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Art Market Watch

BUYER’S REMORSE & THE AUCTION BUSINESS
by Daniel Grant
 
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“Everyone has experienced some difficulty in getting payment from Chinese buyers,” said Leslie Hindman, president of the eponymous Chicago auction house. Perhaps not as much experience as Sotheby’s, which has brought nine lawsuits against successful bidders in Hong Kong for failure to pay an aggregate $22 million on 19 lots in Asian art sales between 2008 and 2011, but experience nonetheless. “In every sale, there is a problem, but it’s not always a terrible problem,” she said.

The problem of slow payment or nonpayment is hardly restricted to the Chinese market, of course; clients in the West as well as bidders in Russia or India or the Middle East or South America or Indonesia -- newly wealthy people in the developing world -- succumb to “what I call buyer’s remorse, especially when they just paid a record price for something,” said John Scofield, who directs the three annual Asian art sales at Eldred’s Auction Gallery in East Dennis, Mass. Figuratively knocking on wood, Scofield did note that at its most recent Asian sale, last December, the auctioneer had no problems in payments. “Maybe, that was because there was nothing so terribly expensive.”

And, maybe, it is because the auction house is doing a better job of weeding out the potential deadbeats among those seeking to register for the sales. “We are identifying our bidders more carefully, asking them ‘Where else have you made purchases?’ and checking with those other auction houses,” such as Leslie Hindman, Skinner (in Boston) and Doyle (in New York City), among others. “We ask, Does this person pay his bills? How promptly? Did he argue? Did he say, ‘I didn’t think the buyer’s premium applied to me?’” When this network of auction houses reveals problems, Eldred’s does not allow the individual to register, or it may require a deposit of 10 percent (in the form of a bank or certified check or a wire transfer from a bank) for whatever that prospective buyers hopes to bid on. If they are successful bidders, the deposit will be deducted from what they owe; if they make no purchases, the money will be returned to them.

Scofield noted that regional auction houses are good at providing information on bidders and buyers from overseas, only noting that Christie’s and Sotheby’s are “not very cooperative.”

Neither of the world’s two largest auction houses would comment for this article, but a spokeswoman for Sotheby’s acknowledged that the auctioneer had established a policy last year that bidders on what are called “premium lots” are required to make a deposit of HK$1 million ($128,791) in order to participate in its Hong Kong sales.

The problems of slow-paying and nonpaying foreign-based buyers is not exclusive to the auction world. Art dealers who meet collectors in the developing world at art fairs in South America, the Middle East and Asia also have reported “cultural differences” in how items are bought and sold. “We’re all learning each others’ practices,” said Nicholas Olney, director of New York’s Kasmin Gallery. “They are learning Western business practices, you pay in 30 days or over some scheduled period of time, and we’re learning about them.” He noted that with buyers in Hong Kong, India, Indonesia and Turkey, “the relationship is paramount. It’s not just a matter of meeting someone for the first time at an art fair, who says ‘I like the painting, and I’ll agree to pay this price,’ and then it’s all done. You have to spend more time building trust,” which may involve a number of telephone calls, letters and face-to-face meetings -- more of that than for most collectors in the United States and Europe. However, “once trust is established, things proceed pretty quickly.”

Adam Sheffer, director of New York’s Cheim & Read gallery, also noted that in years past there have been repeated instances when collectors in the Middle East would agree to purchase an artwork but then never remit money, at which point “we just put the work back on the market.” However, the gallery has established relationships with certain buyers who do pay eventually, and “we understand their payment patterns, which helps.” Learning those cultural differences makes a difference, he added, particularly “the amount of consideration they want to be paid.”


DANIEL GRANT is a contributing editor of American Artist magazine and the author of The Business of Being an Artist and several other books.

 





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