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Introduction to Determining the Value of Art
By Robert E. Bear
The value of a work of art is a peculiar beast, a schizophrenic chameleon. It is witnessed in a myriad of perplexing personas, corporeal and otherwise. Non-the-less, affixing a monetary claim to an art work is a necessary evil in a pragmatic sense and its worth is influenced remarkably by the hat you are wearing. To understand this matter more, one must realize that these values are transient within societies and cultures. Consequently, they must be adjusted over time and in accordance with one's rules and role as an evaluator or art patron.
So, you say: "What in da tar nation eez you talkin' 'bout dude?"
Let me try to explain. The title of this discussion, "determining the value of art", leaves an open ended definition of "value". As a former gallery owner, practicing artist, and as a professional art educator responsible for e-value-ating art daily, I know that there are two distinct classifications of value; tangible, or corporeal, something to which a price tag can be attached. The other, obviously, being ethereal that cannot carry a monetary fixation, but non-the-less, has definite "value" from a variety of standpoints. Within both of these there are also distinctions.
To initiate a dialogue on "value" in reference for money, let's assume you're an artist and want to sell a painting. How do you affix a sales price? This should be helpful to those wanting to know how initial prices of a painting are determined.
To start with, you have to consider legitimate expenses: outlay of materials, approximate rate of utilities while producing the work, expenses for research and photography, travel, fees for models, studio space rental, copyright use, framing, storage, etc. These are all things you can document with a paper trail and receipts. Next, you have to consider a wage for your time in production. How much is your time worth and dependent on your skill? Should you reasonably expect to get more if you have a master's degree in painting, or are a beginner? (It may be interesting to note that most artists in the U.S. do not even make minimum wage on the sales of their work.) Which brings up another issue, how do you recoup your expenses for classes and education or training in art? If you have limited edition signed and numbered reproductions of a painting made, how much should the price of the painting be raised?
These are just some considerations. Some artists simplify this by using a formula, like $6 per square inch plus the cost of framing.
So, you have a price in mind and want to be represented by a gallery. You go to a few galleries and find out their commissions vary from 30 to 50 percent of the sales price. After evaluating gallery requirements and expectations you decide that in order to get the price you had in mind, for example $850, now must become $1,140 with a 40% gallery take included. Other issues involved are not limited to whether or not the gallery can expect to sell it at that price in its market and the galleries' insurance liabilities and limitations.
Here are some other questions regarding artist's pricing. Suppose you have some paintings in galleries and try to liquidate some others yourself. From an ethical standpoint, can you sell a similar work for $850 (knowing it would sell easier at that price), or should you charge the same as the gallery, $1,140? Can a similar painting sell for more in a different location of the country? Watercolors typically sell for less than oils of comparable size, therefore, how do you adjust prices? What do you charge in adjustment for a vignette of the same dimensions as a full composition piece? Additionally, suppose you have participated in some juried exhibitions and some of your works have won awards. Do you now raise the prices of these, and if so, how much (I've known some who double the price.)?
The artist also sees value in their art as a possible source of residual income. This comes in two forms. One is through royalty payments with the paid use of their copyrighted and licensed materials. The second and more obscure to most, is through percentages of repeated sales of the same art work. This is accomplished in a contract purchase where the artist or their estate is guaranteed a certain amount of the purchase each time the work is bought by a different patron. Both of these require the use of a good attorney that specializes in art sales contracts.
Since I mentioned insurance before, let's look at value from under that hat. Dollar amounts may reflect differently from the insurer and the insured. What you think a piece is worth may need to be documented with a certified appraiser's estimate and even appraisers amounts will vary. Another method is to verify a "track record" of sales amounts. An owner of an art purchase will need to show a receipt. Since values of art vary over the years, one should get updated estimates that reflect inflation. On the other hand, an insurer of a gallery may just take a gallery owner's document on total amounts of consignment contracts.
Suppose you own art and want to donate it to a non-profit organization. Now the federal government has stepped in. If you want to claim an amount for tax purposes you have to verify a claim with a receipt. Unless you are the artist, then it's a whole other ball game. Uncle Sam now says you can only claim the actual value of the tangible materials that make up the piece. Your time and other expenses are null and void. So, your piece basically becomes worthless, which brings us to the next three berets of value I can relate to under the voice of experience, 1) estate of the deceased, 2) bankruptcy , and 3) loan value.
In the event of settling an estate, unless one has receipts to verify worth, you can expect to get, or list, garage sale prices (GSP). Here you also have the option of using a professional appraiser to assign a value. In the unfortunate case of a bankruptcy, you can expect to keep art listed as "wall coverings" also valued at "garage sale prices", to sell it at the GSP level, or at minimum, much lower values than your track record of sales. Banks have their own capricious policies in terms of the value of art as collateral. Some won't accept it, some require a certified appraised estimate, which will be in a range from "X" dollars to "X" dollars and as you can rightly guess, the lower amount will be used. Furthermore, you can expect the bank to allow no more than 75% of that number as collateral value. Some will have their own value of several art pieces (note the plural here) by stating that they will accept the art for a $500 loan, this is, in effect, actually a signature loan and the art has no collateral value.
Take the stance of an investor now. Several years ago "Money" magazine published their best long term investments for 15 and 30 year periods. Ranked at numbers 2 and 3 over these periods was original, contemporary art. If you are looking at long term strategies, then a serious glance at art values is important. As an investor, unless you purchase art at auction, you can generally negotiate a purchase price with a gallery or an artist. This demonstrates there can be a difference between perceived and real value for a work. If you buy art just because you like it, it may not be a monetary investment. Prior to investing in art, you need to consider all of the topics mentioned above in deciding what to look for as "value" in buying art. Two things here that also affect the value of art is the notoriety of artist in combination with market supply and demand.
With all this said, the ultimate monetary value of any art work is only the highest amount at any given time that someone is willing to pay.
Up to now we have taken a cursory look at art in terms of tangible market values. Here are a few non-monetary assessments of art work worth: cultural significance, educational and instructional relevance, historical documentation and study, therapeutic value (which can also be seen as an investment), and aesthetic attachment. Each one of these deserves their own treatise at another time.
The "value of art" to each person is a rough diamond. Increasing its worth will depend on the skill of the cutter to weld a working philosophical construct of value with practical applications to be employed as a tool to expose its many exquisite faces. Undoubtedly, theoretical physicists will prove a string theory for the universe before there is any global "value of art" recognized throughout all societies and cultures.
About the Author
Robert E. Bear is a professional educator and national award winning artist. He has been recognized in Who's Who In America, Who's Who In American Education, and National Honor Society Outstanding American Teachers. Robert has created the Star Poster Program, the game of Gig'l®, and the team sport of Bearball®. His website is http://www.ursidaeenterprises.com.
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