In an industry that prides itself on handshake deals, what safeguards can an investor adopt?
There are several measures that a buyer and a seller can take to make sure that the intermediary is acting in their best interest:
- Establish a benchmark for the value of each item:
- Get independent estimates or appraisals provided by an expert, and
- Find comparison prices from similar works of art in the market or previously sold;
- Conduct some due diligence on the art dealer and try to establish his or her financial solvency;
- Have a thorough consignment contract between seller and consignee, as well as between consignee and all buyers, that protects all parties. Such contract should include, among other clauses:
- A full description of the property being on consignment,
- A valuation provided by an expert,
- The amount that the owner will receive from the sale and the amount or percentage the dealer will receive,
- What the dealer is going to do to sell the item,
- What actions the dealer is authorized to do without notifying the consignee and what actions require prior permission,
- A list all the buyers or sellers and their percentage ownership on each piece, and,
- Time limits for the agreement, including the length of time the dealer has authority to sell or hold the item.
Keep in contact with the dealer and verify whether or not he or she is still in possession of the items, or request that the items be deposited with a third part;
- Have property insurance, or request the dealer to provide liability insurance, for the pieces in consignment;
- Demand that a trust account be set for the proceeds from the sale of each art piece;
- Request immediate settlement of the transaction when the sale is concluded; and,
- Trust a reputable dealer (although this was the case with Mr. Salander).
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