fails to sell and is returned to owner.
7. Time cost of money - the delay between consigning and receiving payment for an item.

The total of these charges average 30-50% of the gross proceeds from an auction sale, which is far greater than when selling through dealer.

Unsold Works at Auction:

Unsold works total almost one-third of all items auctioned. Such works are considered to be tainted, or "burned", and become nearly impossible to sell except at substantial discounts. Many unsuspecting sellers have been forced to pay hefty expenses and buy-back fees to an auction house in order to have their own unsold items returned to them!

Summary:

The single most important reason auction houses are unable to regularly achieve solid results on behalf of sellers is that many private buyers simply will not buy at auction. This eliminates much of the demand side of the equation which is essential to achieving the best price for your item. It is also important to note that an auction is a one-time event in which hundreds or even thousands of similar items are all competing for the attention and available monetary resources of buyers on that day. Many museum collectors are unable to compete at auction because their buying decisions must be made by committee.

After observing auctions for almost thirty years, we feel the prices sellers achieve at auction are usually far less than the prices which sellers can achieve working with a reputable dealer.

The Advantages of Selling With a Private Dealer:

When a party contacts a private dealer regarding an item they wish to sell, the dealer will utilize his or her experience to make an estimate of the potential sales value based on both subjective and objective criterion. A qualified dealer can achieve superior results tothose of the auction houses by being able to offer clients the knowledge, experience, and guarantees they require when making purchases, and without time constraints presented by auctions. A dealer is also able to give each item he handles a great deal of personalized attention. These aforementioned factors can make all the difference in securing the successful sale of an item at an advantageous amount to the seller.

When selling privately, there are two methods: immediate sale or sale through consignment. Let's look at both methods, and the most common reasons sellers choose one versus the other.

Immediate Sale:

In an immediate sale, the fair market price is determined and payment is made to the seller. It is that simple. Many sellers prefer the "bird in the hand". The dealer assumes all custodial responsibilities for the item, while the seller enjoys the benefits which utilization of the sales proceeds affords. Many sellers have asked us about going to New York or other large metropolitan areas in order to "get the best price". It is important to realize that because large galleries, especially in major cities, have very high overhead costs and they are usually unwilling to pay sellers fair prices for their items.

Consignment Sale:

For consignment sales, the dealer and seller arrive at a net figure which the seller realizes when the item is sold. The only charge incurred by the seller is the sales commission which, generally speaking, is about 20-25%. All other costs associated with marketing the item, including photography, insurance, shipping, advertising, and printed materials, are absorbed by the dealer in the ordinary course of business. The only expenses the seller pays for are those necessary for restoration and framing, which allow an item to be offered "retail ready". The dealer usually advances these costs, and deducts the expenses from the proceeds when the item is sold. In the rare instance a work is returned to its owner unsold, these expenses would be billed to the owner at cost.

Consignment contracts generally run from 6 months to a year, and are renewable by mutual consent. The main reason sellers choose consignment is the slightly higher net proceeds they can expect to receive for their item when it is sold. The reason for the differential in net amounts between outright sale and consignment sale is that the dealer making an immediate purchase must factor in the time cost of the capital outlay, which is not applicable when selling an item on consignment.




Written by:  FADA
(Fine Art Dealers Association*)

*The Fine Art Dealers Association was founded in 1990 as a non-profit membership organization of respected and established dealers from across the United States. Its members are dedicated to promoting and maintaining the highest degree of professionalism, scholarship and integrity in all business conducted with colleagues, institutions and the art buying public. Membership in FADA is highly selective and by invitation only. Each member has expert knowledge of the artist or periods in which he or she specializes and maintains a corresponding inventory. In addition to demonstrating a commitment to enriching the cultural lives of their communities, members share their expertise through significant exhibitions, informative catalogs, and by offering quality works of art whose authenticity is unconditionally guaranteed.

Selling Fine Art

Dealers vs. Auction Houses

In order to understand the differences between selling through a dealer or through an auction house, a careful comparison of all time and expense factors must be made. It is our belief that selling privately through a qualified and reputable dealer is the best way to achieve maximum returns. Selling privately avoids the many inherent risks and costly expenses associated with selling at auction.

Auction

Many of auction expenses are paid by the seller, whether the item is successfully sold or not. When consigning a piece at auction the charges incurred include, catalogue costs, commission fees, shipping (if applicable) and insurance charges. There are also buy-back fees if an item fails to sell.

Unsold works total almost one-third of all items auctioned. Auction houses make money regardless of their sales performance.

Auctions can work for the seller, or against them, depending on the given circumstances. The lure of getting top dollar for a painting is very attractive, but when all is said and done, it is a gamble at best, and can more often than not, works against the seller. Even if a fair or high market price is obtained, the final auction costs often equal 30-50% of the gross proceeds.

Selling Through a Dealer

It is the business of a knowledgeable dealer to understand how both subjective and objective factors influence the fair market price for an item. The subjective quality of an item is its inherent beauty. Each individual draws his or her own conclusions regarding subjective criterion. Objective criterion include the importance of the artist or maker, the desirability of the subject matter or form, the size, condition, and history of a piece, and the current availability for that particular type of work. When all subjective and objective criterions are properly weighed the current fair market value can be accurately reached for both the wholesale level, which is what sellers can expect to receive, and the retail level, which is what buyers are asked to pay.

There are two ways to go when selling through a dealer, the immediate sale, or consignment. In the case of an immediate sale, the dealer and the seller agree on a fair market price and payment is made to the seller. For consignment sales, the dealer and the seller arrive at an agreed upon price, based on what the market will allow. When the painting is sold, the seller is charged a commission of, commonly between 20 25%. All other costs associated with selling, including photography, insurance, shipping, advertising or printed materials, are absorbed by the dealer. The only case, in which there may be an expense to the seller, is if the work, in order to be retail ready, needs cleaning, restoration or framing. This cost is in most cases advanced by the dealer and deducted when payment is made to seller.