Question: A potential client has just donated two paintings that will be sold at silent auction for a non-profit. There are no published sale records of paintings' artists. Can the items sell for the FMV? That is assuming they exceed $5000 and need an appraisal?
Answer: That’s a tricky question since it’s a charity auction. Sometimes items bring far more than their fair market value (FMV) because it is a charity and the money is going to a good cause. People get caught up in the event action. Sometimes items bring far less than their FMV because it’s the wrong market and people don’t appreciate or even know about the item. For example, I used to be the auctioneer at many live charity auctions. It always seemed that original artwork by a non-published or listed artist did poorly, unless it was one of local reputation that everyone knew about. Sports memorabilia, tickets to a sporting event, and signed balls by famous players always did better than FMV, often due to the type of crowd and the impression that the items were worth more than they really were. In some instances, due to the drinks and hospitality offered at the event, local competition developed among community figures, and bidding became a game of outlasting the other party, with each table of revelers egging the bidder on. Good for the charity, but not remotely viable for use as a comparable.
You must remember that the buyers of goods at charity auctions are only allowed to deduct any amounts over the fair market value of the items. This creates an additional dilemma in that they want to get a good deal (under fair market value), but they can only deduct the amount if it isn’t a good deal (over fair market value).
The conclusion is that charity auction results are usually not good indicators of fair market value. There are too many variables in the situation. Better to find comparable sales or use a parallels in another venue to establish the fair market value of the items.
Entry number 7 on the List of most expensive photographs (Wikipedia) is Dmitry Medvedev photo of the Tobolsk Kremlin (2009) at $1,750,000 at the St Petersburg Christmas Yarmarka, January of 2010. So the prime minister of the Russian Federation sells a rather fine and original work of his at a wealthy charity event. Does this piece really belong on a comparative list along with Stieglitz, Steichen and Ansel Adams?
ReplyDeleteDavid G Anderson