To the disappointment of many dealers, recently auction houses have been selling not only in public tenders but also under private agreements, actually acting as agents. Selling by private agreement is a direct transaction between the auction house and the buyer in the secondary market when the owner of the sold work gets a pre-agreed amount.
This type of sale gives the seller access to the vast client base of the international auction business, including those who knock down prices for such works and ensure privacy without imposing strict time limits.
For example, Ronald Lauder privately acquired a painting by Gustav Klimt “Portrait of Adelie Bloch-Bauer” (1907), which we discussed in chapter 5. In order to sell their work, collectors must first choose those who can make them the best offer and rely on reliable connections that have proven themselves.
IMAGE: PEXELS
Selling Via A Dealer
If you decide to sell your own works through a dealer or art consultant, this way allows you to advertise the process less than the sale at the auction and allows you to do it at any time convenient for you. For those who are going to sell their favorite work, a private transaction provides an opportunity for greater participation in its future fate, as in this case, the work can be offered to the “right” client.
And yet sometimes it can take months or even years for the dealer to find an interested buyer who is also willing to pay the desired price. Finally, everyone knows that you should trust the dealer, but be careful (Yves Bouvier is a vivid example). If you are offering a job to a museum, it can take a year or more to acquire it.
In some cases, it may be more advantageous for the owner to sell the work directly to the interested dealer, receive the money, and make the final decision on the deal. However, more often than not, the seller gives the work to the dealer for sale. In most cases, the agent who took the work for sale immediately offers its owner the final price by agreeing to pay a fixed amount.
The difference in revenue, usually unknown to the collector, becomes the dealer’s income. It can be 20-25%, but it can be 50% or even 100% of the price that was promised to the owner. For him, this combination carries less risk, because he is guaranteed, for example, $200,000 payment for the work sold, even if the dealer can sell it for only $210,000.
And yet, the collector really has no way of finding out how much the agent has earned on this deal. Therefore, this way of selling will always be not very transparent, and later it can cause anxiety and loss of trust.
Dealers and art consultants usually know the market much better, and there are many stories about such experts, which are enriched by collectors. Thus, in January 2012, the collector Ian Coules filed a lawsuit against the dealer: he sold the artwork for $2 million, of which one was taken away as a commission.
If the owner agrees to the sale with the agreed amount of payment, he should also insist on determining the maximum amount of dealer revenue from the transaction. If an art consultant is involved in the process, the contract should stipulate that he has no right to take a commission from third parties (for example, from the buyer).
The best variant for the collector is the system of premium interest, which the dealer receives from the final sale price, simply speaking, in this case, the dealer receives a percentage of the revenue.
Usually, it is 20-25%, but if the work is very valuable, a smaller percentage is also possible. Less often an agreement is made on the shared principle when there is an agreed price, and any amount received over it is divided equally.
In addition, the dealer’s contract for the transfer of the work for sale must stipulate the term for its sale, be it three months or a year. If the work has not been sold during this period or if the market is very unstable, the parties may revise the terms or reschedule the period of sale.
The more volatile the market, the shorter the selling period should be. To catch a good time, the dealer needs some time, and yet the collector must have the right to take the work after the specified period of time at any time.
If you are interested in even more business-related articles and information from us here at Bit Rebels, then we have a lot to choose from.
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