Ten Mistakes People Make Trying To Invest In Art
By entrepreneur-turned-art-dealer and gallery owner, Bill Clark of Clark Art Gallery, in Cheshire and London
At a time where bank deposits, property and most conventional investments are producing poor returns there is a temptation to try less familiar investment commodities like precious metals, coins, antiques or art. But not everything that glitters is gold. Always apply this ten-point test before investing your savings in items with aesthetic value.
Is it a fake?
There are plenty of people out there with enough skill to fake works of art by well-known or famous artists. The fakes might not fool an expert but can easily appear convincing to an untutored eye. If that sounds like you, always ask the vendor to provide proof the work is genuine or give a guarantee of a refund if it turns out the painting was ‘made to deceive’ or take professional advice from a respected expert. If you think you’ve discovered a work of art at a price you think is almost too good to be true, it’s probably a fake. Ebay is full of original works by “famous artists”. The majority are fakes and you will have little comeback on the seller if you buy them.
Can I trust the vendor?
Not all art dealers are everything they seem. Anyone can set themselves up to deal in art and quite a number of crooks do. If you plan to buy a work from a dealer, check out his or her reputation in the trade, use the usual credit reference agencies and company checks to see if they are honest and genuine. Ask around. Once they’ve got your money, a dishonest dealer can make it very difficult for you to get it back if what they’ve sold you is not the sound investment you hoped for. After a few years of waiting for a work to ‘appreciate’, it is very tough to discover you were conned in the first place. The dealer will almost certainly have disappeared, along with your investment.
Has the work got ‘provenance’?
All genuine works of art have some kind of ‘provenance’, i.e. written records of when they were created and signed, where they were first exhibited, who owned them, where they’ve been since, where they’ve been bought and sold or why they’ve been out of the public eye. If the works were part of an inheritance, there should be a will or probate documents to prove it.
When a work of art has no solid provenance, ask yourself why not. Genuine art collectors know that receipts and documentation are critical components in the work of art’s valuation and always have been. They keep them. Ask yourself why these important documents have been discarded…or whether they ever existed at all.
Am I relying on my own taste?
We all know what we like, which is fine, but everyone’s taste differs. One man’s art is another person’s nightmare. A lot of the value in a work of art can rest on the popularity of the subject. If you visit an exhibition, for example, and all the other works have sold, ask yourself why that should be. Perhaps the subject is off-putting compared to the artists other work. If you rely solely on your own taste you may have difficulty selling when the time comes to get a return on your investment.
Checking the market facts and auction records
Remember the value of art can go down as well as up. It all depends on fashion, availability and the artist’s popularity. This applies particularly to the work of living artists. If they go through a very productive spell and ‘flood the market’, prices can suffer. If you go on the Internet, you can find auction records and sales information about well-known artists. See how the trends have been moving and don’t buy the work of an artist whose prices are ‘on the slide’. They may take a few years to bounce back to their peak.
Lesser works by big names
Don’t be fooled by a famous signature. Lots of artists over the years have produced limited editions which are multiple printed reproductions of genuine work. These may have genuine signatures but this will not necessarily give them much value. These ‘lesser works’ also include sketches, pencil drawings and working drawings. Very famous artists, like L S Lowry, can achieve very high prices for simple sketches, but many other names you might recognise might not. It is always much better to buy fewer high quality works. Quality will always sell.
Too big or too small
Works of art are generally displayed in people’s homes. They are bought to display, show off and enjoy as they appreciate in value. Be careful you don’t buy works that are so large they would dominate a conventional room or so small they’d hardly be noticed. Play safe where size is concerned if you want to make a profit.
Don’t forget about commission
If you’re buying or selling a work of art at an auction, whatever you do, take into account the buyers’ AND sellers’ commission in your calculations. Some auction houses charge as much as 25 per cent + VAT of the sale value and if the artist died within the last 70 years an additional 4 per cent artists royalty is payable. If you sell at auction you will be charged fees of 12.5 per cent to 17.5 per cent of the selling price plus insurance and cataloguing costs. Although there are no guarantees, if you’re celebrating because the value of something you bought a couple of years ago has increased by 20 per cent, a robust return in monetary terms, your joy may be short-lived if you sell at auction.
Take ‘condition’ into account
Collectors like their acquisitions to be of high quality and in ‘good-to-excellent’ condition. Don’t ever be tempted to buy soiled, damaged or ‘tired’ looking works because they are temptingly priced; even the work of quite famous ‘names’. It could cost you a fortune to have them restored. By the time you’ve had them reframed or mended and paid other costs, like insurance and transport to the restorers you could end up making a loss.
Expecting quick returns
Having said this, there are handsome returns to be made from investing in serious works of art, not least works by practicing modern artists who are on the point of becoming better known and appreciated. My gallery holds regular exhibitions of such work, often of up-and-coming artists, and investors flood in to make their choices.
Most of these investors are expecting either to leave the art works to their children or grandchildren or make a good return when they ‘down-size’ or retire. They’re not expecting to make a quick buck in a year-or-two. Many people use art as part of inheritance tax planning, if you survive for seven years after gifting a painting to your children it is free of inheritance tax when you die. If you take some informed advice and buy well you could outstrip many other markets by investing in contemporary art over a period of, say, ten or twenty years.
By Bill Clark of Clark Art Limited, galleries specialising in modern British art – www.clark-art.co.uk
Image of painting by LS Lowry titled “The Ferry South Shields” courtesy of clark-art.co.uk
The issues I see when buyers go after new works is that they tend to buy on impulse and not do their homework. There is alot of good advice in this post and always remember, if you are at a function where they are selling art and you are drinking alcahol, keep your credit card in your wallet.