Consignments 101

NEW YORK—For many art collectors, the thrill of building a collection comes not only from acquiring works but selling them, too—which is done to make room for new additions, to cash in on an investment, or simply to get a rush from being a part of the soaring art market.

A large chunk of those collectors are choosing to consign works to auction, taking advantage of record prices in salesrooms and reaping other inherent benefits, such as a rapt audience of potential buyers. However, even with all its boons, consignment can be intimidating for collectors new to selling works.

"It can be a scary process for people, especially if the artwork they own is their most valuable possession," said Deborah Coy, head of 19th-century European art at Christie's in New York.

But Coy, along with fellow experts Todd Weyman, vice president and director of prints and drawings at New York's Swann Auction Galleries; and Scot Levitt, director of fine arts at Bonhams & Butterfields auction house in Los Angeles, said consignment is a straightforward process that works like a well-oiled machine.

Why Consign?

The ability to reach a plethora of collectors at one time and place is the main advantage of selling a piece at an auction versus through a private dealer, Weyman said.

"With an auction house, you're offering something to a wider public at a given moment," he said. "If you're consigning a print, for example, it will be among several hundred objects that will draw people specifically interested in prints. It makes a big splash."

Auctions can also be a quicker way to do business. Once you set a price at a gallery, you may have to wait months for a collector to make an offer, Levitt added.

"At an auction, in 30 to 45 seconds you are showing an artwork to the world at large," Levitt said. "In some ways, it is the ultimate hard sell because [buyers] don't have time to think about it."

How Does it Work?

Details vary between auction houses, but the following steps are fairly uniform, and specifics can be found on most auction houses' Web sites.

1) Arrange for an Appraisal—Most auction houses have specialists on hand to determine the auction value of your artwork, and they will usually do so for free. The most common way of arranging an appraisal these days is to send a clear photograph and a description of the work via e-mail. "You would be amazed at just how much specialists can tell from a photo," Levitt added. "It answers the question as to what people have 95 percent of the time." The majority of auction houses also offer in-person appointments, and some hold regular appraisal clinics at their galleries.

FYI, don't feel bad if your artwork doesn't make the cut; the auction houses ARTINFO spoke with said they reject a majority of proposed consignments (criteria include the quality and condition of the work and the artist's auction history).

2) Lay Out the Numbers—If the auction house accepts your consignment, specialists will give you an estimate of the work's value (pending inspection, if the appraisal is done via e-mail, Coy noted) and a suggested reserve, or minimum price, below which your artwork will not be sold.

The auction house also will inform you of the fees involved. Fees include a commission (Bonhams & Butterfields' standard commission, which is fairly common, is 25 percent of the hammer price for works that sell for up to $2,500; 15 percent for works that sell for $2,500.01 to $10,000; and 10 percent for works selling for more than $10,000). You must also pay photography and marketing costs for the item's inclusion in the auction catalog, Web site, and other advertisements, plus insurance costs. Usually these fees don't have to be paid up front—the auction house simply deducts them from your final payment for the artwork. Some houses also charge a fee if your consignment doesn't sell (we'll discuss that scenario below).

3) Get Paid—Several weeks after the auction (the industry standard is 35 days, but it could take up to two months), you'll receive payment from the auction house, minus their commission and other expenses.

What if My Consignment Doesn't Sell?

Most auction houses will give you the option of reoffering the lot in an upcoming auction or having the item returned to you. Reoffering a work usually involves adjusting the estimate and reserves, and paying a small fee. Weyman said Swann Galleries returns about 65 to 75 percent of items that fail to sell; the other 25 to 35 percent is offered in subsequent auctions.