Art – why is it SO expansive?
How often did you wonder why are paintings by Banksy, Salvador Dali or Picasso so expansive? It seems to us that you did it more than once or twice. That is why in this article we will finally explain why beauty requires sacrifice … especially of money.
If you were selling Gauguin
For simplicity, let’s imagine that you own one of the famous paintings of Gauguin and want to sell it. You will go to the auction house and just before the trade set the price of the reserve – the minimum price of the painting, which must be achieved at the auction. Let’s say 50 million dollars. If the price of the reserve, which remains unknown to customers, is not reached during the bidding process, you will leave with your picture.
In this case, the auction house can offer you a guarantee. In our case, let it be 55 million. What it is? If at the end of the bidding the price is still lower than the reserve price, say 48 million, the auction house is somehow obliged to pay you the guarantee price of 55 million, taking 7 million from its savings.
As you might have guessed, it is unprofitable for an auction house to pay money out of pocket, so they are very interested in potential buyers raising the price. To this end, they add to the sale of the painting itself the history of its previous owners, such legends that add charm to the object of sale.
The auction house may apply to a third-party guarantor. It is a very wealthy art collector who is interested in getting your painting into a collection and it is he, and not the auction house, who will pay you your guarantee in case of a shortage of price.
What is his interest? Get your picture, and more. Secondly, the guarantor is exempted from fees related to the organization of the sale in case he wins the auction. These fees are 25 percent, so the position is very profitable. Thirdly, if the guarantee is exceeded, all money in excess of this price is divided between you, the auction house and the guarantor at a certain percentage.
So, looking at this whole mechanism, let’s summarize the above. The main reasons for raising the price of paintings are:
-increasing the guarantee price by auction houses to attract you, owners of works of art. It creates strong competition between the auction houses themselves
-price rises due to the existence of wealthy guarantor collectors
-in case of excess of the guarantee price, the net profit is divided between the parties. As you understand, the higher the price received, the greater the net profit.
However, there are always buyers .