Thursday, May 17, 2012

Shut Up and Count the Money

Tribal art appraisers are constantly confronted with the challenge of comparing objects and understanding markets to arrive at value conclusions that will make sense to the client that could care less about appraisal methodology. For federal appraisals such as estate and charitable donation we are required to base our value conclusions on the federal definition of "fair market value".  The simple definition is "the price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts.” That sounds pretty straightforward. As appraisers we use comparable sales both in the private market (from dealers, curators and collectors) and public market (auction houses). Okay willing buyer willing seller - that's pretty easy. Neither being under any compulsion to buy is also pretty straightforward if we ignore our obsession with this art. Which leaves us with  the concept of reasonable knowledge. That issue might be a bit trickier. What if the buyer knows nothing about tribal art and relies on the auction house or maybe an advisor that is getting a commission on the sale.  Is it fair market value. I think the courts might get a case like this where say an appraiser uses the illustrated Matisse Lega mask as a justification for  a donation value for a medium level comparable mask. Now maybe the comparable hasn't ever hung in the studio of a famous artist so maybe in that sense it's not comparable. Ignoring this fact and the fact that as appraisers we normally reject aberrant high and low values, the implication is still clear.  Bids that have ranged up to ten times expected value may represent sales that no longer even fall within the definition of "fair market value". I can guarantee you that appraisers will try to use these crazy sales to juice up up their charitable donation appraisal to make clients happy.

As sellers the past ten years  continue to focus out exactly what are our responsibilities in representing our art to the clients. Nobody wants to talk about this because there is a tremendous amount of money at stake in the these transactions. Go back and review the tape on Morley Safer's  60 Minutes piece a month or so ago when he tried to get the contemporary dealers to talk about the current buying frenzy. The smart guys didn't want to talk on camera. The others sounded like piranha feeding on clients that lacked "reasonable knowledge" of what they were doing. I remember one scene where the daughter of a Russian oligarch  was looking up at a European dealer who was  extolling the virtue of this work that was a steal at $4,000,000. Hmm maybe.. maybe not.

It is a gigantic game of musical chairs and when the music stops you know where you need to be. It is a very complex agenda driven world that requires some survival instincts to stay in the game. If you are looking for help, you might find a great many people in the art world mumbling "shut up and count the money."

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