Judd Tully’s tour d’horizon on the subject of third-party guarantees has some excellent nuggets from the Master’s reporting. However, it also retails a few auction-world prejudices like the former specialist who thinks third-party guarantees give the guarantor an advantage or Tully’s closing line that their popularity reveals a lack of confidence in the art market. A guarantee is a means toward displacing risk. It is a sign of confidence in a market’s depth, not skepticism.
Private dealing, where information advantages win out, is a sign of market doubt. Guarantees are provided by dealers and collectors who buy and sell a lot. When they offer a third -party guarantee, it is sign that they’re confident the work will be salable again quite soon and fearful that a buyer will snap it up. A dealer who thinks a market is shallow will wait for a painting to fail and then make an offer based upon the seller’s new sense of their art’s worth.
The more third-party guarantees we see, the more we’ll know that the art market has legs:
- Each house has its own criteria for such transactions, the details of which are strictly confidential. “I’ve done deals [where the third party] gets from 50 to 80 percent of the upside,” says one New York private dealer, who insists on anonymity, noting that the arrangements have become a primary part of his business. He also points out that a more generous guarantee can result in a bigger payback for the third-party once the bottom line is met.
- For his November 2010 Carte Blanche auction at Phillips de Pury & Co. in New York, Ségalot arranged a handful of third-party bids that accounted for $82 million of the $117 million sale total.