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Don’t get me wrong; there are professional appraisers and auction
houses that look after the client’s best interests. There is a cadre of art
advisors that negotiate strategically on behalf of buyers and sellers of
art, and dealers of the highest quality and the best taste.
In this article, I hope to provide you with some guidance and to
help the art buyer and seller make smarter decisions.
Rule #1: Just because an artwork is expensive, doesn’t mean
that it has value.
The story usually goes like this. Mr. and Mrs. Smith go to Nantucket for
vacation. A painting is purchased, a colorful seascape or a Nantucket
scene, a memento of their trip. More than likely, the price tag for the
painting is high. Jump ahead some years later. Mr. Smith and Mrs.
Smith divorce. My firm, Pall Mall Art Advisors, is retained by Mr. Smith
to conduct a valuation of their tangible assets. Mrs. Smith remembers
spending $50,000 on that painting that they bought in Nantucket and
assumes the painting will be valued at a higher price than they paid.
As appraisers, we do our due diligence. We investigate the
artist’s sales in the auction marketplace. In the case of the painting
bought in a gallery while on vacation, it is likely that the artist’s
paintings have never sold at auction. It is probable that the piece
cannot be valued above $1,000. The price paid to a dealer is not its
fair market value or the price it will sell for in the open market. Fair
market value is used for estate planning and estate taxes, equitable
division, charitable donation, estimates for sale and when appraising
a work used as collateral for a loan. It is not necessarily the price you
paid for it. When buying at a gallery, have an independent appraiser
provide you with an opinion of value for the painting before you write
the gallery a check.
Rule #2: The auction house is not your friend.
Sure, it seems like they are your friends. They offered to do your apprais-
als for free, invited you to glamorous parties and private exhibitions.
They arranged internships for your children and generously sent you
their beautiful auction sales catalogues.
An auction house is trying to build up your loyalty so that
when it comes time to sell, you call them first. Their actions are
completely appropriate. The job of an auction house’s contempo-
rary art department is to consign the best pieces at a commission
rate that is profitable for the auction house. What you need to know
is that the auction market is VERY competitive. At the highest lev-
el, there are two major auction houses, Sotheby’s and Christie’s,
whose profit margins are quite small and who offer generally the
same product. All of the auction houses below the two dominant
players are even more competitive.
TAKEOFF
ART
The Pitfalls of Buying, Selling and
Valuing Your Fine Art
By Anita Heriot
elcome to the most unregulated market in the world, the art
market. As an art advisor and appraiser, I have seen the dark side
of the industry: art appraisers that charge clients exorbitant fees,
art advisors that broker fine art to clients at prices far above the painting’s
real value, auction houses that lure clients to sell and their work goes unsold,
dealers that place a huge price tag on a painting which has little or no value,
and charlatans that hand out “certificates of authenticity” for fake works.
W
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“Three Studies of Lucian Freud”
This 1969 Francis Bacon triptych sold for $142.4 million at Christie’s,
making it the most expensive work of art ever sold at auction.

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Some houses specialize in specific areas of the market such as
Asian or American art, and some are general auction houses. The
important point to remember is that like any competitive market,
you need to let capitalism do its job. When selling a significant work
of art, you want the auction houses to compete for the sale of your
art. An auction house makes its money from the buyer and the seller.
From the buyer it charges a “buyer’s premium” which can range
from 10 to 25 percent. For the seller, the auction house can charge
fees for the following: shipping, insurance, photography, marketing,
authentication, restoration, research and a “seller’s commission.”
The good news is that depending on the work, all or some of these
fees can be waived. At Pall Mall Art Advisors, we have negotiated
on behalf of clients for the sale of their collections. When auction
houses know that they are in a bidding war, commissions suddenly
disappear, along with all of the other fees. If a seller is charged five
percent to consign a $5,000,000 painting, the auction house will
collect an additional $250,000 from the seller. Our job is to ensure
that the client is paying the least in commission and achieving the
highest revenue. At times, the auction houses have been so keen to
consign the collection that they have given the clients part of the
buyer’s premium, as well.
Rule #3: Never hire an appraiser that charges a fee based on
the value of the collection.
Traditionally, this fee structure was a common practice for an
appraiser. The client would hire the appraiser to value a one million
dollar painting and the appraiser would charge percentage of the
value of the painting as his or her fee. If the appraiser charged 2.5
percent of the value of a one million dollar painting, the fee would
be $25,000. If the painting was worth $10,000, the appraiser would
charge $250. The incentive to overvalue the client’s work is obvious.
MARC CHAGALL (1887-1985), LA PASSION, 1975
Lithograph in colour, signed and numbered 36/50 in pencil, printed on Velin “Arches”
paper. Plate size: 40cm x 24cm (15.7in x 9.4in) Estimate £3,500-4,500.
Image courtesy of Lyon & Turnbull

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Recently, a very unhappy client called us with a story of a prominent
appraiser still engaging in this practice. The appraiser charged
$100,000 for the valuation of six paintings and stated that her fee
was based on a percentage of the value of the painting. According
to the standard practice of our profession, an appraiser’s fee for
service must be hourly or based on a predetermined amount agreed
upon by the appraiser and the client. Appraisers that charge these
ridiculous fees give the profession a bad name.
Rule 4: A certificate of authenticity does not mean the item
is authentic.
In 2014, a client called us seeking to sell her collection of 100
paintings. After looking at her list of artists, I was encouraged. She
owned a Chagall, Dali, Miro, and Picasso, to name a few. I dug deeper
into the collection, asking her where she bought the paintings and
what she paid. My excitement for the collection dropped immediately
when she told me that “they all had certificates of authenticity” and
she had purchased them all while traveling on her yearly cruise.
Certificates of authenticity can be downloaded off the Internet. Even
worse, she had paid high retail for each of the works and I knew that
the majority were fakes. I showed her list to seven or eight auction
houses and each told me the same thing. They would get pennies on
the dollar for each work. One of the hardest messages to deliver to a
collector is that their treasures have little to no value. Just because
the work is signed by Chagall doesn’t mean that it is an original
Chagall. In fact, if one looks closely at many of the certificates of
authenticity, the small print clearly delineates that the work is a
replica or print of an original.
The goal of this article is not to dissuade you from buying or
selling art or having your art appraised. When buying a painting from
a dealer, ask for an independent opinion. So many of our clients seek
counsel from our firm before they make a purchase of thousands
of dollars. When selling anything at auction, go to more than one
auction house. If you are not comfortable doing that yourself, have
an independent advisor negotiate on your behalf. When hiring an
appraiser, ask a few simple questions:
1. What is the fee structure? You want to ensure they base their fee
for service on an hourly rate.
2. What is their experience valuing your material? You never want
an American furniture specialist valuing your Asian works.
If you are provided a “certificate of authenticity,” read the small
print and seek the guidance of an independent appraiser to advise
you on the correct value of the piece.
If you follow these basic rules, you will successfully be able to
buy smart, sell smart and ensure your collections are valued correctly.
Gavin Strang valuing a decanter
Image courtesy of Lyon & Turnbull
Anita Heriot: Before becoming President of Pall Mall Advisors, a U.S. and U.K. appraisal
and art advisory firm, Anita Heriot served as Vice President, Head of Appraisals, and
ran the British & Continental Furniture and Decorative Arts department for Samuel T.
Freeman & Company. She also worked for Masterson Gurr Johns International, a London-
based firm, as an appraiser. Ms. Heriot is a member of the Appraisers Association of
America, is USPAP certified and has testified as an expert witness in major court cases
involving art valuations. She is a graduate of Bowdoin University with advanced degrees
from University of London and New York University.
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