The Advantages of Buying Art at Auction

When the pandemic first hit, the art market was turned upside down. “People were saying, ‘Oh my god, the wheels are coming off the bus. This is probably not a great time to sell art.’ So there were far less available works at auction,” said Doug Woodham, managing partner of New York–based firm Art Fiduciary Advisors and a former president of Christie’s for the Americas. Fast forward to present, and the situation has transformed. “By the beginning of 2021, the market came roaring back.…Today, there are so many sales taking place, in part because there’s a lot of objects available,” said Woodham. Last year, Christie’s sales totalled $7.1 billion, an increase of 54 percent from a year earlier. Sotheby’s sold $7.3 billion in 2021, a new high in the company’s history, and Phillips’s global sales rose to $1.2 billion, a more than 30 percent increase from 2019.

“When the world shut down and no one could travel [due to COVID-19], we found there was a lot of money in the market and people wanted to acquire art,” said Jonathan Crockett, chairman for Asia and head of 20th-century and contemporary art in Asia at Phillips. “Partly because they were at home, they were buying to make themselves feel better.” He likens it to retail therapy, or what some call “revenge spending.” Virtual and online auctions became increasingly prevalent. Several people began participating in auctions for the first time. Half of all buyers across Phillips’s auctions worldwide in 2021 alone were new. Crockett said that trend is continuing: “Each season, we’re seeing clients we’ve never heard from before engage with us and buy at a very high level.”

Today, there are many reasons why collectors are opting to buy from auctions over galleries, including access to highly sought-after works; a more straightforward buying process; transparency into demand and pricing, through bidding activity and free secondary-market data; and at times, the potential to find high-quality works at relatively affordable prices.

“Recently, buying in the primary market has become so competitive,” said Paris-based collector Kyoko Tamura. “It’s a nice experience to go through a gallery, a more traditional way of buying, but oftentimes acquiring works at auction can be the only way to find certain pieces.”

Hong Kong–based restaurateur Alan Lo, who is also an avid collector, recalls missing an opportunity to buy a painting by Nigerian artist John Madu from a dealer. Later, when he encountered a work by the artist at auction, he snapped it up since it was taking too long to acquire in the primary market.

Unlike auctions, which are more democratic and open to the public, galleries can function as gatekeepers of sorts. “Galleries always have this hidden list of their VIPs who they reserve works for.…You never know what kind of games are being played,” said Jeffrey Lee, a California-based collector and co-founder of frensHouse, a creative agency specializing in web3 and blockchain technology collaborations. He gives the example of collectors being on long waiting lists for a piece by a popular artist, but jumping to the front of the queue if they volunteer to buy one work and donate a second to a museum. “You typically won’t need to deal with situations like that with an auction house where the top bidder gets the work,” he said. “It’s more straightforward.”

Lee recalls the lengthy process of acquiring a piece by Japanese sculptor Kohei Nawa after he saw it at an art fair. He put down a deposit, and then he was placed on a waiting list by a gallery. “They put me through hoops, but a lot of times people don’t have time for that,” he said. Woodham echoed this sentiment: “Many wealthy collectors find that private buying experience at galleries very off-putting. They think, ‘I’m willing to spend the money, so why are you interviewing me?’”

For new collectors, bidding at auction can be more reassuring than buying privately from a dealer as they get real-time feedback of market interest in a work. “This gives people more confidence to spend,” said Woodham. In many cases, people won’t bid on a work if no one else raises their paddle. “They rather see someone else bidding on it first, giving them that assurance that the market is solid because we’re talking about a lot of money most of the time,” said Crockett. Contrary to popular belief, it’s also possible to buy established names at auction without breaking the bank. A few years ago, Lee traveled to Japan to attend a smaller local auction where he acquired a few works by Japanese painter Yoshitomo Nara. “At smaller auctions, and even sometimes at larger sales, you can end up sniping a work that someone else overlooked or acquiring work at a discount,” he explained.

Lo agrees. If he’s looking for historic works from a particular period of an artist’s career—such as a Yayoi Kusama piece from the 1980s, for instance—he looks outside major auction houses to smaller regional houses where competition for a work may be less intense. Even when it comes to big auction houses, there are chances for collectors to take home work at affordable prices. There can be “sleeper lots” at sales that remain unnoticed and tend to be priced below their actual value. “They may be sleeping and look quiet,” said Crockett, describing lots that don’t attract bidders. “But if you manage to discover them when no one else has, you’ve got yourself a bargain.”

In the case of artists who are out of favor, Woodham added that you can pay less at auction than in the primary market because galleries in general are reluctant to lower prices. “Collectors can get a deal at auction if an artist is very good but has no market,” Tamura said, though she quickly cautioned: “You have to distinguish who these artists are and you have to have the guts to bid on the works.”

When it comes to purchasing art, auctions can be a more secure route, too. Major houses tend to offer an authenticity guarantee for a period of five years, which allows you to return the work if it has been misattributed or if it is counterfeit. If you purchase from a small gallery, there is a risk that they may go out of business, so this wouldn’t be possible. Lee added that auction houses often have an unspoken agreement that they will take back the work should you want to consign it down the line. Regardless of if you return to the same auction house to resell a work, Crockett said that when you make a purchase from auction, you know that there is a secondary market for the artist’s work, which makes it a safer investment.

Within the secondary market, private sales at auction have become a popular choice as collectors can buy throughout the year instead of waiting for major seasonal sales. Phillips reported that its global private sales in the first half of 2021 were up 107 percent from 2019. For many clients, the anonymity of private sales is an advantage. “There are a share of collectors who are more public about what they collect, people who have foundations and dedicated spaces for their collections but many others have a passion for art and they want to keep it very private, especially the older generation of collectors in Asia,” Lo said.