“Someone needs money right away or inherited something he or she doesn’t like,” so that person—in possession of the sort of American or European painting exhibited and sold at Philadelphia’s Schwarz Gallery—comes in looking to sell, said gallerist Robert Schwarz. Most will consign the artwork, awaiting a sale that takes six to twelve months on average (and sometimes longer) to complete, but a few will look for the gallery to purchase the artwork outright. In such instances, Schwarz is generally asked two questions: “‘What price do you think you can sell it for?’ and ‘What would you buy it for?’”
The two figures are usually quite different. If Schwarz believes that he can sell a painting for $100,000, he won’t pay that amount for it but something closer to a wholesale price—usually between 50 and 75 percent of the potential sale. So, why would anyone consider selling to a dealer? There are several reasons.
Money in hand can be preferable to the crapshoot of consigning artworks. With no financial stake in a painting or sculpture, a gallery may or may not make much effort to sell the artwork just to earn the average commission. Auction houses, which only take items on consignment, hold public sales, but it’s not uncommon for there to be no buyers for specific pieces; between 20 and 30 percent of all lots at major auctions do not sell, and this failure tends to rub off onto the artwork itself, making it less likely to sell in the future. Additionally, prices realized at auction often do not reach great heights, as prospective purchasers factor in the buyer’s premium auction houses charge that may be as high as 25 percent, to their determination of what to spend, incentivizing them to make lowball bids. Additionally, auction houses charge sellers a variety of fees (for photography, insurance, storage and marketing), as well as a seller’s commission of up to 20 percent, depending on the hammer price of the lot, reducing their net gains.
Art sellers have options, and many will contact auction houses to get an estimated sales price, and talk to dealers who specialize in the particular type of art to receive a proposal. “People ask me about taking works to auction, and I tell them that fees at auction houses can reach 40 percent,” said Susan Sheehan, owner of a Manhattan gallery that specializes in prints and who is far more apt to purchase artworks outright than to take them on consignment. She does pay a wholesale price but, after explaining auction fees to would-be consignors, the artwork owners are less likely to resent the money they are not being paid.
Sheehan doesn’t ask the owners of the artworks why they want to sell—it makes sense to assume they’re looking for money and want it sooner rather than later. “It’s just cleaner and easier all around,” she said, noting that consignors frequently “call up every week asking if the work has sold. They don’t realize how long it can take to sell works, and they don’t realize how flexible they need to be about the price,” alluding to discounts and overall price reductions that are part of dealer’s and gallerist’s ordinary business.
Part of what makes outright purchases cleaner is that the dealer won’t have to negotiate with a consignor. “The risk in a consignment is the risk of a change of heart,” said Anthony Meier, a San Francisco art gallery owner and current president of the Art Dealers Association of America, who noted that almost all his secondary market artworks were bought outright rather than taken on consignment. “What if the consignor turns around and tells me that he doesn’t want to sell the work anymore? I tell a prospective buyer that I have a work by an artist that the person is interested in buying, and then the consignor backs out. That’s the last time that buyer takes my phone call.”
There are, of course, risks for dealers who purchase artworks outright, which often are factored into the amount they are willing to pay: How much cash do they have on hand? How long do they think it will take to sell the piece? What expenses will they have to lay out to make the artwork presentable to buyers (e.g., cleaning, framing, photography and research into the work and its provenance)?
Neither dealer associations nor gallery associations keep lists of which of their members will buy artworks outright, requiring art collectors looking to sell to ask frank questions in their conversations with dealers. Most sellers don’t hesitate, however. “It’s often the first question people ask,” said Manhattan art dealer Debra Force, who noted that most of the 18th-, 19th- and 20th-century paintings in her gallery are on consignment.
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Dealers of older material, such as Old Master paintings or 19th-century art, are more likely to purchase works, rather than take them on consignment, than galleries of contemporary art. Contemporary art is a moving target because tastes change and what’s popular now may not be in a few years, so dealers don’t want to have too much money tied up in it. With older art by recognized artists, the prices may fluctuate, but it is more likely that people will still be interested in buying those pieces years from now.
The years-from-now part is what often complicates the issue of selling art versus consigning it. “I tell people who come in that they’ll do better if they are willing to wait,” Force said.
There is also a third option for those looking to sell through a gallery, Meier added. Sellers can partner with the dealer, selling a half interest in the work to the gallery, “which provides them an immediate cash relief, plus an upside when the work sells.”
