VALUE IN ART
FOR EXPERT WITNESS MAGAZINE, VOL.1 NO.6
What does 'value' mean? Is it always one thing? Does it matter? Well, it varies – no and yes. There are two principal bases of valuation:
FOR SALE IN THE OPEN MARKET
These usually fall into the following six categories:
PROBATE—There is no such thing as a probate valuation. However, Revenue and Customs instruct valuers to produce a market value for the purposes of probate. This should reflect the hammer price at public auction and not a forced sale. If the item is particularly specialist, then the value at an appropriate specialist auction is sought. By commissioning and using such a valuation as the basis for sale at auction, the executor of an estate covers his back and minimises the chance of any claim by the beneficiaries that he has not secured the best net return on their behalf and will consequently be sued.
CONTENTIOUS PROBATE—This often arises as a dispute over title or where the basis of value is differently assessed by opposing parties. For example, a recent case involved the wife and the mistress of the deceased arguing about the value of paintings left in the husband/lover's estate. Research indicated that one artist, a living Frenchman, sold through American galleries for between prices ranging from $9,000 to $35,000. However, when offered for auction, similar works only made between £300 and £600, wherever they were sold in the world. So, in a sense, both mistress and wife were correct, just arguing on different levels of value. Which was more important – ownership of the paintings at an agreed value or selling them and using the money elsewhere? That was up to them to sort out with the aid of their legal advisers.
DIVORCE—I often act as a Single Joint Expert, carrying out a market valuation accepted by both husband and wife as the basis for an equitable division. Although this is usually in the form of an expert witness report, it is rare for a subsequent court appearance to be required for the valuer. However this sometimes occurs when acting for only one party.
DISTRESS—This usually involves bailiffs, some of whom also act as auctioneers. Art seized includes items from bankruptcies and goods seized as a result of criminal activity.
ASSET—Art used not to be regarded by the big banks and lending institutions as an asset class. Times have changed. It is now increasingly common practice for private individuals, trustees and companies to seek to raise capital on their art. During the last two years I have been involved in an asset valuation, including a Turner oil painting, on which a client was attempting to raise monies to pay for a West Country manor house. Loan to value is generally around 50%. Often art is held in secure store whilst the loan is outstanding.
CONTENTIOUS CLAIMS—These usually involve authenticity or quantum, where the importance and consequent value of a piece of art is open to different interpretations.
Valuations fall into the following four categories:
- These are carried out for private individuals, companies and trusts. They include the contents of private houses or selected items, such as paintings or jewellery valued at over a certain figure to replace at retail prices. This figure used to be as low as £500, now it is often £2,000, sometimes £15,000 or even £50,000, depending on the particular policy wording.
- Trustees are responsible for the insurance cover on the items over which their duty of care extends – this involves the production of an inventory and valuation for this particular purpose, usually accompanied by the inclusion of thumbnail images, as many trustees never physically see the items for which they are responsible and a picture always helps. I am currently involved in a rolling series of high net worth valuations which updates collections of furniture, silver, pictures, ceramics and books held in an English private house by an off-shore trust.
- Theft. Where an existing valuation exists, insurers will use those figures in the event of a claim. These are called agreed values and can only be altered by an updated valuation. Where no existing valuation exists a loss adjuster may well be appointed to settle the claim on behalf of the insurers. The insured can hire an independent valuer or loss assessor to help them establish an independent resolution. The adjuster and assessor are usually both given some latitude to reach an agreement to satisfy both parties. The claims are based on retail replacement figures, unless previously agreed otherwise by the insured.
- Total or partial loss may be occasioned by fire, flood, natural disaster or in transit. Valuers are then called in to assess the extent of the damage as to whether or not the item is a total write-off. It may be that the item can be repaired, if so, there is still an 'intrinsic loss of value' to be taken into account. For example an oil painting may be ripped but restoration will not completely mask the damage. Collectors / the art and antiques trade will downgrade damaged items and pay less for them. The difference between the replacement value of an item in pre-loss condition and its value after it has been restored is called the 'intrinsic loss of value'. A fair insurance pay-out will take this into account.
Another factor is that many insurers choose to have items remade rather than replace them in the retail market. This will particularly apply to pieces no longer regarded as stock. For example a silver candelabrum bought from most retail shops would now have to be ordered and remade as a special commission, but an insurer can approach a silversmith direct to produce a piece for a trade price, a fraction of the retail cost.
Unfortunately, as far as surveyors are concerned, insurers have tended to muddy the water when they have assumed that market value is the same as replacement value. It is not. The first is wholesale, the second retail. However arts surveyors have been encouraged by our professional body, the RICS, to make it absolutely clear to everyone, whether a solicitor or an insurance broker, in the certificate of valuation forming the last page of any inventory and valuation, as to the exact purpose of the work, so that any misunderstanding can be avoided. If it is a market valuation for the purpose of sale at public auction, we say so; if it is a market valuation for the purpose of replacement through usual retail channels, we say so. This avoids any confusion.
When matters end up in court, the judge will need assistance from the expert in making a fair assessment; this necessitates the provision of an expert witness report, which, although paid for by the client, is for the attention of the court as a completely objective statement.
In the world of art and antiques, expert witnesses are usually instructed to value for sale in the open market – this is usually interpreted as sale at public auction.
To be an 'expert' implies that the individual has knowledge in depth, which always needs to be kept up to date. I feel that I need to spend a day a week in attending auction previews, noting sale results and visiting shops and galleries to check retail prices. Computer information is not enough – the expert art and antiques witness has to view and handle items himself.
So, what to buy? Maybe, before spending money on a painting, and if at all worried about its value going up or down over the years, the potential purchaser should check on the health of the artist, whether he is still working or has decided to retire, whether he is working towards a new exhibition, whether his eye sight is any good.
An example of ailing health impacting on the art produced is the late work of Claude Monet (1840–1926), who continued to paint impressionist works in his garden at Giverny during a time when cataracts affected his sight and resulted in him using an increased variety of red tones. An operation three years before his death corrected his sight and he used more blue, repainting some, but not all, of the redder works. Should these later works be as prized as his earlier works? Certainly they come on to the market less frequently, most of the paintings being sold up to now being dated before 1900.
On the other hand, student works by established artists are seldom worth more than a small percentage of their mature work. Even an early collage by Damien Hirst, given to a fellow student who gave Hirst cheap lodging whilst at Goldsmith's College, sold at auction for £32,000, a fraction of the prices made by his later original pieces.
Traditionally the value of an artist's work increases after his death, but recent years have produced many whose work sells at high prices whilst they are alive and it is too early to guess how history will judge or appreciate them. Certainly those with an established track record at auction, such as Lucian Freud, who died last year, have seen prices rise in the short term.
But all art sold at auction and through the galleries is subject to whims and trends. The Victorian landscapes, particularly of Scotland, that were so popular in the mid to late 1980s are generally much cheaper now. They are out of vogue.
Contemporary art collecting can be a minefield. Last year I valued a collection by the artist (Alan) Charming Baker, one of our leading surrealist / street style artists, working somewhat in the manner of Banksy. I have recently completed a second valuation for another client including several works by the artist, both originals and signed prints. Even in the year since the first valuation, prices of the prints have risen considerably. An example of one, dated 2008 and in an edition of 85, originally sold for £280 in a gallery and was resold at auction in December 2012 for £1,900. Baker has struck a chord with celebrity art collectors and his palatable yet subtly edgy 'street' style puts him at the fore (for now).
If you remember the 1960s, Cork Street in London's West End was the main location for the principal galleries selling contemporary art. The owners considered that if 20% of the new artists whose work they were selling were household names (at least in arts households) a generation on, then they were doing their job correctly in introducing fresh artists of quality to the arts buying public.
However, by the turn of the century, much had changed. Charles Saatchi started a series of Young British Artists shows in 1992 and consolidated this with Sensation, an exhibition of works owned by him, at the Royal Academy in 1997, which heralded a new age. These works set out to question and shock in new 'sensationalist' ways. The selling galleries, largely led by White Cube, first in Duke Street, St. James's and later in Hoxton Square, expected the large majority, and hopefully all, of their promoted choices to make a significant impact immediately, leading to a longer term increase in values.
With established artists galleries caught on quickly. In 1997 the Annely Juda Gallery put on an exhibition of small oil paintings by David Hockney entitled Flowers, Faces and Spaces. These were priced at approximately three times the amount sought for similar works sold by Hockney previously. They all sold within days. A new benchmark for the price of the artist's work had been set.
With the rapid expansion of interest, contemporary art dealers were able to persuade their artists to produce not only a steady stream of original work, but a large number of limited edition prints.
Here there was a radical change in the way such prints were sold. The tradition had been that with a limited edition of 75 prints, often on hand-made paper, the first would be sold at, say, £200, the second at £205, the third at £210 and so on, until the edition was sold out, not only increasing the return to both artist and gallery, but giving a good indicator of the desirability of that artist's work for the future. Now that galleries could see greater interest and a wider opportunity, print runs were expanded, produced on cheaper paper and priced at a uniform cost. When the edition sold out and demand was still evident, a second edition might be produced with minor variations to sustain demand. No more tiresome recording of individual purchases to determine value. So is a print from an unlimited edition worth buying? Many argue that it is then just a signature on a piece of paper. and that the exclusivity has gone.
Certainly there has been a change to the method of producing limited edition prints. Some artists, once they feel that their market is well established, are now choosing to become more exclusive with smaller limited editions, some as low as ten, set at higher prices, which sell out quickly and add to the exclusivity of buying that particular artist's work.
This maximising of returns by selling volume is borne out by the way Damien Hirst produces elements of his work and echoes the approach of The Factory in New York, the studio set up by Andy Warhol between 1962 and 1984. Hirst has become so popular that he had to employ a number of assistants to help him produce his work, including his spin and 'colour chart' paintings.
So how important is originality in assessing the quality of a work of art? How does this help determine its value? Picasso, paraphrasing T.S. Eliot, said "Bad artists copy. Great artists steal". So who is a great contemporary artist? Coming to an intelligent conclusion is not helped by the way art is currently taught at the colleges, where students are taught that the highest marks to be scored for coursework are for projects that deliberately reference the work of previous artists, so long as they explain what motivated a work and where they consider it leads them. Is there any place for originality? It is certainly not encouraged. What indeed would constitute true originality in media where anything goes? Was Picasso acknowledging that there is nothing new in art?
And where does this place Damien Hirst's shark, Tracey Emin's bed or Rachel Whiteread's solid house?
Perhaps we should not forget that the most popular art is not always the greatest art, however well received in its day. William Powell Frith (1819–1909), probably most famous for Ramsgate Sands, Life at the Seaside (1854), Derby Day (1858) and The Railway Station (1865), all works with multiple figures depicting many layers of society, was the first artist to sell over a million prints. But the popularity of the Impressionists and the advance of photography resulted in a rapid fall in the interest in his work.
I have always thought that the most satisfying art, and therefore arguably the best, is contained in a piece that gives the viewer fresh pleasure each time he observes it. Lesser art is more of a one-off shot and gives nothing new on a second view.
One good piece of advice is not to get over-concerned about the 'value' of what you want to own. Perhaps you shouldn't buy anything you don't like. If it does gain in price over the years, regard that as a bonus. If you need advice before buying, ask someone with no vested interest. Ask an arts surveyor.
Andrew Acquier, FRICS
Originally published in Expert Witness Magazine, Vol.1 No.6