By: Serach Nissim

New York’s auction houses have been preparing for the prime November auction season to start this week.   As reported by Crain’s NY, hundreds of Impressionist, modern and contemporary artworks will be up for sale at Christie’s, Sotheby’s and Phillips. There are single pieces valued at over $1 million.  It is estimated that the three auction houses will sell a total of about $1.9 billion to $2.5 billion.

The NY November sales are mixed with a touch of anxiety, as Hong Kong and London auction houses saw mediocre or even grim results in October sales.  Art experts say the upcoming New York sales season comes with more than the usual jitters. “The market is obviously down,” says Alex Rotter, the chairman of Christie’s 20th century and 21st century art department. “Do I want to say that? No. Do I have to say it to be believable? Yes.”

Auction houses are essentially just a middle man to connect buyers and sellers.  So at times, in a down market, people are less inclined to put their art up for auction, because they are uncertain if it will sell for a fair price.  Unless there is financial need, or items from an estate that need to be distributed between heirs, supply at the auction houses actually drops when there is expected to be low demand.  “Our market is always dictated by the supply,” says Jean-Paul Engelen, Americas president at Phillips.

What auction houses do to counteract this effect is offering a guarantee that a work will sell for a minimum price.  Per Crain’s, the auction house effectively purchase the item, or promises to purchase, before the auction. If during the bidding, the piece fails to go past that minimum price, the auction house—or a preselected third party— purchases it.  If the work does go on to achieve a higher than agreed-upon price, the guarantor gets a percentage of the profit. “More people are electing to take guarantees,” says Brooke Lampley, Sotheby’s global chairman and head of global fine art. She suggests that sellers think of this as an insurance policy. “They should” take a guarantee if it’s offered, she continues. “That’s my advice right now.”

Still, not every seller or piece is offered a guaranteed price.  Also, while the offer guarantees a sale, it doesn’t assure sellers that they wouldn’t get a better price in a better market.  “We’re really in a situation where sellers’ expectations are as great as they’ve ever been, and there’s downward pressure from buyers,” Lampley explained. “I think it’s a positive occasion to address auction strategy with consignors and encourage them to make things enticing—and try to get as many bids as possible.”

Per Crain’s, auction houses were busy getting sellers to put pieces up, and bracing the sellers for lower prices.  After a long-lasting bull market, now they had to explain that though prices are off their peak, they are still much higher than the prices paid for the pieces back in the day.  At Christies, Rotter notes that a Warhol from 1964, Sixteen Jackies, is up for sale with a low estimate of $25 million. Just two years ago, a similar Sixteen Jackies had sold for around $34 million, or 25 percent more. Similarly, a piece by Francis Bacon, “which in my opinion is a $70 million painting in a healthy upmarket, is priced at about $50 million,” Rotter added, further pointing to bargains to be had at the upcoming November
auction.