Comparing offers from galleries and auction houses
Canadian art on consignment: The numbers, the quality and "the mystery box"
Our fixed price art gallery business is supply driven making the challenge that of securing a supply of very high quality works of art to advise our clients to purchase. Unlike art auction houses where, according to the president of one Canadian auction business, one sees "the best as well as the worst”, ours is a vetted selection of works of art . We have said it time and time again that we are aggressive buyers of outstanding works of art and that we do so at the highest competitive prices. However, we are regularly approached by owners of fine works of art and engaged in discussions whereby our presentation is in competition with that of an auctioneer, of a sale on a consignment basis only. Consequently we, too, are asked to suggest a consignment procedure and price.
Recently, we had a discussion with a gentleman, an owner of a highly important and rather glorious example of painting by a first-tier Canadian artist, who asked us to present him only a consignment proposal whereby we would agree to a selling price and we would make a reasonable commission based on that selling price upon sale by us and settlement to us. As best as we are able to transcribe the verbal discussion which ensued in this abbreviated forum, after an extensive preamble and serious market analysis studying any number of comparables we stated that we wanted to offer this important painting for sale with a view in mind to netting the owner a total of $315,000. We were confident that at a retail price of $350,000 the painting represented fair value to a knowledgeable collector of works by that artist and that we could sell the painting within a limited period of time and at that price. In the remote eventuality we do not sell it the painting is returned to him with absolutely no charges to be paid by him.
Our competition had already made a proposal, one that was not disclosed to us until after we had made our presentation. They proposed an auction estimate of $175,000 - $225,000 (if sold between those numbers it would net him approx $155,000 -$200,000*) but the auctioneer said that it could conceivably sell for as much as $350,000 or $400,000 in his sale. Under the first scenario the auctioneer would charge the buyer $203,275, earning a handsome $50,000* commission and at a hammer of $225,000 the auctioneer would charge the buyer $261,250.00 while earning a tidy $60,000* commission. If per chance the work of art did not reach its reserve at the time of the auction, tradition would have it that the consignor would owe the auctioneer over $9,500 (representing a buy-in charge of 4% of his reserve, the insurance fee representing 1 ½% of his reserve as well as those miscellaneous and sundry minor charges) *.
So what are the options here? We have suggested a consignment agreement authorizing us exclusive right to show this painting discretely to the most enthusiastic collectors of works by this artist in the market. From us, when we sell it, he gets $315,000. What the auctioneer says amounts to a net of $154,875*, or maybe $199,125*. Or maybe even more...!
Relating the dialogue to Jon, he referred me to a clip from the television series Family Guy, which satirizes what for some is the lure of the gamble or “Mystery Box". In this episode the protagonist, Peter Griffin and his wife, Lois, have just won a prize, his lifelong dream, a boat! The catch is that before they get their prize, they must sit through a time-share presentation by a slick salesman. The Griffins reject the time-share but as a prize, the salesman then offers them the option of accepting the boat or alternately gambling on the "mystery box". Against her protestations Peter says to Lois; "A boat is a boat but the 'mystery box' could be anything. It could even be a boat!" and he selects the "mystery box", which turns out to contain tickets to a comedy club performance. To our mind as owners of fine works of art, under similar circumstances with comparable options we have no doubt as to which selling option we would select! We’ve said before that we are aggressive buyers of great paintings and we are. The auctioneer never was asked to propose an offer to purchase nor were we but we are confident that on an outright purchase basis we would have offered several tens of thousands of dollars more than the other!
If you the reader are inclined to agree with our obvious preference in the selling scenario and if you have an important work of art you are considering selling on a consignment basis or to sell outright we emphatically encourage you to pursue a dialogue with a fixed-price gallery like Galerie Walter Klinkhoff or other reputable fixed price art galleries. Other articles about selling art. *The calculations contained herein represent the conventional auction commission structure in general. Copyright © Galerie Walter Klinkhoff, 2010