According to basically every financial advice column on the internet, the so-called “Great Wealth Transfer” is upon us.
In the coming decades, Millennials are poised to inherit anywhere from $15 to $68 trillion from their Baby Boomer elders — more than any generation before them. Inheritance might seem like a dream-come-true, but that’s a superficial assumption and doesn’t take into account the myriad realities of wealth transfer, which include: taxes, guilt, bureaucracy, and more taxes. A recent article published by Vox attempted to dissect the “sum total of inherited wealth’s effect,” and ultimately concluded that everyone’s circumstances are different, but that inheritance is typically messy, confusing and emotionally fraught.
An art collection is an asset class that should be carefully considered in any estate plan, especially if there is more than one beneficiary. In those situations, estates are often liquidated, with the cash then being split among the beneficiaries, and/or being used to pay off estate taxes. However, when someone dies, dealing with the complexities of selling off an art collection is rarely top-of-mind — when you’re grieving, the last thing you want to think about is, “how should I sell this art?”
If you have a serious art collection, or have a parent with a serious collection, consigning to auction is a tried-and-true method of liquidating those assets.
Unlike the white cube gallery paradigm, which is essentially designed to feel intimidating and offers objectively little in the way of transparency, auction houses are always happy to entertain new business and therefore welcome every inquiry — even if you’ve never consigned an artwork before.
Artwork Archive spoke to Amelia Manderscheid of Bonham’s auction house about consigning art to auction. Even if you only have one piece to sell, the auction route could be your best bet for achieving the highest price for your artwork.
Amelia has 13 years of experience in the secondary art market. She has worked for Artnet, David Zwirner Gallery and Christie’s, where she was the Global Head of eCommerce & Specialist for Post-War & Contemporary Art, as well as Head of Sale for Andy Warhol at Christie's, overseeing Christie's exclusive partnership with The Andy Warhol Foundation for the Visual Arts. Additionally, Amelia holds an MBA from Columbia University and is an angel investor in Silicon Valley startups.
Currently based in San Francisco, Amelia brings a keen understanding of market metrics and investing to her role as Vice President and Senior Director for Contemporary Art at Bonhams. She also does appraisals and advises clients on every step of their auction house journey.
Here’s Amelia’s advice on consigning work to auction, whether you’re planning your estate, have recently inherited a collection, or are just hoping to sell a few pieces.
Amelia Manderscheid. Photo by Praise Santos.
Have the difficult conversation — before it's too late
No one likes to think about their own (or their loved ones’) mortality, but having a difficult conversation with your parents, spouse, or children will make the eventual passing of the baton, so to speak, much easier for everyone involved.
Amelia agrees, “My first piece of advice would be that before someone passes away, try to have a conversation with them. We'll start there. I just literally experienced this with someone. I walked up to their relative's house and they said, ‘we honestly waited too long to ask him all these questions and, at that point, he was not quite with it. And we couldn't get all the answers about the artwork.’”
Once you’ve broached the topic, the next step would be to get an appraisal of the collection, as well as any other valuables, if applicable.
“I've been doing so many more appraisals for people who I term ‘pre-estates’ lately,” says Amelia. “These are collectors who don't want to burden their children with managing their estate after they’ve died.”
“The proper term is ‘a valuation’,” she explains. “It could also include other collectibles like jewelry, cars, or wine. If it's a serious collection of, let's say, over 15 pieces of art, you could probably have an auction house come by and give you auction estimates, which are free of charge. And then you'll have, at least, a rough idea of what the artworks are worth collectively, and individually.”
A database system like Artwork Archive is an important tool to organize not only artwork information and provenance records but also various appraisals and professional correspondence.
Shop around for the best estimates
If a collection is varied across numerous genres, objects, mediums, etc., an auction house can create a comprehensive appraisal due to their range of in-house “specialists.” There are only five major auction houses worldwide: Sotheby’s, Christie’s, Bonhams, Phillips, and Heritage.
Sotheby’s and Christie’s are considered to have a duopoly, but they’re not the only game in town. There are actually a variety of other auction houses that may possess a niche specialty in whatever collection you’re hoping to consign — from prints, vintage posters, and other works on paper (Swann) to “Western Art” (Hindman) to design objects (Wright).
“I would try to get estimates from at least two auction houses, if possible,” Amelia advises. “Then you can compare those estimates from one auction house to the other to determine who will get your business.”
The estimate is essentially a price range that the auction house believes the artwork will sell for. A reserve is the lowest price that the auction house will accept for a piece. If bidding doesn’t reach a reserve price, then the work is “bought-in” by the auction house, which is bad for the artist (because it could negatively affect their primary market prices) and, obviously, bad for the seller.
In this case, because the work essentially failed to sell (and is now “burned,” in art world parlance) it's unlikely that another auction house will want to take it on consignment. That’s the risk with selling at auction and why estimates are so important.
“Of course, the auction house can and should be able to share with you how they got to those estimates — meaning comparable sales for different types of work similar to those works in the collection,” says Amelia. “Usually, auction houses base their estimates on previous auction sales by the same artist.”
When comparing estimates, keep in mind that this is all part of auction house mechanics. Amelia explains, “An estimate is an invitation to bid, so they are typically going to be lower than the ‘fair market value' of an artwork (or estate).”
Hammer Time — and other auction house terminology to know
Like any fiscal transaction, there are almost always fees with selling (or buying) at auction. And, because the art world loves its own lexicon, these associated costs have special terms. Amelia breaks down the vernacular below:
The hammer price is what an artwork ‘hammers for’ plus a buyer's premium. When a consignor is selling at auction, the amount of money they receive is the hammer price less any seller’s commission.
A buyer's premium is public knowledge and is set in advance. Everyone pays the same buyer's premium — it is a fixed number. You can read what it is on the auction house’s website.
The seller’s commission is variable. It usually ranges from 0% to 10%.
The enhanced hammer price varies, and it is based on the value of the collection and the competitive nature of the collection. This is why you should get more than one proposal before you decide where to consign your collection. Then you can compare the offerings, not only of the estimates but also of the costs to consign and the rate of seller’s commission to be charged.
Guarantees are always attractive to sellers. There are two types of guarantees:
A third-party guarantee is when an individual promises to buy a consigned piece for a set amount of money. This assures the seller that, no matter what, they will receive some payment for their consignment.
A house guarantee is when the auction house itself guarantees a seller a certain sum of money. Auction houses typically only do house guarantees for entire collections — generally estates with hundreds of artworks and a value level of, on average, $20 million-plus.
Auction houses like to do house guarantees for estates because then they get to assume total control — they get to set the estimates, set the reserves, and determine the marketing strategy. And, it turns out, when you let the auction houses do that, they tend to sell the works very, very well. If one work doesn’t sell as well as they’d hoped, they're able to make up the difference on another work that sells far above its estimate. So they also get to minimize their risk.
With a guarantee of any kind — third party or house guarantee — it’s important to understand that it is a minimum guarantee. That means the seller could still make more money than the guarantee stipulates. So if you have a guarantee for $2 million on an important painting, but the painting sells for $3 million, then you will get the $3 million (less whatever costs). As is evident from this example, such guarantees typically only happen on the extremely high end of the market, with the most valuable pieces.
Who sold it better? Auction houses vs. Galleries
Amelia emphasizes that auctions differ from galleries because “we want you to call us and we want to talk to new people. If you are the world's biggest collector, or if you're just starting out, if you want to buy or sell, we want to talk to you.” Often, this is not the case with galleries.
“Auction houses are very accessible in that way,” Amelia says. “Whereas galleries have very different interests. They generally work for their artists (or artist estates) and so where and with whom they place the work is the most important thing. And they want to place the work for the long term. It’s just a different stakeholder situation.”
Unlike most galleries, Amelia stresses:
“We work for our consigners. They hire us to sell their art for the highest price possible. We are very open and transparent with inbound solicitations. We even have a ‘consignment hub’ on our website. So, if you have only a couple of artworks, and you want to know what they’re worth, you can just literally follow the instructions on our website (any other auction house has this, too). And then your query will be routed to the right person who can give you an estimate. We are very interested in providing those estimates — auction houses provide estimates free of charge. All of them do. Appraisals usually cost money, but estimates are free — which is why I said that if you only have 10 or 15 works, you might just want to get estimates to start with.”
In general, the art that will sell the best at auction is, unsurprisingly, by artists who have already sold well at auction. “We are in the repeat sales business,” Amelia says. “We generally prefer not to bring in works by artists who have never sold at auction before. That’s because part of what we do in our intelligence gathering is to determine who the likely buyers of a particular work are based on their buying history.”
Auction houses are legacy businesses — the first auction houses date back to the 17th century. The auction is thus a time-tested strategy to achieve the highest price for whatever goes “under the hammer,” especially when it comes to estates and works by well-known artists.
As the “Great Wealth Transfer” commences, if you happen to be on the inheriting side, then your preferred auction house definitely wants to hear from you.
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