Can You Trust Art Dealers?

Daniel Grant writes an interesting piece in the Wall Street Journal on trusting art dealers.  Grant mentions the recent flurry of lawsuits where collectors feel the prices they have paid from dealers does not represent value.  This has long been an issue, and from an appraisal perspective, many appraisers need to be cautious and understand differing market levels, and the difference between price and value.

Grant spares no one, from museums, to auctions houses to private dealers, they all share in how art is valued and represented.  A very interesting article for the dealer, auctioneers, collector and appraiser. Although his article is more of a list of several cases where sales were contested, it is still a good article to be familiar with.  He does mentioned court cases and the importantance or at least the responsibility that comes along with expertise.

Grant states

The dealer, of course, may not necessarily be in the wrong. A South Korean citizen, Najung Seung, paid Manhattan art dealer Mary Dinaburg $290,000 for a Julian Schnabel painting, after the dealer told her it was worth as much as $500,000—only to find out soon afterward that it was worth closer to $110,000, according the Ms. Seung's lawyer, Michael F. Maschio. Ms. Seung wasn't entitled to get her money back, because the dealer who sold it to her wasn't an expert on the artist's work, according to a New York State Supreme Court ruling filed in 2009.

The court ruled that claims regarding an object's value aren't to be relied upon "if the facts were not peculiarly within [the] other party's knowledge." Ms. Dinaburg didn't possess any "unique or specialized" expertise in the valuation of contemporary art, and Ms. Seung's "blind reliance on Dinaburg's alleged statements of the painting's value is not reasonable as a matter of law." In addition, she "could have, but did not, obtain her own appraisal," which would have made clear the painting's value.

Especially pertinent in this kind of fraud lawsuit is the issue of who sets the price. Carl and Anne Rice of Tucson, Ariz., bought two paintings by Martin Johnson Heade at a local estate sale for $88 in 1996, and later sold the works at Christie's auction house in New York for more than $1 million. They were then sued by the estate in 1998. The Arizona Court of Appeals ruled in the Rices' favor, since the price for the paintings in the estate sale had been set by the sellers or their representatives.

So how do you avoid becoming a sucker? Gaining expertise in a hurry may not be possible, but there are ways to obtain enough information to proceed cautiously. There are, for instance, online auction-results sites that buyers and sellers use regularly—such as ArtNet.com, AskArt.com and Artprice.com—and they may offer a sense of how comparable works of art have done at public sales. (Art dealers and gallery owners tend to keep their own price and sales information confidential.)

To read the full WSJ article, click HERE.