So Flaschen turned down the guarantee and gambled on a night of wild bidding. But just hoping that enough buyers would appear who coveted the Flowers piece among the myriad of other works was not enough. He dispatched Polsky to negotiate with the auctioneers on how they would present and promote the painting. Some collectors bargain with auction houses to exhibit a noteworthy piece or collection as part of a tour. Polsky, instead, insisted upon massaging the auction catalog essay, which is now a common practice for million-dollar paintings.

For collectors out to maximize their profits, correctly positioning a work within a given auction is crucial—and, to the savvy collector, every aspect of this campaign is open for discussion. For example, a collector should insist that an auction house sell his work toward the beginning of an auction, when the most favored pieces are generally introduced. Polsky advised Flaschen to sell through Sotheby’s because of a relationship he has with an executive there that dates back 25 years. He negotiated the painting’s spot on to the cover of the auction catalog, along with a 1,000-word essay praising the work as one done at the "height of Warhol’s creative powers."

When the hammer finally fell on Flowers last summer in London, it sold for nearly double Polsky’s estimate: $1.9 million. Flaschen feels his timing was impeccable. "The art market—more than any other market—goes through ups and downs that are highly irregular," he says. "Having seen the prices do what they did in the 1980s and early 1990s, I saw that prices were way out of proportion. I felt that in a normal market, that painting was worth half as much as it would get at auction in today’s market."

Indeed, the high prices paid during last fall’s auction season have many wondering if this "abnormal" is the new normal. Last November, another Flowers, created with spray paint and silkscreen ink, fetched $6.6 million. Together, Christie’s and Sotheby’s, far and away the two largest auction houses, combined for more than $8 billion in sales in 2006, a 30 percent increase over the previous year, according to published reports. Privately held Christie’s sold $4.7 billion worth of art last year. Publicly traded Sotheby’s generated nearly $3.7 billion in sales; during the first nine months of 2006, its profits more than tripled to $37 million.

The fact that auction houses continue to offer guarantees to collectors who approach them implies that they expect to see more record prices. Robert Manley, a specialist in Christie’s postwar contemporary art division, reported that a "staggering" number of guarantees were paid last season, including for the Impressionist and modern sale last November that earned $491 million, a record for a one-event auction. As the spring auction season begins, collectors around the world who have any plans to consign art wonder how long this bull market can continue. If demand were to suddenly slacken, these auction house guarantees may well disappear, leaving collectors at the mercy of a falling market.

Odd Man Out
Most art sector experts peg the currently inflated market to the overall growth in global wealth over the past few years. This supposition entails that this sector is more highly diversified than the overheated market of the 1980s, a run-up largely fueled by the Japanese penchant for Impressionist art. Some authorities even speculate that a recession would not wholly dampen the market because wealth is so dispersed and, perhaps more importantly, resale prices for art do not necessarily follow the ebbs and flows of the Standard & Poor’s 500, per tracking tools such as the Mei Moses Fine Art Indices.

But others remain more cynical about the sources of this rising market. "It is a combination of speculators and dumb, poorly educated hedge fund guys who hire someone to tell them they need something chic on their walls—and then they all seem to flock to the same artists," says Dean Valentine, a Los Angeles media investor with a passion for post-1965 art. Valentine is not the first art collector to point a finger at newly wealthy fund managers, although fresh collectors from Russia, China, South Korea, Singapore, Latin America and Eastern Europe have also entered the market. Collectors still whisper about the mystery man, thought to come from somewhere in the former Soviet bloc, who outbid everyone from the back of the room at Sotheby’s in May 2006 and walked away with Picasso’s Dora Maar au Chat for $95 million, well above the $50 million high estimate. There are also rumors that he was just pretending to be a novice unschooled in the protocols of where to sit or how to bid.

These stratospheric prices are also spurred by the auctioneers themselves. Christie’s president Marc Porter says the company attracts sellers by broadening its worldwide reach. Auction houses can open branches all over the world, which gives them an advantage that dealers and galleries can never match. "We have committed to the internationalization of our primary departments," Porter says. "About five years ago, we realized this and reorganized from being a regional business largely in London and New York to being a global business with sourcing worldwide." In the past five years, Christie’s has added sales offices in Beijing, Dubai and Madrid.

Flaschen knows firsthand the power a middleman can wield in the process of selling art. "If anyone is going to do what I did, I would tell him to hire a professional to do it for him," Flaschen says. "Richard Polsky more than earned his fee, from negotiating the terms of the sale, to how they were going to approach it, display it and where it was going to be shown in the gallery. You don’t want to try to become an expert on one painting; you want to hire an expert to do that for you."

Not all collectors hold dealers in such high esteem, however, forcing Polsky to prove himself again and again. He says he earned a fee from Sotheby’s that was equal to what he would have made if he had sold the work privately for $1 million. But today he finds fewer and fewer opportunities for such high-priced private deals.

"I used to make money by going to collectors I sold things to years before, telling them that their stuff is worth a lot more money now, and would they consider letting me resell it," Polsky says. "Now everyone thinks I’m making all this money because of this booming art market. I’m not. These same people now say, ‘Richard, you’re a great guy, and thanks for selling me these wonderful things, but I’m going to auction.’ I can’t blame them. There is kind of a trophy-hunting mentality out there."

Scare Tactics
Indeed, auction houses are moving in on terrain once held exclusively by dealers and galleries by increasingly bypassing them and marketing more directly to individual collectors. "Twenty years ago, dealers and professionals comprised most of the audience in a typical sales room at Sotheby’s and Christie’s," says Lark Mason, a Sotheby’s employee for 25 years, who in 2003 bought the company’s online auction business and renamed it iGavel. "I remember my first auction in London in 1973. It was six people sitting around a semicircular table, and an auctioneer at the podium," he recalls. "A porter would hand each lot to the gentlemen at the table, who would one-by-one pass the item around and then go on to the next lot. Every single one of those men was a dealer." Mason says this method intimidated anyone from outside the tight circle. Now, he says, auction houses produce more programs and materials designed to lure private collectors directly into the sales rooms. "Since there are so many more of them with so much more collective buying power, the auction houses are catering to them—and not to the professionals who have been the historical clients of the auction houses."

Today, these backroom deals continue. What is different is that auction houses do not necessarily invite professionals, but instead select groups of private collectors. These individuals negotiate estimates and reserve prices (the minimum price a seller will accept), possibly leaving collectors who are unable to gain access to these discussions at a disadvantage. While today’s art market is seemingly more transparent—websites such as ArtNet.com or Artprice.com provide price tracking—insiders still control important decision-making processes. "The auction houses and databases do provide information, but it is really just price history and other general information," Valentine says. "Using them to value a painting is like trying to value a public company by looking at its sector. If I am looking at Apple stock, I want to know how Apple is doing, not the computer sector."Valentine says the value of a piece of art that an auction house wants to sell is determined, as it always has been, by what he terms a "spitball" approach divined by a small group of experts.

As far as Valentine is concerned, these cadres must like what they see. Today, he says, he fields more calls from auction houses aiming to entice him into deaccessioning some of his favorite pieces. He has yet to accept any offers—although, he admits, what might just persuade him is a "fat guarantee."

Do Not Disturb
While auction houses are ramping up their efforts to lure collectors into the sales arena, the high prices fetched by art today are not lost on speculation-minded private collectors. Norman and Norah Stone, who own some 300 contemporary pieces that they display in their properties in San Francisco, Napa Valley and Hawaii, often receive calls from individuals intent on buying their art. "I personally don’t like it when we open our home to share our collection and someone calls us later to ask if we want to sell a particular piece," Norman says. "There are a couple of people in particular . . . but they stopped calling because I simply did not respond. It’s been happening more in the last three or four years, but we very rarely sell anything."

Robert LaFranco is a freelance writer based in Santa Monica, Calif.

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