Selling an artwork

Once art forms a part of an investor’s portfolio, at some point in time he may want to sell it. One sells an artwork to obtain liquidity either because funds are needed to buy another artwork, or to reinvest, or simply because it is a good time to sell and maximise the profits.

When should you sell a painting? Although this would vary from person to person, as a general rule you should sell when there is an increased demand for that artist/artwork in the market. The demand is likely to be high after an artist has performed well at an auction or has participated in a major exhibition or has been recognized internationally. This generally translates into a better selling price. However, when there is a slump in the market it may be good time to buy but not to sell.

Some people may want to buy newer works and may decide to sell the older ones to create space. One must realise selling an artwork is not a simple and easy process. Sometimes the painting may remain with the gallery for a long time before being sold. One may not always get the asking price. Also, when reselling the artwork, it helps to remember that there are gallery commissions, and tax implications, which will affect the profit margins. According to gallery owner Premilla Baid, “There is no right time to sell. It is a very subjective thing. When we sell artworks for our regular clients, we charge them 10% of the sales.”

To ensure you make a sound investment it is essential you know how to pick upcoming artists with the potential to appreciate. Which means when your reinvest the funds try to pick up works that are likely to appreciate in the future. Remember, art should always be looked at as a long-term investment option.

In general art cannot be compared to the stock market or real estate, there are a lot of variables involved and one must make a decision after a thorough research of the market conditions.

Tips for buying at an auction

At the recently held Christie's Hong Kong auction of Asian contemporary art, N S Harsha topped the sale of Indian works. Harsha's 'Mass Marriage' fetched $6.4 million, which is a new record for the artist. Other Indian artists such as Atul Dodiya, TV Santosh, Ravinder Reddy and Subodh Gupta also performed exceedingly well. This is a good sign for Indian contemporary art.

International auctions usually feature well-established names along with a select group of promising artists. Continuing with our series on whether to buy from an auction, here are a few tips that will help you buy from one.

Apart from the big auction houses there are several smaller ones that also organize art auctions on a regular basis. The amount of money involved in these is generally more reasonable. In fact, some of these are organized to raise funds for a charitable cause, and in such cases a portion of the sales are donated towards the charity. Why should you buy at an auction? According to gallery owner Renu George, “auction houses are able to predict future trends, so even if you buy at a higher price at an auction, chances are it will appreciate in the future.”

Before the auction event, a catalogue is distributed to prospective bidders. The catalogue, lists out the works (name of the artist, title, size, medium, provenance, etc), lot numbers, and estimated selling prices or ‘reserve price’. This will give you an idea, which works to bid for. It also gives you time to crosscheck and get familiar with the artist’s credentials and track record. Before the auction there is a viewing of the works that is organized for the prospective bidders (unless it is an online auction, but these too sometimes organize an exhibition). It is usually a good idea to physically check out the artwork and not bid on the basis of the catalogue alone.

It is important to predetermine your exit price. It is very easy to get carried away during the auction, and to keep bidding in the heat of the moment. However, if you set your limits it will help you enormously.

(Published in Financial Times)

Should you buy at an auction?

When it comes to art there are numerous auction houses - both domestic and international - in the fray. We keep reading about reports where a certain painting fetched a record amount or where an artwork was withdrawn from the catalogue, as there were doubts about its authenticity. The latter used to be a fairly rare phenomenon until recently. Still, the important point is that artworks that lack credibility or have even a shadow of doubt attached to them are withdrawn from the sale proceedings. Sotheby, Christies, Bonhams Saffron Art and Osian are just a few of the auction houses that deal with art. There are many more auction houses that are being set up in India.

Should you buy at an auction?
Theoretically auction houses have experts in the field at hand, who carefully assess, evaluate and authenticate each work before adding it to their catalogue. Also, they ensure that the work is of good quality. Another advantage is that a variety of works can be found at an auction. And, in general artists that are represented at auctions are considered to be either established or promising.

Art collector Harish Padmanabha explains, “Anyone who has the desire to collect can buy from an auction.” He adds that reputed auction houses know good art from bad and that helps the buyer. They also assess the condition of the artwork, and provenance and authenticity are also taken care of. Another advantage for the buyer is that there is a transparency in the dealing, which may not happen with some art galleries and dealers.

For serious art collectors, auctions are probably the best way to source works that are rare or not available in the market. Collectors look at auctions to complete their set or own a work that is highly coveted. For new buyers it is always advisable that they attend a few auctions before starting to bid at one. It will help them to get familiar with the proceedings and will also add to their confidence level.

(Published in Financial Times)

Now is the time to be cautious

Investing in art might be a ‘cool’ trend, but one must remember that there is a lot happening in the art market and unless a buyer is properly clued in, one can easily suffer huge losses. According to a recent report in the media, the Indian art market is estimated between Rs 1,000 – Rs 1,400 crores, which is big money.

You just have to look around to realize how many people have turned art dealers, or see the number of galleries that have mushroomed overnight. Art has become a hugely profitable commercial venture and those with the business acumen have been quick to utilise it. Many artists too have been quick to join the bandwagon, and have been churning out works that might as well be factory made – slight variations to their popular themes and you have a collection ready for sale. Pricing? The less said the better. Unfortunately, price now has no connection to any kind of logic. You will see youngsters and fresh graduates not afraid to ask for a lakh or more. And, the strange thing is that they even find buyers for their works. A profusion of fakes - another aspect that is now plaguing the market more than before.

This leads us to the question if one should invest in art at all?
It appears that it would be a good idea to invest only small amounts of money in the market, at least for the moment. Also, one should take all necessary precautions. For instance, when one buys gold, one always looks for the purity of gold and goes to a reputed jewellery shop. For property, one looks for clear titles and checks out the credentials of the builder. So should be the case with art. In the past, we have talked about ascertaining the provenance and authenticity of an artwork, but now it is equally imperative to check out the credentials of the dealer or gallery. Reputed galleries are likely to have done the groundwork including the investment potential of the artist. The dealings are also likely to be more transparent. But, do proceed with caution; after all, it is your money invest wisely.

(Published in Financial Times)

Refrain from impulsive buying

It is the festival season and the New Year is also round the corner. This is the time when people spend a lot of money on shopping for clothes and jewellery, and in doing up their homes. Conventionally, art has been more of a home décor product rather than an investment instrument. Even today a lot of people buy art to transform their interiors.

There is nothing wrong in buying art as a decorative purchase, but one can try to integrate the two concepts – décor and investment. If you are spending more than Rs 50,000 on a work of art it makes sense to ensure that it is a sound investment. Anything less than Rs 50,000 can be bought for the sole purpose of dressing the walls.

Once you have decided to buy an artwork, curb your impulses and do not indulge in spontaneous buying. Generally at any given point of time, there are a number of art shows going on in the city. Take your time to know more about them and the artists that are being displayed there. When you are buying art purely for its visual appeal look for aesthetics, decorative aspects, colours, theme and style of painting. In such cases, the name of the artist or his credentials do not matter so much. But, always check out the quality of the materials used, since the longevity of the artwork depends on the choice of canvas, paper, frame and other hardware. Don’t let the art galleries push you into buying something you are not sure about. Take your time to make a decision.

Sometimes artworks that have been languishing in galleries for long can get damaged - scratches, minor tears and patchy colours may occur over time and these may not be visible at a casual glance. Watch out for those before buying.

If your budget is more than Rs 50,000 it is important to do all the necessary groundwork – artist’s credentials, price trends and provenance. Make sure you cover all aspects that will have a bearing on an artwork’s investment potential.

(Published in Financial Times)