What makes a painting worth so much money?a

by Mary Dymon

An upsurge of excitement rippled through the art market when Vincent Van Gogh’s masterpiece, "Irises", sold for a record price of $53.9 million at the New York Galleries of Southeby Park Bernet a few years back. The staggering sum for the Van Gogh remains the highest price paid for a painting at public auction to date.

"Irises" came from the collection of John and Joanne Payson, avid art collectors and owners of Hobe Sound Galleries, Florida and Maine, and The Midtown Galleries, New York. Prior to the sale, the Van Gogh had been exhibited (courtesy of the Paysons) at the Westbrook College Museum in Maine.

"The buyer is unknown. He was represented by an agent at the auction and only three or four individuals at Southeby’s were aware of his identity," Payson explains. "Even though the event received worldwide attention and careful scrutiny by the media, he has been able to preserve his anonymity."

What determines the price of a painting? Payson says the artist is the most significant factor, but only a starting point. To bring a top price, a painting must also be thoroughly typical of the artist. In other words, for a painting to bring a high price, even when the artist is considered to be a master, the painting must also have been painted in the style which people have come to think of as characteristic of the artist. Van Gogh’s "Irises" exemplifies this point.

Prices have been rising at a phenomenal rate at every major art auction since the 1950s. In the span of a single week this past November, Sotheby’s and Christie’s sold an unprecedented $430 million of artwork between them. Works from three single-owner collections accounted for nearly 40 percent of the total. Also, in 1988, the sale of Jasper John’s "False Start" at $17.05 million established a record for a painting by a living artist.

Payson predicts the next individual sale to shake up the art world will occur next fall when a Picasso will probably appear in the market. "That sale should be in excess of $60 million," he says. A work by Picasso, "Acrobate et Jiune Arlsquim", was sold for $38 million late in 1988 in London.

Such tremendous growth in the participation of art collecting and dealing today has brought an increasing fascination with the art market and the way it works. Collectors vary from the young enthusiast who ventures $100 for a painting by an unknown artist, to the deep pocket connoisseur who pays millions for a work by a great master like Van Gogh. There are more people collecting art now than at any other period in history, and they are collecting from a wider spectrum of artists and mediums.

For the first time ever, a living artist like Jasper Johns can make a good living. Yet relatively few people, even among collectors, know why art has become such big business. Both buyers and sellers continue to ask themselves: "what is this work of art worth?"

Values in the art market have never been clearly defined, but valuations are continually being demanded for tax and other purposes. Accepted price levels for works of art are established by the interplay between auctioneers and dealers. (Public auctions are generally attended by large groups of interested dealers.) A market for art exists simply because most people take natural pleasure in possessing beautiful things. In fact, Payson advises beginners to concentrate on their own likes and dislikes as opposed to value potential.

"When you start collecting art, you shouldn’t think about the investment potential in it. Buy it because you like it," Payson says.

A market for art is created the moment two people wants to possess the same work of art. A middleman, usually an auctioneer or dealer, then comes on the scene to determine which of the two parties is prepared to pay the higher price.

Fine art is becoming more and more a part of the public psyche. There are art galleries and art stores, books on art, magazine devoted to every facet of the subject, newspapers with art sections and now, even a cable TV station. The overall demand for artwork is booming.

Another factor on the demand side of the art market is the influence of the schools of investment in vogue at a given time. Those watching the financial transactions of the wealthy follow art investment trends, adding to the demand for works by particular artists.

On the supply side, the supply of fine artwork is absolutely limited. With notable exceptions like Jasper Johns, investment-quality artwork generally implies a dead artist. As more of this limited supply is purchased, there is progressively less available for sale. So, the remaining demand must be satisfied out of this limited and now-decreased supply.

It looks like the perfect investment: An increasing demand coupled with an absolutely limited supply. Now, add to that the prosperity of the 1980’s and you will begin to understand the attraction of the art market.

This period of plenty has created surplus funds for an increasing segment of the population. Stock market yields have been low overall, making this market progressively less attractive to the individual investor. Art, as an alternative investment, is not being overlooked.

"Collecting art for the purpose of investment must be carefully considered. We’re talking about a long-term investment," Payson explains. "Art buys can be a hedge against inflation, but you must understand that most appreciation occurs over time."

Payson began his collection at 21 years of age when he fell in love with a painting and bought it. His mother, Joan Whitney Payson, was even younger when she started collecting at age 19. It was Mrs. Payson who acquired "Irises" at an auction in 1947 through the guidance of a private dealer, Carman Messmore-Knoedler. She paid $80,000. Legend has it that Mrs. Payson thought the price tag was too high. It was Messmore who encouraged her to make the purchase by teasing, "Now Joan, don’t be so stingy!" (By the way, "Irises" first sold for 250 francs in 1891.)

"You can see why it is very important to like the art you buy since you will probably have it for a significant period of time," Payson says. "Surprisingly, it doesn’t require a large investment to start. It does require study and knowledge, however,

"Let’s say, for example, you like American realists from the 1930s and 40s. Find the galleries that sell that kind of work. Ask the dealers about the arrangements, terms and details concerning tradebacks. Will they stand behind the painting? When considering the price of a work, there are certain guidelines, points where you should take a closer look. If a watercolor is priced over $1,200 or an oil over $5,000, start asking some questions: Is the artist included in a museum or corporate collection? Is the artist alive? Has he or she participated in any major shows? Get as much information as possible. Also, check the auction records.

"You will probably acquire from only a handful of galleries. My mother acquired from three galleries, two in New York and one in London.

"Interaction at the top level, the auction market, should be approached very cautiously. Works more than 100 years old are not guaranteed by large auction houses. You should work with a dealer you trust implicitly. A good dealer will study the provenance of a painting, tracing its history to its origin. Your dealer may also work with an art expert in determining provenance. Also, it it’s the dealer who should advise you on how high to bid, or you may want to ask him to bid for you."

With his subtle grin and gentle personality, Payson possesses the soul of an artist himself. His is sensitive, perceptive and has acquired the ability to recognize great art. Payson brings to his Hobe Sound Galleries an impressive array of outstanding new artist. Many of these new artists he helped develop himself either through his school in Maine or by offering the artist the opportunity to show. In sum, the art in his gallery in Hobe Sound is a reflection of the man himself: Colorful, yet subtle, thought provoking, intelligent and financially sound.

Payson, like many important collectors of paintings, does not buy art just to sell it. His paintings are his treasures and a major love of his life. Of course, a price tag can be attached, as with the Van Gogh, but more often it is enough for Payson to know that the value is there and that it can be passed on to museums or public institutions as his contribution to the cultural aspect of society.

Art investment is often cloaked by a veil of secrecy. It is a very personal marketing process based more on human emotion than on any predictable market formula.

In the end, the investor-collector comes back to a subjective assessment of quality. As beauty lies in the eye of the beholder, so lies value in the mind of the buyer.

Currier's Price Guide to American and European Prints at Auction 16th Century to Present

Sothby's Art at Auction: The Art Market Review 1994-1995

Auction Book; Worldwide Contemporary Art Results from 1993

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