Judging art value is to weigh several factors at once. Current sales, auctions, and market trends must be examined and this data then needs to be projected into the future. There are different factors to consider for upcoming artists, the established, and the deceased. When an artist passes away, several hundred works can potentially hit the market at once. This influx of art requires valuation. However, this is not an easy undertaking. Ronald D. Spencer discusses this in the article Why Courts Dramatically Overvalue Artist Estates.
Spencer covers three court cases that shaped the current laws that dictate how to handle artist estates. The main issue surrounding the sale of art by a recently deceased artist is that it is a gamble. The works can easily be overvalued or undervalued. The market becomes flooded by the artist’s work, both from the estate itself and from collectors or galleries. There is also a high likelihood that the estate owns pieces that couldn’t be sold. Most importantly, an appraisal must be made at some point after the death.
Due to the precedent of three Tax Court cases, many of these works become overvalued. The estates of David Smith, Georgia O’Keeffe, and gifts of Alexander Calder each highlight situations were courts needed to determine value via a blockage discount. The blockage discount works on the idea that art pieces can only be sold after death to a group or a reseller. These pieces will then be sold to collectors and galleries at a later date. The discount takes the retail value and then reduces for commissions. Spencer goes into further detail on the effects of the blockage discount in each of these cases.
There is always risk when valuing art. It is an arduous task to predict the future return of an art sale. Art history has many instances of popular living artists becoming obscure after death and vice versa. By examining situations such as what happens after an artist’s death, collectors and galleries can better value works of art.