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Answer by Paul Denlinger, occasional buyer and seller of Chinese art, stamps, and postal history:
The direct way is usually the easiest way. That is: buy and sell art.
I buy and sell Chinese art on an occasional basis, and as soon as the major auction houses such as Sotheby’s and Christie’s identify you as an art connoisseur, you will make it to their mailing lists. One of the best benefits of their mailing lists is that they usually have very good art magazines that go out via email and promote upcoming sales and items in those sales.
If you spend time looking in an auction catalog for Christie’s, for example, one of the most delightful parts of the catalog is the writeups, or descriptions, given to items, outlining their provenance and history. Often, these give detailed history about the item and who the previous owners were. If an item was offered in a previous sale or catalog, that previous sale will be mentioned. If you are a specialist collector, you can easily find out when an item previously appeared at auction and plan your bids accordingly. Genuine art connoisseurs buy an item not only for the item itself, but also for the provenance of the item. Good provenance routinely brings higher bids at auction.
This is especially the case for classical Chinese paintings, as famous Chinese paintings are frequently covered with the seals of each previous owner as it was handed down through the centuries. Understanding the importance of history and provenance comes very naturally to the Chinese.
The most valuable asset of an auction house is its art specialists; these are the people who really have deep domain knowledge about certain art fields. If and when you make it onto their list of art connoisseurs, then you get access to the contact information for their art specialists. Art specialists know who collects what, who has what, and who the major buyers are. If a rare art piece comes up at auction, they contact all the major collectors to let them know that it is available. In some auction houses, art specialists get a cut on the sales commission of items they bring to auction.
Art specialists are given a wide degree of authority and independence to make special offers to bring particular items into their auction houses. For one item I offered, a smaller auction house offered to put my item on their auction catalog cover. In the end, even though they offered very generous terms on publicity for the item and on the commission they would charge, I chose to go with the larger auction house, which did not offer any breaks to me, simply because they are well-known and respected for Chinese art and thus have a better roster of prospective buyers. Yes, the top-tier auction houses are that much better and are that much ahead of the rest of the pack.
It is common to contact the art specialists about different art items and to assess their value. In this respect, the auction art specialists are your best friends. Of course, if they find an item particularly interesting, they will try to persuade you to sell it at one of their upcoming auctions.
There is another reason art specialists are important: Many art items come to auction houses not as items for consignment at auction but are sold directly to the auction house or through the auction house directly to a buyer. Sometimes, family descendants come to own a collection on death of a mother or father, and if they have to pay estate taxes or are in financially tight circumstances, they will choose to ask the auction house to negotiate a direct sale with a buyer, with the auction house drawing a commission on the sale. This is called a private treaty sale; the items offered basically never hit the open market. Unless you have a good relationship with the right art specialists, you will never even be notified about a private treaty sale.
In terms of pricing strategy, most auction houses try to start at fairly low prices. It is not unusual for them to price a unique item that they believe will sell for more than $200,000 at only $15,000 to $20,000. The purpose is, of course, to get a bidding war started. A lower entry price is a good way to get those bids coming in.
Following the auction, the auction house publishes a “prices realized” list that includes the lot number and price paid for each item. The best publicity for an auction house comes with the prices realized list, because if an item was estimated at $15,000 to $20,000 but sells for $260,000, that is excellent publicity for the auction house among both buyers and sellers. For the auction house, the prices realized list is a double-edged sword: If an item fails to meet its reserve price or meet its estimated price, then that reflects poorly on the auction house or shows that particular art market is in the doldrums. If prices are depressed, then art collectors are less likely to buy or sell their items, which means that the auction houses have less inventory to sell.
This is how and why art markets become depressed and why a fall in art prices often becomes self-reinforcing, making the troughs in the art market even deeper than in most other markets.
Many art collections are handed down through families, and descendants often sell off parts of the collection while developing their own new interests in art. This is how the new generation of art collectors and connoisseurs start.
While auctions are a popular format for the low- and medium-end of the online market, such as with eBay, the premium art market is not likely to change to an online auction format because the most important knowledge lies in the heads and databases of the art specialists, and there are no technological or monetary incentives to replace them in the immediate future.
At the end of the day, art is about people, not technology.
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