Auction House Guarantees Put Pressure on Dealers

The Art Newspaper’s Charlotte Burns wrote about the profusion of guarantees during last week’s auctions. But reading between the lines of these quotes she presents, there’s an important and lingering question about auctions and guarantees. Namely, is the sales growth coming from an expanding market? Or do the auction guarantees torpedo private dealers more than any other market participants?

A guarantee gives the seller the best of both worlds. The seller can sleep at night knowing they’ve made a deal they’re content with. But if the work sells particularly well at auction, they’ll participate in the windfall. That’s risk-free selling and it leaves private dealers little room in today’s market:

“The auction houses are speculating to accumulate. They’re giving guarantees in order to be seen as the guys who can handle that kind of art,” says the London-based dealer Hugh Gibson, of Thomas Gibson Fine Art. The practice seems to be paying off, especially for Christie’s. It has been particularly aggressive over the past couple of years and the soaring success of its sales is attracting the best consignments.

“There was so much excellent and high-priced material at Christie’s that many people were wondering whether there could be that many buyers in one evening to absorb it,” says Allan Schwartzman, a partner of Art Agency Partners. […]

“The question is, where we will go from here—will the market continue to grow? People have been saying the bubble will burst for the past three or four years but it’s just got bigger and bigger,” Gibson says. “I don’t see any reason why Christie’s won’t break the billion dollar mark in May next year. There are still a lot of great works out there.”

In auctions, unlike in life, there are guarantees  (The Art Newspaper)