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sale,” says Evan Beard, national art executive at U.S. Trust.
The enhanced hammer is only one tool the houses are using. When Sotheby’s auctioned off the Twombly, it gave the seller, Los Angeles art patron Audrey Irmas, most of its $7.8 million buyer fee, say the people familiar with the matter, on top of the hammer price. It also made a risky agreement with the buyer, hedge fund manager Daniel Sundheim: According to a financial filing by Sotheby’s with New York state and people familiar with the deal, the house let the collector pay for the Twombly largely with an art swap. Sundheim pledged to consign seven other works, including a Warhol and a Basquiat, with a combined estimated value of $50 million to $75 million. Sotheby’s guaranteed him minimum prices for the pieces— a move that would leave the house on the hook if prices fall short. Sotheby’s, Sundheim, and Irmas all declined to comment.
A new management team at Sotheby’s, led by Chief Executive Officer Tad Smith, seems less willing to trade profits for market share. In February he told analysts that the dealmaking remains “fairly significant” for highly competitive collections, but also that he’s seeing signs of fewer givebacks on single consignments. The same goes for Christie’s. “We’re trying to recalibrate the market and persuade the sellers to come to a more realistic point of view,” says Brett Gorvy, global head of postwar and contemporary art at the London-based house. “We believe that if we work very hard and create value for the consignor, we should be paid for it.”
Will collectors be willing to forgo deals that have been so lucrative? Thomas Danziger, a New York lawyer who negotiates auction sales for major dealers, advisers, and collectors, agrees the auction houses want their old commissions back. But he says that may not be so easy, especially when the art market is showing signs of cooling: “We’d ask for enhanced hammer for anything.”
The bottom line The art market has been hot in recent years, but a price war has led auction houses to give up some of their profit margin.