The truth about art auctions.

I have been collecting artworks for several years now and acquired nearly 400 pieces in the last five years alone. A significant portion of my collection was purchased at auctions, and while participating in auctions was exciting, the outcomes were not always favorable, especially in the beginning when I often paid well beyond justified value. Art enthusiasts can understand the excitement of acquiring a new piece for their collection. However, add to that the thrill and dynamic atmosphere of auctions, and you find yourself caught in a whirlwind that pushes you to pay much more than the market value of a work.

I have come to the conclusion that art auctions ARE NOT FOR EVERYONE. Of course, there are instances where you may stumble upon a hidden gem at a bargain price, but those are very rare. The mere probability of such a treasure being incognito at an auction is akin to a national lottery, and then you must possess the skills to recognize the value of that work when the auctioneer, art experts, and numerous professional collectors participating in the auction have not recognized it.

For most novice, purchasing art at an auction is rather risky. First and foremost, it is essential to know that not everything sold at an auction is necessarily in good condition. I estimate that around 40 to 60% of the works sold at auctions have defects ranging from minor to much more serious.

Take for instance the following painting that was offered at an auction in Montréal a few years ago.

 

The auctioneer description on the internet is: Oil on Canvas by artist Pattie Iles dated 1905, 12’’x24’’. Estimated price $200 - $500. Starting bid $50. And the picture on the left side is provided. Can you tell from the provided information if the painting is in good condition?  Th short answer is no! You must go to the auction house and carefully examine the painting from back to front to tell.

The photo on the right side shows the painting with a source of light on the back revealing three puncture holes that where not visible on the pic provided by the auction house.

A closer examination confirms the extent of the damages.

 

Auctioneers, due to time constraints or lack of interest, do not rush to inform you about these defects. It is very rare to find a note about the condition of a work in the auction catalog or on the website. To obtain this information, you must ask for it. And while most auction house employees will do their best to provide you with an accurate assessment, they are not specialists, and their inspections of the artworks are often cursory and incomplete. The only way to ensure the good condition of a work is to examine it yourself or have it examined by a trusted specialist.

Beware of counterfeits as well! Auction houses put little to no effort into confirming the authorship of the works they sell, and no auctioneer guarantees their authenticity. Once again, you are left to your own devices, and you must conduct the necessary research to reduce the risk of becoming the owner of a forgery or falling victim to a misattribution of the artist.

Also, be aware that once you win a bid, you can no longer change your mind. You are obligated to pay the total amount of the bid, the buyer's premium, which can vary from 15% to 25%, and applicable taxes. No returns are possible. If you do not wish to keep the artwork, you can resell it at the next auction with a seller's premium, which can also range from 15% to 20%. So, assuming that upon resale, you get the same price you paid, you still lose between 30% and 50% of the purchase price. It's better not to make a mistake, isn't it?

The most common idea that "art bought at an auction is always a better deal" is false. This concept attracts many buyers to auctions while contributing to its falsehood at the same time. Obviously, the more buyers there are at an auction, the higher the bids go. The reality is that there are many more people who overpay at auctions than those who make a good deal. But how can you guard yourself against this? First, you must be able to determine the true market value of the work, and then you must be able to stop when the bids have reached that value. All that is easier said than done. In fact, determining the true value of a work requires a fair amount of experience. You must continuously monitor market prices, be well-acquainted with the artist, their work, the period for which they are recognized, the condition of the work, and so on. Be cautious of the estimates provided by the auctioneer; there is often a significant variation in these estimates, which are all too frequently inflated and give a false impression that you have made a good deal when purchasing below the minimum estimate.

Finally, assuming you have done all your homework, accurately assessed the value of a work that interests you, and ensured its good condition, it is now time to participate in the auction. With luck, the bids stop below your target, but more often than not, that's not the case, and the price continues to rise. So, what do you do? You might think, "I may have underestimated it," and place one last bid. But someone else raises their bid, and you find yourself caught in the whirlwind. Then you think, "After all the research I've done, I can't just give up now," and you place another bid, but the price goes up again. Next your thoughts turn to the love you feel for the artwork – "It's exquisite, it would look so perfect in my office" – and you bid again. As a result, you end up paying well beyond what you had planned and most likely more than its fair value. A professional collector would have stopped when their limit was exceeded and focused on the next auction.

To illustrate, out of about a hundred artworks I evaluate, I bid on around twenty, and I end up winning a maximum of 3 or 4 and it often happens that I leave an auction without buying anything at all, grumbling of course, about all the effort that led to nothing, but still content with my self-control. I tell myself that next time, I'll find something even better.

If, despite all these difficulties, you still want to participate in auctions, I advise you to start by attending a few as an observer, without bidding, just to familiarize yourself with the environment. Learn about the artistic field that interests you. Get to know the artists and their works and when you are ready to actively participate in an auction, start with a less expensive artwork. This way, if you make a mistake and pay too much, it won't be too serious.