Earlier in the year, a client of ours mentioned he had a Pop art painting he planned to sell. Although not our typical stock in trade, we told him we knew of someone who might be very interested in the picture and would be happy to offer it. This was a picture of a type and by an artist well established in the canon, with a number of recent sales records, making a reasonable market value fairly easy to determine. Our client, however, told us that, not knowing we would be able to handle this sale for him, he had been in contact with both Christie’s and Sotheby’s, with representatives from both houses scheduled to call within the next couple of days. What happened then, judging from what both houses have been doing in the last couple of years, should come as no surprise. The houses got into a bidding war to acquire the picture for sale. Christie’s ended up putting the most on the table, offering our client up front $1,200,000, about 120- 130% of what we considered the market value of the picture, plus a 50/50 split on anything over that amount that the picture realized at auction. This was done, as well, with no commission charged to our client- in fact, no out of pocket expenses at all, with Christie’s bearing the entire risk. When our client informed us of all this, our suggestion to him was to agree to it before the auction house changed its mind.
In this instance, Christie’s sold the picture for slightly more than their minimum guarantee. However, it is an open question whether or not the buyer’s premium, 12% on lots in excess of $500,000, was sufficient to cover Christie’s direct selling costs, much less allowing for any contribution toward their huge overhead. As well, I think Francois Pinault, the French billionaire who owns Christie’s, probably likes to see a bit of net profit, as well.
This story is repeated over and over, and often with a not happy ending for the sales rooms, witness last week in New York, where Sotheby’s important impressionist sale had 20 of the 76 offered lots unsold. Further, of the sold lots, ten sold for below low estimate. All of this has resulted in massive losses on guaranteed lots, and a nearly 30% fall in the value of their shares. Financial results for Christie’s are speculative, as the company is privately held, but it is my understanding that M. Pinault is heard to utter with extraordinary frequency the word ‘merde’.
It is really hard to have any sympathy for the salesrooms. One has to go back only a few years to remember the premium fixing scandal that sent senior officials of both Christie’s and Sotheby’s to jail, and resulted in millions of dollars in rebates to both buyers and sellers. That episode nearly broke Sotheby’s, and doubtless forced M. Pinault to pump a lot of additional capital into Christie’s.
What all of the present mess points to is not only what fools some of the folks running the houses are, but how the major auction houses are yet again overcharging the buying public, this time running up the price on items that they have a financial stake in. Of course, in last weeks’ sales, the auction estimates were clearly vastly in excess of what the buying public thought the pieces were worth, but what about the instances, as in the case of my client’s picture, the painting was offered for an amount only marginally in excess of what sales records clearly indicated it was worth? The cumulative effect of this apparently frequent practice is arguably far more egregious.
The net effect of all this is, the auction houses maintain their soiled reputations. A few weeks back, my blog entry was about whom to trust in the art market- dealers or auction houses. Any opinions?