As auctions houses started to suffer financially over the past year or two, they have backed away from the straight house guarantee to secure consignments. The large international houses have now embraced these new third party guarantees in order to transfer all or a portion of the risk in guarantees.
Pollack's article goes a long way to answering many of the questions about irrevocable bids and how they differ from guarantees.
Pollack states
To read the full Art Newspaper article, click HERE.Irrevocable bids were developed about 15 years ago by Sotheby’s as a way of passing on its exposure to an outside party. Christie’s began to do similar deals in the last five years. What was new in November 2008 was Sotheby’s decision to identify which lots were guaranteed by the house (a small circle is used), versus lots guaranteed by anonymous third parties (a circle plus a horse shoe). Christie’s only indicates which lots are guaranteed, with no special marker for third-party guarantees.
Sotheby’s said the decision to add the new symbol was in the interest of transparency. “We decided to make as full disclosure as possible, while still respecting the interest of both sellers and buyers,” said Mitchell Zuckerman, chairman of Sotheby’s financial services. Yet dealers and collectors say they aren’t clear how the process works.
Third-party guarantees are on the rise as auction houses pull back on straight guarantees. During the 2005-2008 boom years, Sotheby’s and Christie’s each laid out hundreds of millions in straight guarantees, mostly for modern and contemporary or impressionist art, with an estimated $700m in spring 2008 alone. This all changed with the credit crisis in autumn 2008, and resulting art market tumble. “We took losses,” said Zuckerman. “We announced we were going to stop giving guarantees.”
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