“An exuberant Gustav Klimt garden scene sold at Sotheby’s on Wednesday night for about $59 million with fees, the third-highest price for any artwork sold at auction in Europe.
“Selling for 48 million pounds after a valuation of at least £35 million, the painting was fought over by four telephone bidders, reflecting newly energized demand for works by the great names of 20th century art.”
That was the New York Times report from London in early March, offering the latest breathless evidence of the trends that have shaped and reshaped the art world since the Great Recession.
Anita Heriot has had a front-row seat to it all for years.
The president of U.S. operations for Pall Mall Advisors, a London-based firm that advises art owners worldwide, Heriot says most art holders have no idea that valuations have risen so dramatically.
The ascendancy of Asian buyers and technology that allows buyers to bid at auctions from the comfort of their poolside chaise lounges anywhere in the world have helped drive up prices. To an extent, political instability in parts of the world also has helped.
It is, at least for some, perhaps a good time to sell.
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Yet whether you’re selling, holding or giving away your art to a museum or hospital, there’s a certain responsibility that comes with owning art that extends beyond doing all you can to preserve it.
It’s the duty to do your due diligence regarding its worth, an obligation to ensure you know the most accurate and up-to-date fair market value of your piece.
That was one of the central points Heriot delivered in a recent presentation to CCIG clients.
All too often, especially after the passing of the last surviving parent, the children who inherit their family’s artwork make at least one big mistake in how they handle the high-value assets they inherit, Heriot said.
They fail to obtain an independent appraisal and instead trust an auction house or dealer to set the price. The problem in doing so, she said, is that those parties’ interests often conflict with an owner’s.
“The art world is one of the most opaque industries there is,” Heriot said. “The value of art has shot up to the sky and a lot of people just have no idea.”
There are many people who do their best to take advantage of that lack of awareness.
To illustrate her point, Heriot recounted the experience of a Seattle family that had relied on an old appraisal of its paintings. Heriot had gone to see the collection herself.
“We saw four Rothkos, two Francis Bacons, Pollocks, Clyfford Stills. The list goes on and on. I will never forget that day. … In the end, what surprised me was that this collection, which the trust company was valuing at $2 million, was easily worth $140 million. And there had been almost no estate planning.”
Indeed, families often put off developing a strategy for their valuables until it’s too late to make a rational decision, she said. “We see this practically every single day,” she said.
Sadly, without a recent appraisal, art owners make easy targets for unscrupulous buyers who might tell them that their assets are worth much less than they really are.
Knowing the fair market value of an artwork isn’t important only at the time you might want to sell a piece. It’s also critical when insuring it.
Certain insurance policies will protect you if the market value of your art is greater than the amount for which it’s insured. However, even those policies typically pay only up to 150% of the amount of itemized coverage for that article. In a world in which art valuations have doubled, tripled and gone even higher, that’s a lot of money to leave on the table.
What else should you do if you own either a single work of art or have a collection?
Be sure you create and update detailed records of your collection, including information on the artist, the title, date the work was created, medium, size and condition. It’s also a good idea to keep photographs of the artwork in a safe place.
And, remember, although your policy will cover things such as theft, fire or water damage or damage caused during transit, it will not pay for gradual deterioration, such as fading or cracking caused by natural or artificial light.
Mike Rosser leads the Private Client practice at CCIG. Reach him at MikeR@thinkccig.com or 720-212-2068.Back to Resources