Art Auction Guarantees

I have posted many times in the past few years about both the pros and cons of auction guarantees.  Now there is a new firm the looks at guarantees a little differently, it is actually insurance for the buyer.

The Antiques Trade Gazette has a good article on a new firm from Palm Springs, CA called Art Auction Guarantee which provides auction buyers a guaranteed selling price based upon the original purchase price when the time comes to liquidate. AAG will offer insurance on purchases from $10k up to $1.5 million.  If the client wishes to sell, the artwork must be sold by auction houses recommended by AAG.  Click HERE to visit the AAG website.

As appraisers and art advisors we should have a solid understanding on how guarantees work, although typically they are placed on only the top lots to reduce seller risk and to encourage the seller to consign, especially in a changing market. With this new insurance from Art Auction Guarantee, a buyer is now able to obtain insurance which will guarantee a minimum sale amount based upon the original purchase price when sold through AAG and its recommended auction houses. I would of course recommend a full review of how the policy works, restrictions, and of the claims process before taking advantage of this new insurance option for art collectors and art speculators.

The ATG reports on Art Auction Guarantee

The auction world is used to guarantees for sellers, but this scheme also allows buyers to pay a premium guaranteeing at least the hammer price they paid for it when reselling.

Although policies don't cover all the costs of buying and selling at auction, they will cover at least the reserve for sellers, explained AAG's president, Arnaud Aquizerate.

Potential clients will have to drill down further into the details (see How it Works) to see whether it makes sense for them to opt for such cover - buyers can negotiate policies that refund the premium as well as the hammer price, but not other charges - but it is the removal of uncertainty in a world increasingly conscious of cashflow that Mr Aquizerate's "boutique insurance" operation hopes to tap into.

He came up with the idea for the company after running art galleries in Milan, St Moritz and Beverly Hills for the past decade. "The company is funded through various financial instruments (bank credit lines) and committed capital from investors/collectors and myself," he told ATG.

As well as relying on valuations from approved auction houses, including those selling the objects in question, AAG aim to build an in-house database of analysis, auction results and other statistics to make their risk assessment more accurate.

Source: Antiques Trade Gazette