July 29, 2021
Art Valuation in Disruptive Times

Art valuation in disruptive times

By: Mary Elizabeth Klein

Art is meant to disturb, science reassures Georges Braque, Pensees sur l’Art (George Braque Illustrated Notebooks: 1917–1955)


Although fine art and collectibles1 are often viewed  by collectors themselves as a personal passion pursuit, in actuality these assets should be viewed as an investment class to be monitored and continuously evaluated along with other alternative asset classes such as real-estate holdings or private equity.

Global sales of art and antiques reached an estimated US$64.1 billion in 2019, reflecting a 5% decrease in value and 2% increase in volume.2 Even over the past year of the pandemic, the art market has shown considerable resiliency, with the auction houses, art dealers and art fair organisers innovating in their technology and creating variant sale formats and venues, thus granting collectors more access to their offerings than ever before, and instilling confidence in the viability of the market throughout.

Despite a sharp decline in public auction sales  totals by the end of the second quarter in 2020, a drop of 77.9% in sales (compared to the second quarter in 2019) resulting from the postponed mid-May sales in response to the Covid-19 pandemic, a rebounding occurred in the second half of 2020. The quick pivot to virtual auctions and later to hybrid live-streamed sales, involving specialists on the phone in multiple cities and online bidding, boosted overall sales for the three auction houses (Christie’s, Sotheby’s and Phillips) to US$5.59 billion in the second half of the year, a 30.1% increase over the same period in 2019. Global auction sales from Christie’s, Sotheby’s and Phillips ended at US$7.41 billion in 2020, down 25.9% from 2019.

These results do not account for private sales, which became a major way for consignors wary of the public markets to transact in 2020. Sotheby’s reported that its private sales soared more than 50% in 2020 to more than US$1.5 billion. Similarly, Christie’s reported a 57% gain in 2020 private sales to a projected US$1.3 billion, noting that it sold more works above US$25 million privately than through public auctions.3

The size of the art and collectibles market is even more expansive considering it is estimated that between $4 and $6 trillion of collectibles will pass intergenerationally in the next 40 years.4

Since the art market is ever changing, and unexpected life events can readily occur, it is prudent to be fully prepared both in pre-planning and anticipating future outcomes for these specialised assets. Family offices need to understand the art market and art valuation principles, especially in the context of macro-economic developments. This evaluation should consider an appreciation of art economic fundamentals along with external factors (socio-economic, governmental, technological events and changes) affecting the art market, as well as the formulation of a comprehensive stewardship plan for the collection.


The art market

Less liquid than the traditional equities market, the  art market has nonetheless solidified as a distinct   asset class, with major auctions traditionally occurring in the early spring and autumn each year thus determining changes in levels of pricing every six months. The pandemic has necessitated a more fluid sale schedule, many more online sales at all price points, a re-thinking of art centres to include more international focus on Paris and Hong Kong salesrooms, and pop-up venues from the Hamptons   to Palm Beach. The market is divided between dealer/private transactions and public auction transactions, with over 50% of sales typically occurring in the dealer/private platform, and the remainder at auction. It is the Emerging, Contemporary and Modern fine art markets that currently drive the art market in overall turnover.

Public perception is another driver since auction results are publicly tracked, and those prices are most often used to gauge the levels and vibrancy of different sectors of the market, with art fair results adding to the data points, when available. As mentioned, online auction sales, as opposed to live auctions, are becoming increasingly prevalent and accepted in the art market largely due to the restriction on public gatherings, but also because of an increasingly younger demographic, comfortable with the technology and making large purchases sight unseen. Unlike a traditional field like Old Master paintings or drawings, much Contemporary and Emerging art often demands less personal inspection, especially if the auction house readily provides professional condition reports. Given that the art market remains the least regulated of the major asset classes in transactional matters, and that appraisers of tangible personal property are not required to be licensed in the United States, the art market is an opaque economy, and extra due diligence when buying or selling must be undertaken by the individuals engaged in those activities.5 The market is, however, attracting more governmental scrutiny with the likelihood of stricter know-your-customer and other procedures hovering over the market for money laundering and terrorist funding concerns; similar laws have already been imposed on auction houses and the art trade since 1 January 2020.


Art valuation elements, appraisals, and methodologies



The challenges in valuing art, real estate and private equity are analogous in many respects and include the following:6

  • Each asset is unique
  • Valuations can be challenging given that, in some cases, few if any direct comparables exist, or those that are similar must still be carefully interpreted by a competent certified appraiser.
  • There are a myriad of indices that use diverse underlying calculations, and there is imperfect reporting of art sale price results, especially when printed catalogues are now less common and offerings and results can be purged easily from digital records.
  • Both markets are illiquid.
  • Buying, holding and selling costs are considerable.
  • Buying and selling are often infrequent


Furthermore, art involves additional complexities, and the value of a piece of art is based on many variants. These include:

  • art quality;
  • artist quality;
  • category or genre;
  • readily apparent and underlying condition issues;
  • curatorial and scholarly interest;
  • differential in pricing between primary (gallery) versus secondary market (auction or resale) venues;
  • differential in pricing between public (auction) versus private (gallery) venues;
  • dimensions;
  • medium, including new media and subsequent conservation problems;
  • presence of markings or signatures;
  • provenance history;
  • rarity;
  • stand-alone item or part of larger set/collection;
  • vagaries of fashion and popularity;
  • year/period;
  • fakes and forgeries; and
  • passing good title – including WWII and other past ownership and restitution issues.


Art appraisals

Past auction prices can reveal trends in the art market, but due to relatively thin trading, and the many complex factors noted above, assessing the worth of a specific art piece requires considerable professional expertise and most often and optimal the personal physical examination and analysis of the property. This assessment process has developed into the industry of art appraisal.

A credible art appraisal is a legal document that fully describes:

  • the artwork(s) being appraised;
  • the value of art work for a specific purpose (estate tax, charitable donation, insurance, financial and estate planning, and family division, including divorce); and
  • a specific type of value (such as fair market value, retail replacement value, market value, or marketable cash value).


As in real estate, art appraisals are used to provide an independent and expert view on the value of an asset and include the use of comparable sales analyses. Online tools such as,, and other subscription-based databases, are an essential part of the process for providing accessible sales data that most often provide images of the work and links to the auction house cataloguing data and notes.

An appraisal that will be scrutinised by tax authorities for such purposes as charitable donations, gifting, or estate purposes must be certified by a ‘qualified’ appraiser.7 The fees charged by the appraiser cannot be based on a percentage of value of the object but is normally charged on an hourly or project rate, plus expenses. It should contain the following elements:

  • a detailed description of the work of art, its characteristics and its current physical condition, citations of provenance, exhibition and literature history;
  • accurate photographs of the object(s);
  • a detailed description of the appraiser’s background and qualifications, a statement of disinterest in the property being valued, and a statement that the appraiser has not been previously disqualified by the US Internal Revenue Service;
  • the method of valuation used (such as current market comparison approach) to determine a defined type of value for the stated purpose (charitable gifting, estate tax, insurance, etc);
  • a thorough analysis of comparable sales transactions with photographs of the comparables; and
  • the appropriate tax forms if appraisal is prepared for charitable dona8


In the United States, the Appraisers Association of America (AAA) is a non-profit professional association that exclusively includes personal property appraisers and is a reliable source for selecting appraisers with appropriate expertise in specific categories of art, antiques and collectibles. The organisation will confirm the credentials of their members who are listed on their website. Members of the AAA must adhere to a strict Code of Ethics and be current with the aforementioned Uniform Standards of Professional Appraisal Practice (USPAP), a set of congressionally sanctioned standards for professional appraisal practice. USPAP includes standards for competency, ethics, objectivity and report writing. A correctly prepared appraisal will include an analysis of an art object that will reflect economic conditions at the  time of valuation, supply and demand in the market, and scarcity or rarity of the item.

A thorough and up-to-date appraisal is an invaluable resource to assist the family office collector in stewardship, investment and financial and estate planning areas related to:

  • insuring the art;
  • making short and long-term decisions about the collection;
  • transferring the art by gift to individuals, family members, or by donation to charities, museums and art institutions; and
  • borrowing against the art


Appraisals should be kept up-to-date to reflect current market trends.

Given the many variables in the art market, family offices need to hire best-in-class professionals to conduct periodic art appraisals as a critical component in managing their art collection as a financial asset.

An accurate appraisal keeps an art investment portfolio current, ensures viable planning for estate tax planning and gifting strategies, covers the work for current insurance purposes, and enables strategic planning of a potentially saleable or collateralised assets.


Art valuation methodologies

The two most common approaches to art valuation are fair market value (FMV) and retail replacement value (RRV). In situations where the art is being insured shortly after purchase, cost value may be used by the insurer. When a division of assets is contemplated, marketable cash value, in which commissions and costs are deducted, is a typical valuation method.

Precise and well-documented art appraisals are essential for family offices given the potential for tax penalties. In the United States, the Internal Revenue Service may take several years before reviewing a donation or estate tax filing, subjecting the taxpayer to additional tax penalties and interest. Higher-value donations of art assets and valuable art in wealth estates will be subject to review by the US Internal Revenue Service’s Art Panel, comprised of top art curators and dealers.


Art pricing

What makes a work of art worth its selling price? In 2017, there was the landmark sale of the ‘rediscovered’ Leonardo da Vinci painting Salvator Mundi said to have been purchased by the Abu Dhabi Department of Culture and Tourism for US$450 million at Christie’s New York at more than four times the price of any other painting previously sold at auction. A set of ink-brush panels by Qi Baishi Twelve Landscape Screens sold for US$140.9 million in December 2017 at Poly Beijing, the highest price ever paid for a work of Chinese art at auction and the highest price paid for a single lot in China at auction.9  In the 2020 Covid environment, a Francis Bacon triptych was sold for US$84.5 million at Sotheby London’s marathon virtual auction in June 2020.10  In January 2021, a painting by Sandro Botticelli, Young Man Holding a Roundel (c.1470–1480), sold for US$92.1 million, the second highest price for an Old Master at auction at Sotheby’s New York.

In valuing art objects, there are a myriad of factors for an appraiser to consider, including the merits of the object itself, its condition, its rarity, and many other specific factors such as past sale precedents for similar objects. Auction houses establish pre-sale low and high-value ranges based on these factors. The excess paid over this range measures the extent of the irrational and subjective premium inherent in art prices, which may be due to extraordinary quality, rarity or provenance.11 There is also a huge premium involved in the ‘celebrity factor’ where an object or collection is sold on behalf of a well-known ‘star’ of the past or present, or where property is sold from esteemed private collections or museums. The importance to family offices with significant collections or those aspiring to hold art as an investment is to engage trusted art advisers, legal and tax professionals early in the collecting process to maximise exhibition opportunities at major museum exhibitions and other venues, which can add value to an art portfolio. It is also important to structure the collection strategically prior to its formation for long-range tax-planning purposes.

Art market supply and demand

The premise that the art market is supply driven is a fundamental concept to understanding the economic framework of the art market and its impact on valuation. The total quantity of art supply is essentially fixed in the short run for nearly all artists (and also in the long run for deceased artists). No matter what price someone may be willing to pay for more art, extra supply cannot in most cases be created simply to meet demand. It is because of these limits  on supply that prices for art can reach extraordinary levels when rare or exceptional works with art of historical importance, art ‘fresh to the market’ from estates, major institutional or private collections, or works by the ‘hot’ artists of the moment, appear on the market. The lengthy market cycle, typically several decades, adds to the scarcity value of art.12

Subjective drivers of art prices

While objective factors influence the prices or estimates set for an art work, there are intangible, subjective factors that affect pricing, such as the ability of the gallerist or auction house to promote an artist’s work or promote a specific auction sale or lot. Sales history or ‘freshness’ to the market also affects valuation. For example, art ‘bought in’ or unsold at auction may be considered ‘burned’ or over-exposed which can adversely affect its value in the short and possibly the longer term. Conversely, a work of art that sells for a very high price at a particular point in time is likely to result in higher estimates being set for the same work or similar works in the future. When a price jump is sudden and dramatic, it is easy to distinguish the irrational component of the premium, but if these premiums are embedded in sales over time, they may become more difficult to establish or recognise.13

Objective drivers of art prices

The specifics of art valuation are both qualitative and quantifiable, though difficult for the layman to ascertain without professional guidance. Objective drivers of art prices include:14

  • artist’s reputation and standing;
  • characteristics of the work itself (size, medium, period, subject, condition, provenance); and
  • characteristics of the sale (venue, timing, economic trends).


Artists become famous through a progression to fame based on peer and academic recognition and art dealer promotion, followed by critical and curatorial recognition, and finally wider public acknowledgement.15

National patrimony

National patrimony represents the store of wealth of a national economy and includes non-monetary wealth such as artistic heritage. Under this principle, government interventions through regulations may affect the potential value of an art investment. Family offices should consider local country tax and regulatory regimes when holding art as an investment. International laws such as the UNESCO treaty and other more recent rulings have greatly impacted the trade in antiquities. The US government, for example, has recently imposed stricter regulation on due diligence for sales in this category.


The value of art is linked to the perception of its authenticity. Unless the authenticity of a work can be firmly established, the valuation and marketability of an object is likely to be substantially constrained.16 In recent years, due to litigation risks, some artist authentication committees have been hesitant or refused to definitively opine on the authenticity of works not previously well-documented, creating uncertainty in specific artist’s markets, and, in some cases, rendering works (at least temporarily) unsaleable. Authentication of a piece of art increases risk as it can help uplift or completely devalue art.17 During a recession, art tends to retain its value far better than other commodities – unless of course it is proven to be a forgery.18 Forgery, fakes and provenance schemes are all means of deceiving  the collector.19 The table below outlines common forgery categories.


Categories of art forgery Description
Forgery Wholesale creation of a fraudulent work often requiring great skill and understanding of the original artist’s technique.
Fakes The intentional misrepresentation of a work’s creator, origin or date to create greater sales value.
Provenance Altered or fabricated documented history of an art object, which may result in enhanced value.
Misattribution of authentic work ‘Expert’ convinces buyer that art work is by a more important artist; can also result in a ‘sleeper’, an object that is misidentified and subsequently recognised by one or more experts.


To support provenance, collectors verify the trail of ownership including inclusion in prominent collections, past exhibition history, and inclusion in the acknowledged catalogue raisonné. The catalogue raisonné is a seminal starting point for establishing authenticity and represents an annotated listing of accepted art works by a specific artist in a particular medium or media. For example, Gerhard Richter, a living and top-selling German artist, meticulously numbers his works to aid the archiving and production of the catalogue raisonné of his work (and the very complete website which contains much of this information in a highly accessible digital format).20

Navigating the complexities of the art field emphasises the importance of engaging an independent, conflict-free adviser when investing in art. Art dealers and galleries fulfil a major role in exhibiting and promoting an artist’s work, educating the public, and fulfilling their responsibility to sell art with clear title and warranting authenticity of the art object but are often not entirely objective, necessitating that a collector and their family office seek tailored advice from a trusted and competent hire adviser.

Family offices can avail themselves of the International Foundation of Art Research (IFAR) website to protect against art fraud. IFAR is a 501(c)(3) not-for-profit educational and research organisation dedicated to integrity in the visual arts. IFAR offers impartial and authoritative information on authenticity, ownership, theft, and other artistic, legal and ethical issues concerning art objects. It serves as a bridge between the public and the scholarly and commercial art communities. IFAR is also a reliable source of information on acknowledged and respected catalogue raisonné. IFAR publishes a quarterly journal with a “Stolen Art Alert” section that includes data from the London-based Art Loss Registry (ALR) and Interpol listing works of art stolen from around the world. This data is shared with local police, insurance companies, museums, galleries and private individuals who have been victims of theft. It is highly advisable to suggest that your art adviser run a search, for a minimal fee, through the ALR database to check for possible stolen art or pre-existing liens against an art work before they make a sizeable purchase.

Involving an art lawyer to review a contract for the purchase of a work, or to review a bill of sale, especially for significant art transactions, can protect buyers against purchasing art without clear title, stolen art, a potential dealer or gallery bankruptcy,  or a Ponzi scheme, all of which scenarios have been covered by the news media of late. In the United States, filing a UCC-3 before a work is put on consignment at a gallery is a prudent step to protect against bad actors in the art world.


Technology developments

Collectors are increasingly relying on online  platforms, digital images, and auction pricing websites to either purchase art or select or research these purchases. Although there are a number of technology platforms for purchasing art, Artsy, Artnet and Artspace are just some of many online platforms dedicated to art collecting based on digital images and information technology. The online purchasing trend offers the convenience of viewing, researching, bidding and buying art anywhere at any time, using only a mobile device. Given the authentication risks discussed, online purchasers should ensure:

  • all lots have guarantees for authenticity;
  • the platform or vendor has a well-established reputation;
  • complete condition reports accompany every lot;
  • each lot is fully displayed preferably in several clear photographs; and
  • all additional charges are disclosed, which may include, but are not limited to, buyer’s premiums, taxes, and shipping and handling.21


Online price databases provide increased transparency and reflect the trend of art becoming more widely viewed as an asset class. However, collectors should take caution in relying solely on this data, as all art works have unique characteristics which need to be interpreted by a professional art adviser or appraiser. In addition, some databases incorrectly list sales that are unconsummated (not paid). Auction house guarantees, ‘third party guarantees’, and irrevocable bids can misrepresent or mask underlying sale dynamics, and in some cases, actual sale results.22


Summary and conclusion

Art experts and advisers can help assess economic conditions, financial and art market dynamics, and other variables that may influence the price, activity, availability of supply and future attractiveness of opportunities identified for investment. These opportunities are generated by the underlying dynamic of the art market, which is inefficient and illiquid, lacks price transparency, and has highly differentiated products. As an asset class, art is considered a good ‘store of wealth’, along with other tangible assets such as gold, and it is mobile.23

While all markets ebb and flow over time, what is different now is the pace of change and complexity of factors (cultural, social, political, financial, technological) impacting the art market.24 Family offices need to approach the management and opportunities related to art with diligence to protect their wealth in this time of great change.




  1. “Is It Fine Art, a Collectible, or an Antique”, Emerald Art Services ( an-antique). Any item could be classified as Fine Art, a Collectible, or an Antiqu Here are some general guidelines:
    • Fine Art: Visual art is considered to have been created primarily for aesthetic purposes and judged for its beauty and meaningfulness. It specifically includes painting, sculpture, drawing, watercolour, graphics and architectur The word ‘fine’ does not so much denote the quality of the artwork in question, but the purity of the discipline.
    • Collectibles: A collectible is typically a manufactured item designed for people to collect. In addition, a collectible can be an item made without the intention of special interest but  due to rarity or uniqueness, production fault, human error, nostalgia or other events, which becomes sought after due to its rarity in these circumstances. A collectible does not necessarily have to be valuable or antique.
    • Antique: An antique is considered a decorative object, piece of furniture, or other work of art created in an earlier period.
  2.  Dr Clare McAndrew, “The Art Market 2020”, An Art Basel and UBS Report by Arts Economics,
  3. Elizabeth von Habsburg, Managing Director, Winston Art Group.
  4. Boston College’s Social Welfare Institute estimates that of the $41 trillion that it projects will pass intergenerationally by 2052, between $4 and $6 trillion will represent art and antique assets.
  5. Elizabeth von Habsburg, Managing Director, Winston Art Group.
  6. Sarah D McDaniel, Eliana Greenberg and Liz Gully, “Art as an Asset”, Morgan Stanley Private Wealth Management, June
  7. Defined as a vetted and tested member, in good standing, of one of the three major appraisal organisations, such as the Appraisers Association of America, who has taken and passed USPAP (Uniform Standards of Professional Appraisal Practice) a set of ethics, standards and methodology established by the Appraisal Foundation in Washington DC and promulgated by US Congress, who has specialisation in the field being appraised.
  8. In the United States, Treasury Regulation, Section 170 A- 13(c)(4) sets out the paperwork that has to be supplied with the valuation for charitable purposes. Completion of IRS Form 8283 (signed and dated by both the appraiser and donee charitable organisation) is required for all non-cash gifts of more than $500 to a charitable donee, along with a signed copy of the full appraisal. Ralph E Lerner, Withers, “Art and Taxation in the United States” in Fine Art and High Finance, Bloomberg Press, 2010, p223.
  9. Dr Clare McAndrew, “The Art Market 2018”, An Art Basel and UBS Report, by Art Economics.
  10. Carlie Porterfield, “What 2020’s Most Expensive Painting Says About the Art Market”, Forbes, December
  11. Dr Clare McAndrew, Fine Art and High Finance: Expert Advice on the Economics of Ownership, Bloomberg Press, 2010, p
  12. Elizabeth von Habsburg, Rachel Goodman, Gurr Johns and Dr Clare McAndrew, “Art Appraisals, Prices, and Valuations” in Dr Clare McAndrew (ed), Fine Art and High Finance: Expert Advice on the Economics of Ownership, Bloomberg Press, 2010, pp19–20.
  13. Ibid, p
  14. Ibid, p
  15. Sir Alan Bowness, former Tate Gallery director, quoted in Dr Clare McAndrew (ed), Fine Art and High Finance: Expert Advice on the Economics of Ownership, Bloomberg Press, 2010, p
  16. Thomas C Danziger and Charles T Danziger, “The Illegal Art Trade” in Dr Clare McAndrew (ed), Fine Art and High Finance: Expert Advice on the Economics of Ownership, Bloomberg Press, 2010, p
  17. Conversation with Nancy Harrison, Partner/Senior Fine Art Specialist, Emigrant Bank Fine Art Finance/Fine Art Management, March
  18. Noah Charney, The Art of Forgery, Phaidon Press Limited, 2015, p
  19. Ibid, p
  20. Conversation with Nancy Harrison, Partner/Senior Fine Art Specialist, Emigrant Bank Fine Art Finance/Fine Art Management, March
  21. “The Experts Guide to Collecting”, Appraisers Association of America, www.appraisersassorg/.
  22. Conversation with Nancy Harrison, Partner/Senior Fine Art Specialist, Emigrant Bank Fine Art Finance/Fine Art Management, March
  23. James Rickards, “Fine Art’s Worth More Than Its Weight in Gold”, Daily Reckoning, 22 July 2017.
  24. Noah Horowitz, “The Art Market 2020”, An Art Basel and UBS Report by Arts Economics,




‘Art valuation in disruptive times’, by Mary Elizabeth Klein, is taken from the twentieth issue of The International Family Offices Journal, published by Globe Law and Business, international-family-offices-journal.