Payment Problems

Daniel Grant has a good article on Artnet which looks into payment problems with many international art buyers.  In the past we have heard many stories of Chinese collectors not honoring their auction bids, but it appears the problem may be far deeper and wider.  Grant sates that bidders from Russia, India, Indonesia, South America and the Middle East all have been known to fail in settling accounts for art purchases.

The problem also goes beyond the international auction houses and impacts regional houses as well as retail galleries.  Some say it is not a huge problem and careful screening, planning and learning the payment habits and patterns of clients helps. The article notes that some of these buyers get buyers remorse after a significant purchase and need to be coaxed into settling accounts.

Grant reports

The problem of slow payment or nonpayment is hardly restricted to the Chinese market, of course; clients in the West as well as bidders in Russia or India or the Middle East or South America or Indonesia -- newly wealthy people in the developing world -- succumb to “what I call buyer’s remorse, especially when they just paid a record price for something,” said John Scofield, who directs the three annual Asian art sales at Eldred’s Auction Gallery in East Dennis, Mass. Figuratively knocking on wood, Scofield did note that at its most recent Asian sale, last December, the auctioneer had no problems in payments. “Maybe, that was because there was nothing so terribly expensive.”

And, maybe, it is because the auction house is doing a better job of weeding out the potential deadbeats among those seeking to register for the sales. “We are identifying our bidders more carefully, asking them ‘Where else have you made purchases?’ and checking with those other auction houses,” such as Leslie Hindman, Skinner (in Boston) and Doyle (in New York City), among others. “We ask, Does this person pay his bills? How promptly? Did he argue? Did he say, ‘I didn’t think the buyer’s premium applied to me?’” When this network of auction houses reveals problems, Eldred’s does not allow the individual to register, or it may require a deposit of 10 percent (in the form of a bank or certified check or a wire transfer from a bank) for whatever that prospective buyers hopes to bid on. If they are successful bidders, the deposit will be deducted from what they owe; if they make no purchases, the money will be returned to them.

Scofield noted that regional auction houses are good at providing information on bidders and buyers from overseas, only noting that Christie’s and Sotheby’s are “not very cooperative.”

Neither of the world’s two largest auction houses would comment for this article, but a spokeswoman for Sotheby’s acknowledged that the auctioneer had established a policy last year that bidders on what are called “premium lots” are required to make a deposit of HK$1 million ($128,791) in order to participate in its Hong Kong sales.

Source: Artnet