Excerpt from the Digital Journal of Advanced Appraisal Practice - THE DYNAMICS OF VALUING EMERGING ART AND ARTISTS

Over the next few weeks I will be posting excerpts from the articles in the new Digital Journal of Advanced Appraisal Practice.

The block quoted content is from appraiser David Shapiro's article THE DYNAMICS OF VALUING EMERGING ART AND ARTISTS.

To read the full article visit the online edition of the Digital Journal of Advanced Appraisal Practice, sponsored by the International Society of Appraisers Private Client Services.  I think you will enjoy and learn much from David's well researched and referenced article as well as from the other articles in from the Journal.

David stated to me "This article will treat the dynamics of valuing emerging art and artists, with specific attention to the challenges one faces when assigning values to works of art in markets that expand and contract precipitously. This article will cover the relationship between retail prices and auction sales, and relatedly, the distinction between Retail Replacement Value and Fair Market Value as it pertains to specific emerging artists."

I will post another article excerpt next week, but you dont have to wait, click HERE to full, free access to the new Journal, or follow the source link below.

If you are interested in contributing an article for the Fall edition, please let me know. 

The valuation of works of emerging art,  while performed in accordance with the same methodological principles as the valuation of works in other collecting categories, has dynamics that are particular to it. One notable difference between emerging art and appraising works in many other collecting categories is the limitation of data. Whereas appraisers using the Sales Comparison Approach to valuation often rely upon the transparent, verifiable data of public auction records to establish Fair Market Value,  this is not an option in assessing values of many emerging artists who have limited or no auction history, requiring the appraiser to rely upon sales data recorded in news accounts or given by dealers. The latter may be difficult to obtain, as dealers are under no legal obligation to disclose information about past sales. Dealers’ asking prices may or may not correspond to a market of realized sales, generally rendering them inappropriate as comparable data for purposes other than the assessment of Retail Replacement Value  for insurance.

When works by emerging artists debut at auction, the results may be at significant variance from prices commonly realized in the dealer market, which often remains the main market for the artist’s work. Collectors seeking to re-sell works by emerging artists often return to the primary-market dealer, who may be able to secure stronger prices than an auction house can. Dealers normally operating in the primary market may want to handle the artist’s secondary market (even if with relatively low returns) rather than risk a collector putting work to auction too soon, resulting in poor performance and consequent tarnish to an artist’s emerging reputation. Works by artists with no prior auction history frequently sell for low prices at auction if they sell at all. Prices realized on the auction market for works of emerging art are often only a small fraction of prices realized in the primary market at retail galleries. In such a circumstance, particularly when the gallery has no known history of selling the artist’s works on the secondary market, Retail Replacement Value will likely be many multiples of Fair Market Value.

By contrast, when primary-market supply is scarce and demand is high, works by emerging artists may sell at auction for prices that are considerably higher than retail gallery prices, inverting the traditional expectation that retail is a higher market than auction. In such cases, high prices may be realized from auction debut, sometimes for works that are the same age or scarcely older than those being sold at galleries in the primary market.

This has been the case with Loie Holowell (American, b. 1983), whose hard-edge paintings abstracting from female human anatomy and treating themes of sexuality have performed extraordinarily well in her few auction offerings to date. Her first auction offering, Transformation in Green and Red (2015) (illustrated below) sold for $68,750 at Sotheby’s New York on May 17, 2018, well above the pre-sale estimate of $15,000 - $20,000. Her next auction offering, Linked Lingam in blue, gray, pink and copper (2018) (illustrated below) sold for $110,000  at Christie’s New York on September 27, 2018, far surpassing its pre-sale estimate of $20,000 - $30,000. Each of these works is 28 by 21 inches.

Despite these auction prices, Pace Gallery, which represents Holowell, was offering her 48-by-36 inch paintings for $55,000 each as of January 2019. Pace said that their prices did not change significantly over the past several months, despite the high sales at auction. Although the stellar performance of these works at auction might have signaled to Pace that a price increase was warranted, the gallery presumably maintained the price structure to guard against inflation, maintaining close control of market growth.

One can observe a similar pattern in the market for Christina Quarles (American, b. 1985), known for colorful paintings of abstracted long-limbed figures, which, according to her explanation, explore ambiguities stemming from her identity as a queer woman of mixed race.  Just two years after receiving an MFA from Yale University, and one year after her first solo show at a commercial gallery, David Castillo (Miami), one of Quarles’s paintings, Pull on Thru Tha Nite (2017) (illustrated below), sold for $225,000 in her auction debut at Phillips New York on November 15, 2018, far surpassing its pre-sale estimate of $30,000 - $50,000. This price was several times higher than the prices for which her paintings sell in the primary market at retail galleries. As of February 2019, the gallery Pilar Corrias, which represents Quarles in London, stated that their prices for her paintings are in the range of $50,000 - $60,000, but at the time, the gallery had none to offer, and thus, one can reasonably expect that in such an environment of scarce supply, if another painting by Quarles were to be offered at auction, it would again command a price far higher than gallery prices. Although such control of primary-market prices guards against inflation, which can have pernicious effects on the market for emerging art, it also limits the financial benefit to the artist, as the strong prices on the secondary market afford the artist little or no benefit, with the windfall going to the re-seller. 
Source: The Digital Journal of Advanced Appraisal Practice

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