Since the da Vinci sale, more information about the backroom deals auction houses make have been coming to light. Katya Kazakina gives us an overview of the benefits and risks of auction guarantees. As Ed Dolman (Phillips Auctioneers) points out, there is a very good reason why these guarantees are needed to secure works of art: If you’ve got a $30 million work of art, it’s an incredibly important asset for an individual or a family. You can’t just take a chance on whether it sells or not, because the work of art that fails to sell at auction loses its value in the short term. Very true and an important consideration.
On the other side, along with some upside potential, Katya points out the guarantor does get another little bonus for taking the risk: If the work sells to the guarantor, he or she still may receive a financing fee, which ends up reducing the final price. The question now: was the hammer price of the work the actual selling price?