Why Work with an Advisor when Selling a Collection?
When building a collection, it's not uncommon that collectors need to divest select works. Motivations for such divestments could be
to realize a return on investment,
to better align a collection with current content motives,
to free up exhibition space, or
to satisfy other financial or personal motivations.
No matter the reason, it is vital that a collector work with an advisor to sell the collection effectively and respectfully under appropriate market conditions.
While collectors are often very knowledgeable about the works in their collection, an advisor is equipped with art historical and market knowledge. They are steeped in art history, theory, criticism, connoisseurship, and art world dynamics. Consequently, art advisors can mitigate risk, manage logistics, and optimize the return on investment.
While foundational, it is essential to begin the divestment process by knowing the identity of the works and their current fair market value. At this juncture, it's important to note that most collectors have their artwork appraised for insurance purposes. The appraisal standard for this type of appraisal is retail replacement value (RRV). RRV is defined as the highest amount in terms of US dollars that would be required to replace a property with another of similar age, quality, origin, appearance, provenance, and condition within a reasonable length of time in an appropriate and relevant market. When applicable, sales and/or import tax, commissions, advisement fees, and/or premiums are included in this amount. RRV differs from fair market value (FMV), which is defined as the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts. A common pitfall amongst collectors is to consider these two values interchangeably. Doing so may give a collector a false sense of what the work might reasonably realize when offered on the secondary market.
By knowing the identity of the artwork and its fair market value, an advisor can identify the most appropriate venues for sale, whether they be auction, dealer, or private sale, and which particular institutions and individuals within each of those spaces have established the best collector following to successfully realize a sale. They can also identify whether the work is best sold within a regional, national, or international market and whether the work should be sold in a specialty sale or as part of a single-owner sale if the collector is divesting a group of objects. It's essential to consider the collection holistically, as well as each work individually, to determine how to effectively optimize results.
Just as important as knowing when to sell, a qualified advisor will help a client understand when not to sell. Like other markets, art is subject to ebbs and flows. Micro and macro market trends can affect an artist's market. Knowing when these influences favor selling is critically important, as the presence or absence of just one potential buyer can dramatically affect the sale.
In addition to helping a collector understand the value, an advisor can also assist a collector in knowing whether conservation, framing, or authentication services might be warranted to further enhance the desirability of the subject works. As part of these considerations, the advisor will do a cost-benefit analysis to determine which services are financially viable.
Alternatively, an advisor can identify other divestment options, including philanthropic giving to museums or other non-profit collecting institutions. By donating, a collector can bolster a museum's permanent collection while minimizing their income tax liability. Another reason for donation is that a work of art might possess more cultural/historical import than market value in certain circumstances. In these instances, philanthropic giving to a well-suited institution might be a suitable alternative.
While collectors are often very knowledgeable about their collections and the artists within them, a qualified advisor possesses an intimate knowledge of art history, connoisseurship, and the dynamics of the art market. In a notoriously complex and opaque industry, even the most knowledgeable collectors are prone to making costly mistakes when divesting from their collections. In working with an advisor whose job is to understand these markets and navigate these hazards, a collector can not only optimize their return by leveraging the advisor's market knowledge and industry connections but also alleviate the stresses related to the sale.