The Trouble With Auction House Guarantees

18Nov08

By Emily Waldorf

auctionmalelrg

Despite gloomy sales, this Kazimir Malevich painting sold for $60 million, an auction record for the artist. There will always be exceptions to the rule in the emotionally driven art world.

This year’s annual fall Impressionist, Modern and Contemporary art sales produced the worst results in over a decade according to Carol Vogel’s article in The New York Times.  Although over $600 million of art exchanged hands over the two week auction period, Sotheby’s lost a whopping $52 million from overly optimistic guarantees made this summer when the market looked much brighter.

Prices for the formerly super hot Takashi Murakami, Richard Prince, and Peter Doig dropped noticeably and the market for superstars Damien Hirst and Andy Warhol slowed to a near halt.  In order to protect against future losses, auction house executives are speaking out about reforming their practice of overly easy guarantees.  Vogel writes:

 “To say the party is over is an understatement. Edward Dolman, Christie’s chief executive, said his company would, for the most part, give guarantees only in “exceptional circumstances” and it would not be rebating any of the buyer’s fees back to the seller. Mr. Ruprecht of Sotheby’s expressed similar sentiments: “We’re preparing for a different market. We are out of the guarantee business at least for a while. It’s too hard to predict what tomorrow looks like”…Without guarantees, gone will be the sellers trying to turn a quick profit. “We’re going to be a more traditional business,” Mr. Dolman said and quoted the adage about relying instead on “the three D’s — death, divorce and debt” — to get business.”

Despite all of the bad news, Eli Broad, the definition of a seasoned collector, took advantage of the downturn, deeming the fall auctions a “half-price sale,” and acquiring works by Jeff Koons, Donald Judd, Ed Ruscha, and Robert Rauschenberg for a seeming bargain at $8 million.  It seems the art market is backtracking to the clubbier, more traditional way of doing business that has been eschewed in recent years.   Perhaps this isn’t such a bad thing as it weeds out the serious collectors who are truly passionate about art from those that are solely in search of another trophy to hang on their walls.

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