How to Avoid Dirty Art Auction Tricks – artmarketblog.com

How to Avoid Dirty Art Auction Tricks – artmarketblog.com

Having focused my last few posts on the issues surrounding the questionable practices of some art auction houses, I thought it important to let people know how they can avoid becoming a victim of dirty art auction tricks and tactics. The only real way to avoid becoming a victim of the art auction houses is to ask questions and to know which questions to ask.  Below is a list of questions, and the reasoning behind each question, that will ensure that you know exactly where you stand.

Seven questions every buyer should ask before bidding on a work of art:

1.       Does the auction house or anyone associated with the auction house have an ownership interest in the work of art I am thinking of purchasing?

(The reason you should ask this question is that if an auction house has an ownership interest in a work of art you should question whether this would have an effect on the way the auction house markets and presents the work of art in question – as well as the final price.  Auction houses are required to indicate in auction catalogues when they have an ownership interest in a work of art.)

2.       Is the auction house employee who is advising me on my purchases also representing the seller of the works they are advising me on?

(The reason you should ask this question is that it is not unknown for a specialist assigned to a particular client as an advisor to be representing the seller of the works they are advising the buyer to purchase.  If you are assigned an expert advisor by an auction house make sure they are not representing the seller of the particular works you are interested in.)

3.       Is there any doubt regarding the authenticity or provenance of the works of art I am interested in purchasing?

(The reason you need to ask this question is that auction houses are not always forthcoming with information regarding authenticity.  It is worth while making sure that you are getting what you are paying for.)

4.       Who has authenticated the works of art I am interested in purchasing, what qualifications do they have and what evidence was the authentication based on?

(The reason you need to ask this question is that auction houses have been known to justify the attribution they make using less than reliable information.)

5.       When were the works of art I am interested in purchasing last consigned to an auction and what was the result?

(The reason that you should ask this question is that auction houses are not always forthcoming with information regarding the consignment history of a work of art.  Auction houses have been known to sell the same work of art a number of times within a short period of time and not disclose this information to buyers.  It is important to know this information as it is likely there is reason that this has occurred.  It is also important to know this information because a work of art being passed in at auction can gain a stigma that can reduce the value.)

6.       Does the auction house allow the auctioneer to bid in his own sale?

(It should be obvious why one needs to ask this question, and yes, some auction houses to allow the auctioneer to bid on their own sale.)

7.       What is the condition of the works of art I am interested in purchasing and has a condition report been completed on each work?

(Auction houses are not always forthcoming with information regarding the condition of a work of art. It is generally expected that buyers will inspect a work of art themselves and will be aware of the condition of the work of art.  If you are not able to assess the condition of a work of art then hire an expert.)

**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of http://www.artmarketblog.com, writes the art column for the magazine Antiques and Collectibles for Pleasure and Profit and contributes to many other publications



The Rise of Victorian Paintings Pt. 4 – artmarketblog.com

The Rise of Victorian Paintings Pt. 4 – artmarketblog.com

WILLIAM SOMERVILLE SHANKS, R.S.A., R.S.W. 1864-1951 TIDDLEY WINKS 150,000—200,000 GBP Lot Sold. Hammer Price with Buyer's Premium: 181,250 GBP

Sir David Scott began collecting art in 1910 and over a period of 75 years amassed a large art collection that included 150 Victorian paintings, all of which were auctioned by Sotheby’s in 2008, more than 20 years after Scott’s death (1986). Scott was an eccentric aristocrat whose efforts to maintain a low profile meant that he was able to put together an extremely important collection of Victorian art at his Dower House, Northamptonshire residence in relative secrecy. Scott’s passion for art, the Victorian period in particular, is evident in a comment he made regarding one of the paintings in his collection. According to Scott:”I don’t think I have ever seen another picture by Somerville Shanks but if this is typical of his work I wonder why he is not better known, for it is really beautifully painted, the dress of the girl in the foreground is reminiscent of Sargent at his best and of course the whole picture is delightfully nostalgic, absolutely redolent as it were, of a day nursery of the 80s or 90s.” This comment is also evidence of how under-valued and under-appreciated the Victorian era is, particularly the work of Victorian painters.

The length of time that the paintings in the Scott collection had remained off the market made the sale even more enticing to collectors and connoisseurs who turned out in force to take advantage of the opportunity. “A Great British Collection” was the title given to the sale – a move that Sotheby’s hoped would distance the sale from the stigmas associated with the word “Victorian” and bring more people to the sale. At the time of the sale, in November 2008, the art market was still reeling from a major crisis of confidence brought about by the hyperinflated market for contemporary art, which led to many art market commentators making rather sceptical predictions about the sale. Because the market for Victorian paintings was dominated by a small number of passionate collectors and connoisseurs, there was particular concern when the auction took place due to the fact that the removal of even one of the main patrons of the Victorian era could spell disaster for the whole Victorian paintings market.

To be continued……

Part 1:

http://artmarketblog.com/2010/02/25/the-rise-of-victorian-paintings-part-1-artmarketblog-com/

Part 2:

http://artmarketblog.com/2010/03/04/the-rise-of-victorian-paintings-pt-2-artmarketblog-com/

Part 3:

http://artmarketblog.com/2010/03/11/the-rise-of-victorian-paintings-pt-3-artmarketblog-com/

**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of http://www.artmarketblog.com, writes the art column for the magazine Antiques and Collectibles for Pleasure and Profit and contributes to many other publications

Sotheby’s Changes to Franchise in Oz – artmarketblog.com

Sotheby’s Changes to Franchise in Oz – artmarketblog.com

In what I understand is an unprecedented event, Australian auction house Bonhams and Goodman Auctioneers will ditch the Bonhams brand and relaunch as the Australian arm of Sotheby’s. According to the ACCC website, “First East Auction Holdings trading as Bonhams & Goodman proposes to acquire auction business and associated assets of Sotheby’s Australia and also obtain a licence to use the Sotheby’s trademark in Australia and New Zealand for a period of 10 years.”

Sotheby’s International has operated a branch in Australia since 1982 but will now hand over the reins to Tim Goodman, head of Bonhams and Goodman, along with a license agreement which gives Goodman the right to operate under the Sotheby’s name. Bonhams, on the other hand, will now manage their own operations in Australia instead licensing their name to another company. According to Bonhams: “Bonhams 1793 – a shareholder in the Australian company First East Auction Holdings Limited (FEAHL), which has traded for six years as Bonhams & Goodman – announced today that Bonhams 1793 will launch its own independent operation in Australia, looking to expand its presence in this important market as part of Bonhams operations in 25 countries around the world.”

At the beginning of the year there were rumours spreading that Sotheby’s would follow Christie’s and abandon Australia all together so it is a relief for the Australian art market that Sotheby’s are not jumping ship. Sotheby’s licenses their name to real estate agents through the Sotheby’s Realty brand which was purchased by Cedant Corporation in 2004 but, from what I can gather, has not licensed their name to an auction house in this way before. According to my sources, Sotheby’s is very reluctant to lend their name to anyone so is obviously very trusting of Tim Goodman and seems keen to maintain a presence in Australia.

On a less positive note Artemis Auctions, the Australia art auction house aimed at the middle market which was started at the beginning of this year, has been re-absorbed by the parent companies after poor results. Mossgreen Auctions and Deutscher and Hackett Auctions were responsible for the ambitious venture that supposed to be filling what was thought to be a gap in the lower to middle market. When artemis auctions was started at the beginning of the year I  with the statement made by the owner of the auction house, Paul Sumner, who said that the lower and middle market was under serviced. In fact, my impression was that this sector of the market was in fact over serviced; an opinion that I made clear on my Australian Art Market Blog. And I was right.  It is a shame that the business was not a success but such is life.

**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of http://www.artmarketblog.com, writes the art column for the magazine Antiques and Collectibles for Pleasure and Profit and contributes to many other publications.

Sold to Richard Green – artmarketblog.com

Sold to Richard Green – artmarketblog.com

Thomas Gainsborough R.A., A Pug, oil on canvas

While browsing through the top results of recent auctions, as provided by Sotheby’s through their press releases, I came across something that I don’t see to often – the identity of a buyer listed in the release. Usually under the heading “Buyer” there is an indication of what sort of buyer they are and sometimes where they are from. Examples of the usual identities given to buyers are: UK Private, UK Trade, Private European Collector, London Trade or, as is often the case, a buyer is listed as anonymous. I continued perusing the press releases when I came across another with the same buyer once again identified as having purchased a painting that had achieved one of the ten highest prices of the auction. The buyer in question was the very well known London art dealer Richard Green who dabbles in everything from 17th century Old Masters to 20th century British art but is best known for his dealings in Old Master paintings.

In a market where a high level of discretion is the norm for both buyers and sellers it is interesting that a dealer in Old Master paintings, of all people, would be so transparent with their dealings. It makes sense though that if you are a dealer and want to sell a painting that having your name on the press release identifying you as the successful bidder would not only advertise your business but attract potential buyers. This tactic seems to be working quite well for Mr. Green whose business seems to be fairing extremely well in the current climate. There is, however, more to the story of Richard Green and his success as an art dealer. Much more in fact. To start with, the two works that I said were listed by Sotheby’s as having been purchased by Mr. Green are rather revealing. The first painting was purchased on the 9th of July from the Sotheby’s Early British Paintings sale and was an oil on canvas by Thomas Gainsborough titled “A Pug”. Listed with an estimate of 100,000-150,000 pounds, “A Pug” was purchased by Green for £993,250 (including premium) which, other than being more then six times the high estimate, was the highest price of the auction. The second work was a painting by Herbert Olivier titled “Summer Is Icumen In” which Green purchased  from Sotheby’s July 15 Victorian & Edwardian Art sale. He paid for 331,250 pounds against an estimate of 80,000—120,000 pounds estimate – a new record for the artist at auction and the third highest price of the sale.

Richard Green is known for identifying then purchasing works of art that he, as a results of his research, has identified as being undervalued. In fact, there are many reports of Green uncovering hidden gems which he then manages to on-sell for many times more than he paid for them. Both “A Pug” and “Summer Is Icumen In” were purchased by Green for well above the high estimate which suggests that Green identified these two works as being undervalued. One thing is for sure, he would not have paid what he did for these two works unless he was confident that they would appeal to his wealthy clientele and that he would be able to make a profit from them. Exactly what Green knows about these two paintings that makes them so much more valuable than the estimate provided by Sotheby’s I do not know. What I do know is that the research Green does, and his scholarly knowledge of the art he deals in, has played a major role in his success. One of the smartest dealers around if you ask me.

**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of http://www.artmarketblog.com, writes the art column for the magazine Antiques and Collectibles for Pleasure and Profit and contributes to many other publications.

Sotheby’s Contemporary Art Surprises – artmarketblog.com

Sotheby’s Contemporary Art Surprises – artmarketblog.com

Alexander Calder Ebony Sticks in Semi-Circle 1934 $3,498,500 Sotheby’s New York May 12, 2009

I always find it interesting to look at the lots from a particular auction that achieved prices well in excess of expectations because I find you can tell a lot about market trends and the state of the market for particular types of work from this information. The recent May contemporary art auctions were especially important because of the impact that the global financial crisis and subsequent art market correction has had on the market for contemporary art. It is immediately evident from the results that buyers are paying less for works of art and spending less on average on works of art but this comes as no surprise as the market begins to adjust to the new reality of the market for art. Now that the market is showing signs of stability there is a new benchmark beginning to develop that we can use to track trends, assess auction results and determine what direction the art market is heading. I don’t think that the art market has quite finished finding it’s feet but judging by the recent auctions we are not far off.

Looking at the lots that exceeded expectations from the Sotheby’s Contemporary Art Evening and Day sales that took place on the 12th and 13th of May can tell us several things about the market for contemporary art. First of all, buyers still have confidence in the work of the worlds top contemporary artists and are willing to pay good money for quality works by these artists within reason. Works valued up to the US$1,000,000 mark seem to be very popular at the moment with healthy competition for works and buyers appearing to be quite comfortable purchasing at this price range. Seven of the eight highest achieving works from Sotheby’s evening sale of more expensive works had high estimates under $1,000,000. Even more popular are original works of art with estimates up to the $100,000 with competition for the best works by the big names producing some great results. Seven of the eight highest achieving works (hammer price compared to estimate) from Sotheby’s day sale of lower priced works had high estimates under US$100,000. As you can see from the results below there was far more competition for less expensive works (under $100,000 especially) from Sotheby’s day sale than there was for more expensive works from the evening sale. It is also pleasing to see that works by up and coming contemporary artists are also seeing plenty of action provided that they are under the $100,000 mark.

Surprise Results from Sotheby’s Contemporary Art Auctions:

Sotheby’s Contemporary Art Evening Auction May 12

Lot 4: Andy Warhol ‘Kellogg’s Cornflakes [Los Angeles Type]
sinkscreen on plywood
Estimate: $200,000-$300,000
Hammer Price: $400,000

Lot 5: Dan Colen ‘Untitled (Blow Me)’
oil on canvas
Estimate: $100,000 – $150,000
Hammer Price: $320,000

Lot 15: Alexander Calder ‘Ebony Sticks In Semi-Circle’
wood, steel and string standing mobile
Estimate: $1,000,000 – $1,500,000
Hammer Price: $3,050,000

Lot 25: Gerhard Richter ‘Mirror Painting (Blood Red)’
pigment on glass
Estimate: $600,000 – $800,000
Hammer Price: $1,100,000

Lot 35: Richard Prince ‘Can You Imagine’
acrylic and silkscreen on canvas
Estimate: $600,000 – $800,000
Hammer Price: $1,150,000

Sotheby’s Contemporary Art Day Auction May 13

Lot 104: Alexander Calder ‘Untitled’
painted metal and wire standing mobile
Estimate: $150,000 – $200,000
Hammer Price: $270,000

Lot 111: David Hockney ‘Aubergine’
pastel and colored pencil on paper
Estimate: $15,000-$20,000
Hammer Price: $39,000

Lot 119: Philip Guston ‘Untitled’
ink on paper
Estimate: $200,000 – $300,000
Hammer Price: $340,000

Lot 131: Alex Katz ‘Folding Chair’
oil on canvas
Estimate: $60,000-$80,000
Hammer Price: $120,000

Lot 158: Lucio Fontana ‘Concetto Spaziale Attese’
waterpaint on canvas
Estimate: $100,000 – $150,000
Hammer Price: $220,000

Lot 162: Robert Mangold ‘Plane Figure Study A (Double Panel) Study
acrylic and black pencil on canvas
Estimate: $150,000 – $200,000
Hammer Price: $250,000

Lot 173: Lee Ufan ‘From Line, No. 78154’
pigment suspended in glue, on canvas
Estimate: $50,000-$70,000
Hammer Price: $100,000

Lot 176: Elsworth Kelly ‘Light Green Panel’
painted aluminium
Estimate: $70,000 – $90,000
Hammer Price: $130,000

Lot 185: Andy Warhol ‘Untitled (Diamond Dust Shoes)’
acrylic and silkscreen on canvas
Estimate: $80,000 – $120,000
Hammer Price: $180,000

Lot 194: Andy Warhol ‘Camouflage’
silkscreen on paper
Estimate: $12,000 – $18,000
Hammer Price: $32,000

Lot 198: Andy Warhol ‘Look Years Younger’
graphite on sketchbook paper
Estimate: $10,000 – $15,000
Hammer Price: $34,000

Lot 203: Andy Warhol ‘Detail of the Last Supper’
synthetic polymer paint and silkscreen ink on canvas
Estimate: $80,000-$120,000
Hammer Price: $180,000

Lot 209: Tom Wesselmann ‘Upside Down Blue Nude #2’
oil on canvas
Estimate: $220,000-$280,000
Hammer Price: $340,000

Lot 230: Neil Jenney ‘Saw and Sawed’
acrylic and graphite on canvas in artist’s frame
Estimate: $180,000-$250,000
Hammer Price: $420,000

Lot 305: Jr ‘Favela’
chromogenic print on metallic paper mounted on aluminum
Estimate: $10,000-$12,000
Hammer Price: $20,000

Lot 339: Damien Hirst ‘N-T Boc-L-Alanine N-Hydro Ester’
household gloss on canvas
Estimate: $20,000-$30,000
Hammer Price: $42,000

Lot 364: Makoto Saito ‘Portrait of Laurence (Recognition)’
acrylic and oil ink on canvas mounted on wood
Estimate: $150,000-$200,000
Hammer Price: $280,000

Lot 400: William Kentridge ‘Anamorphic Drawing’
charcoal on paper in Plexiglas box, stainless steel cylinder on steel support
Estimate: $15,000-$20,000
Hammer Price: $26,000

Lot 428: John Currin ‘The Living Room’
ink and watercolor on paper
Estimate: $20,000-$30,000
Hammer Price:$60,000

Lot 450: Barbara Kruger ‘Untitled (Open Wide)’
photographic silkscreen ink on vinyl
Estimate: $50,000-$70,000
Hammer Price: $120,000

Lot 451: Barbara Kruger ‘Untitled (We Are Transformed Into Special Effects)’
unique photographic montage in red painted artist’s frame
Estimate: $60,000-$80,000
Hammer Price: $110,000

**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of http://www.artmarketblog.com, writes the art column for the magazine Antiques and Collectibles for Pleasure and Profit and contributes to many other publications.

NY Art Auctions Feel the Heat – artmarketblog.com

NY Art Auctions Feel the Heat – artmarketblog.com

Tamara de Lempicka, Portrait de Marjorie Ferry, 1932

Since January 2008, prices in the Impressionist & Modern Art segment have posted a cumulative fall of roughly 30% and they contracted no less than 10% in the first quarter of 2009 alone. So, inevitably, the first day of the Impressionist & Modern Art sales in New York was awaited as a test of the top-end of the market. By the end of the two evening sales at Christie’s and Sotheby’s the verdict was clear: with sales revenues just half their previous year totals and some major works bought in or withdrawn from sale, the market appears to be demanding even larger adjustments to price estimates.

Anticipating weaker demand, the auctioneers had diminished the size of their catalogues by roughly half compared with 2007 resulting in a low bought-in rate (20% on average), but drastically reduced total revenue figures. The correction has been particularly severe for Sotheby’s who were expecting $81.5m from their 5 May sale but only generated $52.9m. Remember that on 7 May 2008, Sotheby’s fetched $208m for its Impressionist & Modern Art sale. This disappointing result is partly due to the financial context, but it also reflects buyers’ overall sentiment with respect to the two aggressively priced star lots: Alberto GIACOMETTI le Chat and Pablo PICASSO’s La Fille de l’artiste a deux ans et demi avec un bateau both of which were bought in at just a couple of million dollars below their low estimates of $16m. In the more favourable context of May 2008, Sotheby’s fetched $15.5m for Picasso’s Le baiser, a large painting executed in 1969. Today, bids above the $10m line are much less common: only Christie’s managed to generate a successful 8-figure bid over the 2 days of sales and that was for Picasso’s Mousquetaire a la pipe which fetched $13m. The same piece was last sold at auction for $6.4m by the same auctioneer in November 2004.

This year, the two major auction houses were both seeking to set new records for Tamara LEMPICKA de whose paintings appear rarely at public sales. In 2008, for example, only 5 of her paintings were auctioned compared with 12 in just two days this year as Sotheby’s offered 10 works from the collection of German fashion designer Wolfgang Joop. On 5 May, Portrait of Marjorie Ferry set a new record for the artist at $4.3m. The following day, Christie’s substantially exceeded that score with $5.4m for Portrait de Madame M.

At the end of the two evening sales, Christie’s posted a better overall result than its rival with a revenue total of $89.4m from 38 lots. Apart from the disappointment of a Max ERNST’s Malédiction à vous les mamans that was expected to generate a record but was finally withdrawn from the sale (estimated at $7-9m), Christie’s generated a number of respectable results including $6.8m for Buste de Diego (Stele III) by Alberto Giacometti and $6.8m for another Picasso, Femme au chapeau, (just below its low estimate of $8m). Sotheby’s best result came from a 1932 Piet Mondrian painting which doubled its estimate at $8.2m. This result was undoubtedly carried by the recent record of $24.6m (€19.2 m) generated by Christie’s at the famous Y.Saint Laurent & P.Bergé sale in Paris in February of this year.

Although Sotheby’s sales figures signal a serious depression on the New York market, the majority of art market players seem relatively optimistic (the AMCI at over 40 points on 11 May) buoyed by excellent purchase opportunities after recent price reductions.

Copyright@Artprice.com

**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of http://www.artmarketblog.com, writes the art column for the magazine Antiques and Collectibles for Pleasure and Profit and contributes to many other publications.

Sotheby’s May 2009 NY Contemporary Art Sale – artmarketblog.com

Sotheby’s May 2009 NY Contemporary Art Sale – artmarketblog.com

MARTIN KIPPENBERGER 1953 - 1997 UNTITLED 3,500,000—4,500,000 USD

Sotheby’s 12 May 2009 New York Contemporary Art Evening Sale bought in a total of $40,080,000 (hammer price) against a mid estimate of $62375000 which reflects the continuing decline in the value and desirability of contemporary art. A total of 39 works sold from the small catalogue of 49 works which gave Sotheby’s a respectable 80% clearance rate for the sale. Despite the good clearance rate results were mixed with seven works selling for above their high estimate, twenty within their estimate and twelve below their estimate.

The top performing lots were Alexander Calder’s ‘Ebony Sticks in Semi-Circle’ which sold for $3,050,000 against an estimate of $1,000,000-$1,500,000, Dan Colen’s ‘Untitled (Blow Me) which sold for $320,000 against an estimate of $100,000-$150,000 and Richard Prince’s ‘Can You Imagine’ which sold for $1,150,000 against an estimate of $600,000-$800,000. The most expensive work was Jeff Koons ‘Baroque Egg with Bow’ which failed to break the low estimate selling for $4,800,000 against an estimate of $6,000,000 – $8,000,000 followed by the cover lot, Martin Kippenberger’s ‘Untitled’, which scraped in just above the low estimate selling for $3,600,000.

The biggest disappointments of the auction were Robert Rauschenberg’s ‘Transom’ which failed to sell with a $4,000,000 – $6,000,000, Robert Godber’s ‘Untitled’ which failed to find a buyer with a $2,500,000 – $3,500,000 and Richard Diebenkorn’s ‘Cane Chair-Outside’ which remained unsold with a $1,800,000 – $2,500,000 estimate. The total value of the 10 works that failed to sell was $11,450,000 which contributed significantly to the mediocre result. Of the 39 lots that sold, the average price was $1,027,692.

Considering that Sotheby’s 2008 May Contemporary Art Auction bought in a total of $320,640,000 (hammer price) for 85 lots, the 2009 result looks ridiculously low in comparison. An average price for the 2008 auction of $3,777,2235 compared with the average price of $1,027,692 for the 2009 auction shows that the prices people are willing to pay for contemporary art have dropped dramatically. In fact, the closest results to the 2009 auction come from the 2004 auction where a total of 60 works sold for 65,670,400 USD with the highest price paid for a work being $5,104,000 (including premium) for Lichtenstein’s ‘Step-On Can with Leg’ and the average price paid for a work turning out to be 1,094,506.

**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of http://www.artmarketblog.com, writes the art column for the magazine Antiques and Collectibles for Pleasure and Profit and contributes to many other publications.

Evaluating Art Auction Results Pt. 4 – artmarketblog.com

Evaluating Art Auction Results Pt. 4 – artmarketblog.com

2. Percentage of lots sold by value continued

In part three of this series I looked at the first of two different methods of calculating the percentage of lots sold by value. The first method that I looked at which is calculated by using the following formula:

(total sale value at hammer price)

divided by

(total sale estimate)

x100

is the less frequently used of the two methods and is not the method used by the top auction houses. The main problem with the above formula is that the sale estimate is being used as a representation of the value of the works of art being auctioned which we all know is problematic to say the least. Auction houses use estimates as a marketing tool with a low estimate often used to encourage bidding which would make the percentage of works sold by value calculated using the estimates highly inaccurate.

Other than the estimate for each work as calculated by the auction house there is really only one other indicator of the value of a work of art and that is the highest price someone is willing to pay for the work. When you think about it, using the highest price someone is willing to pay for a work of art as an indicator of value does make sense because, in reality, the true value of a work of art is really only what someone is willing to pay for it at the time it is sold. For this reason, all the major art auction houses use the highest price that someone is willing to pay for a work of art as being representative of the value of that work of art. But what about lots that don’t sell?. Well, the value that the auction house uses for unsold lots is the highest bid for those that do attract bids and the final (lowest) figure reached by the auctioneer for lots that are passed in without receiving any bids. The value that the auction houses use in place of the denominator (total sale estimate) in the formula referenced above is called the knockdown figure and includes:

1. the hammer price of works that are sold
2. the highest bid for works that receive bids but are passed in
3. the lowest figure reached by the auctioneer before passing in a work that did not receive any bids

The formula used by the major auction houses to calculate the percentage of works sold by value is:

(total sale value at hammer price)

divided by

(knockdown figure)

x100

As an example of the way the sold by value percentage is calculated I will use an auction of five works with the following results:

1. Sold for $100,000
2. Sold for $150,000
3. Passed in $100,000 with three bids
4. Passed in at $50,000 with no bids
5. Sold for $200,000

The total sale value at hammer price of the three works that sold is (numerator). The knockdown is the hammer price of the three works that sold plus the highest bid of lot 3 and the price that lot 4 was passed in which comes to a total of $600,000 (denominator). When you use these two figures in the formula you get $450,000 divided by $600,000 x100 which equals 75 – the percentage of lots sold by value. If every single lot in a sale were to sell then the percentage of lots sold by value would be 100%.

Although the auction houses choose to use this particular method of calculating the percentage of works sold by value there are just as many problems with this method as the first method I looked at.  More on this in my next post.

To be continued………..

**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of http://www.artmarketblog.com, writes the art column for the magazine Antiques and Collectibles for Pleasure and Profit and contributes to many other publications.

Evaluating Art Auction Results Pt. 3 – artmarketblog.com

Evaluating Art Auction Results Pt. 3 – artmarketblog.com

2. Percentage of lots sold by value

In part 2 of this series of posts on the real value of the statistics that are used to determine the success of a sale, I conducted an in depth analysis of the percentage of lots sold by number statistic. The other percentage figure often used by auction houses is the percentage of lots sold by value which, unlike percentage of lost sold by number, is rather complicated. There is also very little information relating to the way the percentage sold by value figure is calculated which made this post rather time consuming to put together. Other than the lack of information, one of the main problems with the sold by value figure is that there are variations in the way auction houses and other art market professionals calculate the figure. There is also an issue with determining exactly what the “value” in percentage sold by value refers to. This post will start to address these and other problems associated with the percentage sold by value figure as well as determining what the figure actually tells us and whether it is of any use.

As a result of my research I found that there are two formulas for calculating the sold by value percentage that are the most commonly used. The first formula I will analyse is probably the one that makes the most sense but is in fact NOT the “correct” formula and is NOT the formula used by most of the top art auction houses. If someone were to ask me to calculate the percentage sold by value for a particular auction, and I didn’t know how it was calculated, I would presume that I was being asked to compare the total estimated value of the works with the total value of the works sold. Because the value of the works of art in an auction is a matter of opinion, the auction house’s estimates should be used An example of the way this formula would work is:

(total sale value at hammer price) divided by (total sale estimate) x100

If the total sale estimate was $500,000 and the total sale value at hammer price was $400,000 then you would calculate 400,000/500,000 x100 which would equal 80% sold by value. If it was the other way round and the total sale value was 500,000 and the total sale estimate was 400,000 then the percentage sold by value would be 125%. At this point I will mention that if there are is an estimate range then the average of the high and low estimates should be used as the total sale estimate in the formula. One of the only references I could find to this particular percentage sold by value formula, other than the one I have written above, was on an auction results website which stated that:

% Sold by Value is based on total sales value at hammer price, including the premium, as a percentage of the average of the sum of the high estimates and low estimates for the sale. % Sold by Value can be greater than 100%

Although the formula in the reference above is essentially the same as the one I have been writing about it does have one minor differences that creates an even greater margin for error and a greater chance of confusion. The formula in the reference above includes the hammer price in the sale total which I did not include in my example because the buyers premium is not included in the estimates and therefore should not be included in the sale total. Including the buyers premium in the sale total increases the percentage of lots sold by value because the estimate does not include the buyers premium and therefore results in incorrect figures.

to be continued…….

**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of http://www.artmarketblog.com, writes the art column for the magazine Antiques and Collectibles for Pleasure and Profit and contributes to many other publications.

Evaluating Art Auction Results Pt. 2 – artmarketblog.com

Evaluating Art Auction Results Pt. 2 – artmarketblog.com

In Evaluating Art Auction Results Pt. 1 (see here) I began to take an in depth look at how people interpret auction results and exactly what it is that determines whether an art auction has been a success or not. Continuing on from that post I want to take a closer look at the different statistics that are used to determine whether an art auction has been a success or not and exactly what each of those statistics can tell us. I will conduct this analysis over several posts as the whole subject of art auction statistics is rather more complex and complicated than it would appear to be.

1. Percentage of lots sold by number:

The total number of works sold compared to the total number of works offered for sale is a widely used statistic that can be useful when analysing an auction but only when compared with statistics from similar auctions or, when the difference between the two auctions being compared is taken into account. By a similar auction I mean an auction that has a similar number of lots, the same type of art, estimates of a similar range and works of a similar price range. Just looking at the sold by lot percentage of a single auction doesn’t really tell us much about how successful an auction was because there are a number of factors that are able to be manipulated by an auction house to alter the chances of selling a higher percentage of offered lots.  There are also other statistics that can result in two auctions with the same sold by lot percentage having different levels of success (or failure). As an example of the problems related to the use of the sold by lot percentage as a sole indicator of an auction’s success, if someone were to reach a conclusion that an auction which took place that had the following statistics (auction 1) was a huge success because of the high percentage of lots sold:

Statistics for auction 1 (2009)

Number of lots: 20
Sold by lot: 80%
Sold by value: 80%
Total value: $20,000,000

but this person had failed to look at the statistics for the same sale by the same auctioneer for the previous year (auction 2) which had the following statistics:

Statistics for auction 2 (2008)

Number of lots: 80
Sold by lot: 80%
Sold by value: 80%
Total value: $120,000,000

the person’s conclusion that auction one was a huge success would be questionable to say the least because although the percentage of lots sold is the same for both sales the previous year’s sale had a higher total and a higher average sale price. The significance of this is that an auction house is a business that has to make a certain amount of profit to continue operating and achieve a certain level of financial success to retain people’s confidence in the business. The auction house would have made more profit from the previous year’s sale even though the sold by lot rates were the same which means that from the auction houses point of view, the previous year’s sale would have been more successful because it made them more money.

By reducing the number of total lots being sold at an auction, reducing the estimates and limiting the works that are included in the auction to those that are most likely to sell, an auction house can reduce the likelihood of a low sold by lot percentage. This is exactly what has happened with the auctions that have taken place so far in 2009 as auction houses attempt to keep up appearances in a much more conservative and challenging market. So far this year there have been several sales that have achieved very good sold by lot percentages as a result of changes made by the auction houses to their auctions which I will discuss in more detail as this series of posts progresses.

The fact that it is virtually impossible to analyse one of the statistics without referring to another statistic suggests that there is an important relationship between the various different art auction statistics. Each of the different statistics can tell us something different about an auction but only when each of those statistics are analysed together and the results of that analysis viewed in the wide context of past results with the current market conditions taken into consideration.

There is no doubt that achieving a high sold by lot percentage is a positive achievement regardless of whether or not an auction house has altered a sale to increase the chances of better figures and regardless of whether the results from a comparable sale are better overall. It is important, however, to recognise that a high sold by lot percentage doesn’t necessarily mean that an auction was a massive success.  As I have shown above, art auction results are not as simple or as clear-cut as they may appear.

to be continued……

**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of http://www.artmarketblog.com, writes the art column for the magazine Antiques and Collectibles for Pleasure and Profit and contributes to many other publications.

Evaluating Art Auction Results Pt. 1 – artmarketblog.com

Evaluating Art Auction Results Pt. 1 – artmarketblog.com

In my last post I wrote about how the figures released by the auction houses after an auction can be rather deceiving. Almost every article I have read on the recent February Impressionist and Modern Art auctions says that these auctions were a major success. One journalist even went as far as to say that the auction results are an indication of a bullish market. Now I’m not trying to be picky, but a bull market refers to any market condition where prices are rising so referring to the art market as a bull market when the market is currently characterised by falling prices is incorrect. On a more positive note, the fact that people are still willing to spend large sums of money on art at the current time is a good sign that people have not completely lost confidence in the art market and that there is still plenty of wealth available to spent on art if the price is right. The fact that considerable sums of money are still being spent on art does not, however, mean that prices being paid are on the increase. At the current time it just means that the market has responded positively to lower estimates and the increased potential for bagging a bargain.

After writing my last post I began to think about exactly what it is that determines whether or not an art auction is successful or not. There are statistics that can be used to gauge the success of an auction and they are:

1. Percentage of lots sold by number
2. Percentage of lots sold by value
3. Sale total (value)
4. Average lot value
5. Number of works that exceeded previous sale price

Before these statistics can be used to determine whether or not an auction was a success one first needs to decide whether they are judging the success of the auction in relation to the art market or in relation to the company that conducted the auction. Although this may seem like an unnecessary step I believe that the failure by journalists and analysts to indicate the context in which they are conducting their analysis of an auction can lead to confusion or a seemingly incorrect analysis. The primary motivation of a company such as Christie’s or Sotheby’s, whether we like it or not, is making profits yet I often think that people forget this fact and treat these companies more like non-profit organisations. Not-profit organisations whose job it is to maintain a balanced and stable art market that acts in the best interest of artists, collectors and investors.  But we all know this is not the case. As a publicly listed company, Sotheby’s has a responsibility to it’s shareholders to provide a return on their investment. Therfore, for Sotheby’s, a successful sale is one that gives people a positive impression of the company and is highly profitable so that the share price increases. To achieve the results that they need auction houses often operate on a very thin line between what it is considered to be ethical and acceptable and what is considered to be anti-competitive and unethical.  Sometimes this line is even crossed as was the case with the Sotheby’s/Christie’s commission fixing scandal.

To be continued…..

**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of http://www.artmarketblog.com, writes the art column for the magazine Antiques and Collectibles for Pleasure and Profit and contributes to many other publications.

The Reality of Feb 09 Art Auctions – artmarketblog.com

The Reality of Feb 09 Art Auctions – artmarketblog.com

The first round of major art auctions for 09 have proven that there is still a considerable amount of money available to be spent on top quality and rare works of art provided the price is right. Fresh works from private collections appeared to be particularly sought after, a sign that solid and extensive provenance continues to be a big draw card. Even some of the less impressive works were eagerly fought over which suggests that the low prices and the excitement of the year’s first major auctions may have induced a bit of over-enthusiasm. The conservative estimates gave buyers plenty of reason to open their wallets and the smaller sales encouraged healthy competition for the top works.

Christie’s Impressionist and Modern Art Evening Sale was the most impressive sale realising a total of £63,428,750 / $91,210,543 / €70,088,769 with 83% sold by lot and 88% by value. Sotheby’s Impressionist and Modern Art Evening Sale wasn’t quite as successful as Christie’s bringing in a total of £32.6 million with 76% sold by lot and 68% by value. Sotheby’s failure to mention the sold by value percentage of their evening sale even though they did mention the sold by lot percentage suggests that they weren’t quite as impressed with their results as Christie’s were.

With the Impressionist and Modern Art Day Sales, Sotheby’s trumped Christie’s with the sold by lot and sold by value percentages but Christie’s sale total was higher than that of Sotheby’s. Christie’s sold £14,131,975 / $20,307,648 / €15,841,944 work of works with a 76% sold by lot percentage and an 81% sold by value percentage where as Sotheby’s sold £11,292,825 / $16,179,230 / €12,687,503 work of work with 83% sold by lot and 90% sold by value.

The figures look impressive considering the events of the past six months but were the auctions really as successful as the figures suggest?. In short, no. And here’s why. First of all, Christie’s 2008 Impressionist and Modern Art Evening Sale realised £105,372,000 which is considerably more than the £63,428,750 taken at this years sale. Sotheby’s 09 Impressionist and Modern Art Evening Sale faired even worse when compared with their 08 sale which realised £117 million pounds, more than three times what the 09 sale achieved. Yes, the sales were much smaller, but the auction houses conducted smaller sales because there is not as much money available to be spent on art and the buyers are much more discerning. A smaller sale means that there are less works to fight over thus increasing the chance that the chance that the bidding will be far more competitive. Low estimates provided even more encouragement for bidders to get involved and, as I am sure many of you know, once you get involved in a bidding competition with someone else you don’t want to come out the loser.

Had this years sales had the same number of works and the same estimates it is unlikely that the results would have been as good as they were. Because of this, the only way that they true state of the art market could have been measured using these auctions was if the circumstances (auction size, estimates) were the same as they were the previous year. Sold by lot percentages and sold by value percentages are easily manipulated by the auction houses using the tactics that I have mentioned above. What can’t be manipulated by the auction houses is the total number of people that are willing and able to spend money on art and the total dollar value that they are able to spend. The success of a business such as Sotheby’s is determined by the dollar amount of profit that they make. Common sense would suggest that the dollar amount of profit that Sotheby’s and Christie’s made from their significantly smaller auctions would be far less than the dollar amount of profit they made in the much larger sales of 2008. Adjusting to the conditions to achieve results that appear to be positive is not the same as achieving a positive result.

To be continued…….

**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of http://www.artmarketblog.com, writes the art column for the magazine Antiques and Collectibles for Pleasure and Profit and contributes to many other publications.