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Pablo Picasso
Yo Picasso (Study for Self-Portrait)
sold for £1,763,750
at Christie's London
June 25, 2001

Tête d'homme et nu assis
sold for £333,750
at Christie's London
June 26, 2001

Le miroir
sold for $435,000
at Christie's New York
May 10, 2001

Nature morte à la bouteille de rhum
sold for $7,922,500
at Sotheby's New York
May 10, 1999

Paysage au pin
sold for $390,750
at Sotheby's New York
May 9, 2001

La fille u concierge tenant une poupée
sold for $1,216,000
at Christie's New York
May 9, 2001

sold for $7,156,000
at Christie's New York
May 9, 2001

Le peintre et son modele
sold for $3,746,000
at Christie's New York
May 9, 2000

Le repos
sold for $7,925,750
at Sotheby's New York
Nov. 9, 2000

Femme aux bras croisés
sold for $55,006,000
at Christie's New York
Nov. 8, 2000
Art Market Guide 2001
by Richard Polsky

One of the oldest jokes in the art profession goes something like this: "When can you tell if an art dealer is lying?" Answer: "The minute he starts moving his lips."

Obviously, as an art dealer myself, I don't believe this to be the case. But the above one-liner does illustrate the perception that many people have of art dealers. While space doesn't permit a full rebuttal, it is important to consider the factors that make it so difficult for an art dealer to be totally forthcoming with his clients. Basically, a scrupulous dealer will provide a collector with 90 percent of the information that's relevant to a deal that's on the table. The other 10 percent that isn't disclosed is part of the "mystique" that makes a work of art so alluring.

The most frequent misperception among collectors is that art dealers make vast profits on their transactions. In truth, that is rarely the case. Sure, every dealer can point to a few scores over his career where he tripled or quadrupled his money. But the reality of the business is that it's high risk, but not always high yield.

The bottom line is that most dealers get involved in the art world because they are fascinated by the art itself as well as the lifestyle -- not because they view dealing art as the path to riches. Most of the time, unless you're staked to a pile of money or have money that you made in another field, it's a pretty tough way to make a living. In fact, most art dealers buy and sell art because they can afford to, not because they have to.

For the sake of argument, let's say you're a dealer and you have a mere $500,000 to spend on a Picasso. Where do you begin?

Your first decision as a dealer is to decide what period of an artist's career has the most potential for appreciation. If you decide Picasso's Cubist works have the most upside, you're out of luck -- you can't buy a Cubist painting for $500,000. A good one starts at $5 million. You're forced to consider buying a late work from the 1960s.

But even here, your vision is likely to be thwarted. You would have to settle for an extremely small canvas. While late Picassos have been going up in value, it has been more a function of the scarcity of early work, than the quality of the late work. That means you're going to have to buy a painting that you might not necessarily believe in or want to live with.

Let's say that you've reconciled in your mind that you'll take the plunge and buy a late Picasso, even though it's not your first choice. Your next move is to find a painting that's undervalued. The easiest course of action is to buy one from another dealer or at auction. But each of these options has their drawbacks.

If you buy from a dealer, you may be buying a painting that's less than fresh to the market. Chance are, despite the dealer's furious denials, that it's been shopped around -- which reduces its desirability.

If you buy at auction, the amount of money that you paid for the painting becomes public record. As a result, you usually have to warehouse the picture for at least two years, until collectors have forgotten about the painting and what you paid for it.

The best-case scenario would be if you already knew of a late Picasso in a private collection. Assuming you had a good relationship with the owners, you would summon the courage to place an exploratory phone call. You call them up, and yes, they might consider selling for the right price. Now you've opened Pandora's box.

Initially, the collectors are going to rely on you to give them an honest appraisal of the painting's value. If you quote too high of a price, just to hype them into selling, you're going to have a problem down the road when you fail to deliver on your promise. Conversely, if the numbers pencil out too low, you may scare them out of selling. If the owners are particularly savvy, they're going to ask you difficult questions about current market conditions, as well as past results for similar Picassos at auction. Ditto for gallery prices.

Now you're in a no-win situation. As when giving a deposition, your best strategy is to answer the questions but not volunteer too much information. You want to allow yourself as much room as possible to maneuver. It's unfortunate, but you can't be totally forthright with the owners and still make money.

For example, if you give them an honest evaluation of their picture and tell them it's worth $500,000, they'll say, "Fine, give us $500,000." Although they expect you to make a profit, even if you offer them $450,000 and explain that a ten percent profit is extremely reasonable, chances are they'll be appalled by your greed. All the collectors see is that you're going to make $50,000.

What collectors don't understand is that you're taking an incredible gamble if you buy the painting. They have no idea what you're up against. For openers, chances are you borrowed the money and have to pay carrying costs. Let's say your cost of the use of money is ten percent. That means for each month you hold onto the painting, your account is debited $4,166, or $50,000 a year. If you can't position the painting within a year, you may have to try and dump the work at auction just to recoup your losses.

Then there are a multitude of expenses that you're likely to incur selling the Picasso. You have to insure the painting, you may have to hire a conservator to have it cleaned, and you'll probably put an expensive gold leaf frame on it. There may also be crating and shipping costs. To market the painting, you have to employ a professional photographer to shoot costly transparencies. While all of this is being done, the meter continues to run.

Your investment is also vulnerable to the gyrations of the American economy. When the economy goes south, one of the first things the wealthy quit buying is art. Obviously, there are also fluctuations within the art market. Let's say that a major Picasso collection comes on the market and winds up at auction. The effect of such a sale could go either way. If the sale is a disaster, you have a serious problem on your hands.

But for the sake of argument, let's say that luck is with you. A group of late Picassos come up to auction and all of them sell over estimate. The ensuing publicity about the sale gives you some positive momentum. After only three months you find a buyer for your Picasso. But the buyer turns out to be another dealer, which means you're not going to make as much of a profit as if you sold it to a collector.

What's more, dealers can be notoriously slow about paying their bills. With some reluctance, you agree to a deal, ship the painting off, and pray you'll be paid in a timely fashion. But even then you're not home free.

The painting could arrive damaged in shipping. Or the dealer's commitment may be a ruse. He may have agreed to buy it just to get you to send him the painting. Meanwhile, he was really planning all along to show it to a collector. The collector sees the painting and turns it down. The dealer then calls you with the absurd excuse that the painting has a "condition" problem or says the provenance (history of ownership) you gave him was inaccurate. Believe it or not, a well-known New York dealer has a reputation for pulling this scam from time to time.

It's been said many times before, but the only time you have a firm deal is when you deposit the check -- and it clears. Such risks explain why a dealer is often forced into misleading a collector on the value of his property. Realistically, you can't buy inventory and make only ten percent. On a $500,000 investment, you're looking to make $150,000 to $250,000, or more.

The other approach to dealing out of the back room is taking works on consignment. Here, it's completely logical to broker deals for ten percent. After all, you're not risking your own capital. Unfortunately, when you receive a blue chip work on consignment, it's usually not first-rate. If a collector has something outstanding to sell, they know they can find a buyer on their own or put it up to auction.

There are exceptions to the rule. If the collector originally bought the work from you, as a courtesy he might let you handle its resale. For that reason, whenever possible, you want to sell to a collector rather than a rival dealer. That way you know where the bodies are buried.

If you're fortunate enough to secure a great consignment, it's still not time to celebrate. If you don't move fast enough, the collector can (and will) withdraw the work on a whim. Sometimes a rival dealer will see a picture in your gallery, know the collection it comes from, and call the owner to make a deal -- cutting you out of the loop. The point is that whenever possible you want to control the art object. To succeed on the secondary market, you generally have to be a well-capitalized buyer.

Naturally, there are other scenarios that the Picasso deal could take on. However, what's relevant to this discussion is that collectors not worry so much about whether a dealer is being honest. It's far more prudent to worry about covering your side of the equation by doing as much research as possible on the artist you are planning to acquire.

But you also have to be realistic about where the dealer is coming from -- namely the risks he has taken when he offers you a work from his inventory. Once you've done your homework, and considered the dealer's point of reference, you'll then be on a level playing field and in a better position to negotiate your deal.

RICHARD POLSKY is a private dealer specializing in post-1960 works of art. Questions or comments can be directed to Richard Polsky at