Daniel Grant examined the post-sale buying a few weeks ago on The Huffington Post. He describes the action as essential to the overall functioning of the art market for all sides–buyers, sellers and middlemen–but quotes Aileen Agopian of Phillips on the positive effect those sales can have in mixed market: “It can turn a so-so sale into a very successful one.”
Here Grant lays out the pluses and minuses:
The auction world prides itself in its transparency but, following a sale, deals are made in quiet by all parties: Consignors of bought-in lots, especially those with reserve prices, may owe the auctioneer money — called a “buyback” — for various fees, such as for catalogue photography, outside expertise, insurance and shipping, which provides them with a strong incentive to lower their reserve or bottom price in order to sell the object. For instance, Bonham & Butterfields in San Francisco assesses “an unsold property fee equal to 5% of the reserve,” which is in addition to catalogue illustration fees ($200 per lot for color and $150 per lot for black-and-white), the cost of shipping and an insurance fee of one-and-a-half percent of the reserve. The expense may well compel consignors to take a small loss rather than a larger one. In general, the “three d’s” that bring a large percentage of consignments to auction — death, debt and divorce — often encourage a willingness to be flexible.
The post-sale wheeling and dealing is part continuation of the sale (“post sales have a very practical purpose in the art world,” Nick Lowry, president of the New York-based auction house Swann Galleries, stated) and part client services (helping consignors get rid of stuff, keeping them happy), and all about moving merchandise. Certainly, most collectors and dealers are aware that an artwork that is bought-in, or unsold, at auction is viewed as having a problem, such as being in poor condition or being of little interest among collectors. The lot, in auction parlance, is “burned,” and may be more difficult to sell in the future. “There is a shadow on artworks that have been bought-in,” Gene Shannon, president of Shannon’s, said, “and a post-sale lessens the scarlet letter somewhat.” Auctioneers themselves may agree to reduce their commission to help lower the object’s cost, because “I’d rather make something than nothing,” Richard Wright, president of the Chicago-based Wright Auction said, “and we need to recoup our costs.”
The Auction World’s Buy-Ins and Post-Sales (The Huffington Post)