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BusinessWeek Investor: Collecting Art
The Art of the Dealer
Stepping into the market? You'd best get professional help
If there's anything art collector Paul Graham hates in a dealer, it's attitude. "I've been given the cold shoulder, ignored, and maltreated as if I were some sort of interloper," he complains. One problem is that he dresses in Birkenstocks and chinos. But in 1998, this onetime painting student sold his Viaweb e-commerce software to Yahoo! for $49 million. Says Graham: "There are an awful lot of millionaires walking around looking like art students now."
There is indeed a lot of new wealth shopping for art, including such Internet tycoons-turned-collectors as Netscape co-founder Jim Clark and Microsoft co-founder Paul Allen. Since his own big score, Graham has plunked a quarter of a million dollars into art. Trouble is, not all new collectors do as Graham did: get advice. "Just because you have come into a lot of money," says New York dealer Mary-Anne Martin, "doesn't mean you have the knowledge you need to buy art intelligently."
If you're a novice, buying without help from a trusted dealer or art consultant is risky. A dealer can steer you away from costly mistakes. Is the work innovative and of sufficient quality that it will survive trendiness and increase as an investment? A good dealer will know. "You're trying to pick who that next generation of household names is going to be," says Mary Boone, a New York dealer who has promoted to celebrityhood such contemporary artists as Jean-Michel Basquiat, Eric Fischl, and Julian Schnabel.
Dealers can help a new collector in many ways. They alert clients to new works, using databases that track client tastes. They supply a work's provenance, or history of its ownership and past sales, which helps determine its value. They prescreen and attend auctions--and bid for you, to protect your anonymity. They let buyers "try out" art at home. They give you first refusal on works you might like and let you pay in installments. They even make referrals for lighting and framing. And they'll find you a buyer when you decide to sell. Says Graham: "Dealers do a lot more than hand you the painting and keep the check."
Finding a dealer you're comfortable with and can trust, however, isn't easy: The art world is awash in tales of unsophisticated collectors being taken for a ride. The value of art works, particularly those by new artists, can be highly subjective. New collectors should do as much research as they can on their own and view dealers as only one tool.
One way to start is to attend art fairs (box), such as last month's Art Dealers Association of America (ADAA) show in New York or the huge upcoming European Fine Arts Federation show in Maastricht, Netherlands. You can see a lot of work at one time, learn which galleries specialize in which types of art, and begin to get a sense of prices. You can also browse art magazines or Web sites (recommended: www.artnet.com). And you can obtain referrals from the ADAA (212 940-8590); the International Fine Print Dealers Assn. (212 759-4469); the Private Art Dealers Assn. (212 572-0772), for dealers without galleries; and the APAA, or Association of Professional Art Advisors (888 682-APAA).
The next step is a face-to-face. Don't be intimidated: Most dealers love to schmooze about art. "I don't think there are stupid questions," says Gilbert S. Edelson, ADAA administrative vice-president. "There are only stupid comments, such as `My 6-year-old could do that."'
Good dealers will also help a collector choose a better, rather than a lesser, painting from a particular artist. Cheryl Fishko, co-owner with husband, Robert, of the Forum Gallery in New York, last fall discouraged a buyer from acquiring a minor-league work by Norwegian realist Odd Nerdrum and advised him to wait for Nerdrum to finish some more mature paintings.FAKE FEAR. That's the kind of guidance that Graham, the Web tycoon, looks for. When he encountered the Fishkos at the San Francisco International Art Exposition last fall, he was struck by their warmth and willingness to help. (He eventually wrote them a $65,000 check for a Richard Maury canvas he had long admired.) One reason he likes the Fishkos, Graham says, "is they feel they don't have to `sell' you just their artists." They'll actually refer you, he says, to other dealers for works you want. Graham has also mined Denver dealer Tom Carson's knowledge of realist artist Scott Fraser and has learned fine points about Renaissance artist Albrecht Durer from New York print dealers C. & J. Goodfriend.
Buying at auction is another part of the mix. Martin, who specializes in Diego Rivera, Fernando Botero, and other Latin American artists, admits auction fever is fun, but she's wary. Auction houses sometimes issue a report on a work's condition, and they'll refund your money if a work turns out to be a fake. But fakes aren't always discovered. And Martin, who worked at an auction house for 13 years, says she has seen paintings in which the entire middle of the canvas was restored. The lesson? Take an expert with you.
When you find a work you like, don't hesitate to ask the dealer for information about it. And some skepticism about prices is warranted. "You shouldn't buy from dealers unless they can justify the price they're asking," says Peter M. Fairbanks, whose Montgomery Gallery in San Francisco deals in French Impressionists and 19th century American art and who relates his prices to market trends and comparable works.
Also, be aware of the costs: The more you know, the better you can negotiate. For primary market works (received directly from the artist), dealers pocket as much as 50% of an artwork's price. For secondary market works (those resold by collectors, institutions, and estates), the dealer may take from 10% to 35%.
As every reputable dealer will remind you, art is only secondarily an investment. The main thing is to acquire works that you'll enjoy living with. But the finer the work, the more it will increase in value over time. So, when buying, don't make like a day trader; get some help.By Joan OleckReturn to top