Many people invest in artwork as, in most cases, it steadily goes up in value over time. The fact is however that even the most avid art collectors can sometimes have a change of heart and, when it happens, usually it’s the gallery or auction house that takes the brunt of the canceled purchase or broken deal.
While this doesn’t mean that art galleries or auction houses are the easiest places to “stiff”, the simple fact is that sometimes bidders or purchasers will suffer financial problems or other extraneous circumstances that cause them to reconsider their purchase. In most cases the auction house or gallery will either “eat” the loss or scramble to make some type of alternative arrangements rather than pursue the buyer legally.
Ralph Lerner, a lawyer in Manhattan who specializes in artwork, says that “When you make a bid auction, implicitly you have made a contract with the auction house to pay the full amount if you win whatever you’re bidding for.” Mr. Lerner also admits that as a practical matter, it’s very bad publicity for auction houses or galleries to sue bidders because they tend to run in the same circles and talk amongst themselves.
If you have recently purchased artwork as an investment and you having “buyer’s remorse” the advice and tips below should be of great help.
Greg Rohan, president of Heritage Auctioneers & Galleries Inc. in Dallas, Texas, estimates that roughly 10 bidders per year at his auction house renege on their winning bids. Mr. Rohan says that the usual excuses are that someone has passed away between the time that a bid was placed and the actual date of the auction, a tax lien was unexpectedly put on a bidder’s bank account or some type of medical emergency came up. Divorce is also cited quite frequently as well as the simple fact that some bidders get so caught up in the excitement of bidding that they get in “over their heads”.
Rohan said that Heritage, rather than pursue matters legally, will instead try to work out an extended payment plan that fits the buyer’s needs. In some cases they also turn around and look for a non-winning bid and see if that person still wants to purchase the artwork and, in other cases, they simply put the item up for sale again.
Of course the actual amount of the winning bid will sometimes make a difference in whether or not legal proceedings are started. For example, if someone walks away from a $10,000 artwork purchase the chance of legal involvement is relatively small. On the other hand, someone who decides to back out of their $8 million art deal will probably find him or her self in court. In many cases the bidder’s standing in the art community plays a part and you’d be surprised how much consideration is shown not only to VIPs but also to the “average” artwork buyer if they have a good reputation.
Ron Warren is a director at an art gallery in New York City as well as a very reasonable man.. “Most people understand that they’ve made a commitment to buy something,” he says, adding that “we try to work it out.” Some of the possibilities extended to customers wanting or needing to back out of their agreement include extended payment plans as well as a trade that takes a piece from the buyer’s collection in lieu of payment.
Sometimes a buyer will get home only to find that the artwork they just purchased doesn’t “fit” in their home or, in some cases, will find that their spouse isn’t exactly happy with their purchase. Renato Danese, a New York art dealer, is realistic about these types of situations. “I don’t want them to have things they don’t want,” he says. “That’s not good for the artist and it’s not good for the collector’s relationship with the gallery.”
So if you’ve recently made a sizable art purchase and now you’re regretting your decision, know that there are options and alternatives that, in most cases, don’t include the court system and leave everyone with a good taste in their mouth.