The relationship between dealers, galleries, artists and auction houses is sometimes quite sensitive, sometimes filled with a bit of animosity, and always interesting.
Let’s understand the difference; not all dealers work from galleries, many are independent advisors who work with a limited number of clients and advise, consult and buy on their behalf. They broker deals and will bid at auction for a client. In this instance they would earn a commission, when they buy and sell to a client they obviously make a profit.
There are two broad categories of gallery, those who represent living artists and those who sell works in the secondary market.
The galleries and dealers who represent living artists have different approaches to the way they see the market. Some will sell a work on the condition that the buyer gives the gallery/dealer first option on buying it back. This way they are able to control the prices of their artists and set the price points for their work. Some will sell on the basis that the work may not go to auction. Others set prices close to auction values so that if the work does come to auction the result is close to the gallery price and the dealer/gallery is able to justify their artists’ value in the secondary market as a good investment.
Dealers in the secondary market have found over the years that they compete more and more with auction houses, particularly now that auction prices are available on the internet and more collectors have found that buying at auction is usually a lot less expensive than buying from a gallery. They have had to source more work privately or buy at auction and keep the work out of the public eye for a while before putting on their walls for sale. Galleries do offer work for sale at auction, although the works offered are usually old, slow moving stock that the gallery needs to clear so they are not too concerned with the estimate and eventual selling price.
Then we have artists who sell without gallery representation directly to collectors. They run the risk of a collector cornering the market in their work, buying up as much as they can, keeping it for a few years and then slowly putting a few pieces on the market, building a market value and then dumping works on the market, making a huge profit and destroying the artist’s value. Unrepresented artists can have a love hate relationship with auction houses. Sometimes they need the auction house as a channel to sell work when they are short of cash, sometimes they avoid auction houses for the same reasons as galleries, they are scared that the price achieved at auction will be a lot less than the prices they are achieving with private sales.
The unrepresented artist can, if they control their marketing well, be very successful as galleries typically take a 40%-50% commission, and therein lies where the auction houses come in.
The prices achieved at auction are transparent and are a true reflection of what the market is prepared to pay for a work, which is precisely why some galleries, dealers and artists would rather their work did not come to auction. Auction reveals the true value of a work, good and bad. Good works often do better at auction than in galleries, after all, auctions reach a bigger market than galleries. The better auction houses also try and sell a better quality art, so buyers are assured of getting good advice from people who know their subject. The auction house has no vested interest in the work on sale, other than trying to do the best for the seller and make as much commission as possible so the advice will be impartial, after all if the auction house gives bad advice they are only going to do it once!
Auction houses do their best to achieve good prices, it is in the best interest for the seller, whether a private seller, a gallery, an artist and the auction house.