Determining Auction Estimates

Carol Vogel of the NY Times recently published an article on the difficulties auction houses have in determining fair auction estimates. She states the auction house wants to be fair in the estimations, not pricing so low that it is not representational of fair value for the seller, and not so high that it scares off potential buyers. Appraiser face this issue every day. Although we are dis-interested third parties and not trying to please any group with a valuation, the final value conclusion can be complex and difficult to make, and based upon multiple factors, selecting the proper market and analyzing market trends. With value conclusions only being an appraisers researched opinion, it of course be should be fully documented and explained so the reader of the report understands how the final value was determined. Auction houses, in determining estimates, do and should have a level of care in determining estimates. Yet depending upon the scope of work, the level of care for an appraisal is typically far higher.

Vogel states George Wachter, a co-head of Sotheby’s old-master paintings department worldwide, faced this challenge in September when he was asked to sell a pair of 1637 portraits by the Dutch artist Frans Hals at the Jan. 29 sale in New York. He held off agreeing on an estimate with the owner until he saw the results of the old-master auctions in London in November and could better gauge what the euro-dollar exchange rate would be.

He placed firm estimates on the paintings only this month, just before sending the sale catalog to the printer: $8 million to $12 million for the male portrait, and $7 million to $9 million for the female. He based the numbers on recent Hals prices — for example the $9.5 million paid at Sotheby’s in London in 2007 for “Portrait of Samuel Ampzing,” from 1663 — and on the knowledge that great works by important masters are becoming harder to find.

I was excited when I found the article and title, thinking it would have excellent appraisal related material with some good detail. The article relates more on the history of the painting, and never really details how Wachter determined the values other than the short paragraph above. Of course we as appraisers know there is more to proper valuation than a quick look at a recent comp, and in this case exchange rates. But, at least some of thought process on valuation is getting out to the public. Although it could and should be much higher, revealing there is more to appraising and valuation than guess work, off the cuff numbers and basic connoisseurship.

To read the NY Times article, click HERE.