BOTH BRAHMINS and dilettantes flock to art showcases, such as Art Basel. Serious collectors generally avoid art auctions in favor of galleries, lamenting that speculators are driving up auction prices to ludicrous heights.

Serious collectors normally eschew the free-for-all of the auction houses in favor of the gallery market, where relationships and reputations matter more than a swollen wallet. Indeed, Tirschwell had not bid at auction for nearly two years, but her passion for the French Fauvist lured her to Christie’s sale of Impressionist and modern art. She promised herself that she would pay no more than $50,000 for the painting, which the auction house estimated would sell for $18,000 to $25,000.

Those who have coveted a collectible caught in the throes of an overheated market can picture what transpired next. "Do I hear $20,000?" barked auctioneer Richard Brierley. A telephone bidder quickly jumped in, setting off a sparring match with Tirschwell that soon drove the price up to $110,000. Her jaw set, Tirschwell bid $125,000; her adversary held her tongue and Maternité was hers. The 30-some attendees broke into applause; Brierley clasped his hands and hopped about gleefully. Tirschwell, flushed and "a little bit in shock," grabbed her coat and papers and broke for the door, spurring Brierley to quip: "May I see your paddle before you leave the room?"

The Valtat commanded the highest price that day, and Christie’s brought in $2.3 million in all, a new record for its midseason sale. Prices in the art markets have been rising for years; the Christie’s auction was merely the latest point on an upwardly sloping curve that shows no signs of plateauing. A few weeks earlier, Pace/MacGill gallery’s Peter MacGill, representing a private buyer, set a new high price for photography when he bought Edward Steichen’s The Pond-Moonlight for $2.9 million.

Unfortunately, serious collectors like Tirschwell often end up paying the price–literally and figuratively–for the market’s exuberance. But they do have some advantages. All but the most passionate (or naïve) collectors typically eschew auctions, insulating themselves from the impoverishing bidding wars. They rely on carefully cultivated relationships with specialists–art advisors and the established gallery owners–who act as their charges d’affaires in the art world, helping them build collections, alerting them when coveted pieces become available and brokering private sales. These authorities are increasingly in demand, as new collectors look to gain the insights and relationships that will allow them to build important collections of their own.

Art Nouveau Riche
Gallery owners say the collecting herd separates itself into dilettantes and Brahmins when the former ask questions like, "Will this appreciate?" and the latter inquire about an artist’s body of criticism and interest from art institutions. Iwan Wirth, co-owner of galleries in Zurich, London and New York, says that he will not work with people who look solely to an artwork’s financial potential. He, like many serious gallery owners, prefers to hold the best works for museums, longtime serious collectors with whom he has formed relationships and art advisors who can assure him that their buyers are not speculators. He recently rebuffed some Chinese collectors who were flush with cash but clearly sought to purchase artwork for speculative purposes. "It’s not a democratic process," he says. "I want the people who buy with their eyes, not their ears."

TOP VIEW: Prices in the art market remain on their upward trajectory, driven in no small part by speculators who often irritate serious collectors by competing for important works. But seasoned collectors can circumvent these investors by eschewing auctions, building long-term relationships with respected galleries and advisors, and remaining alert to undiscovered and overlooked artists.

Those willing to pay large sums indiscriminately quickly earn a reputation as speculators; in close-knit art circles, this usually condemns the buyer to haunt the auction market. The most elite gallery owners realize it will hurt their own reputation, as well as their artists’, if they sell to the wrong buyers. "The speculative buyers are the hedge fund types who are playing the market like a stock play, who focus on certain hot artists and buy it all," says Wendy Cromwell of Cromwell Art, an advisory firm in New York. "And at a certain point, they’re all going to be dumping it–and that’s going to be interesting."

Those driven solely by the prospect of outsized speculative gains run the risk of acquiring inferior pieces that will not hold their value. "It’s not born of a curatorial focus or a curatorial eye or any particular intelligence around the thing that’s being bought," says Thea Westreich, who runs an art advisory service in New York. Iconic contemporary art in particular is subject to fluctuations in critical opinion, and its value can erode if collectors fear a buyer has overpaid. One bellwether for this market is the value of work by Damien Hirst. Experts who study the economics of the market believe prices today are more volatile than normal in part because hedge fund manager Steven Cohen substantially overpaid–reportedly forking over between $8 million and $12 million–for Hirst’s shark-in-a-tank piece, The Physical Impossibility of Death in the Mind of Someone Living, 1991, in 2005. Hirst is reportedly working on a new shark-in-a-tank piece.

Even those collectors who seek out emerging artists are finding their field increasingly crowded as enthusiasm for ever-younger, unproven artists grows. Jo Ann Alter, who advises many young, new collectors through her consulting firm, approached an artist at a recent show of Columbia University’s MFA candidates. She was surprised to learn a gallery had already purchased the artist’s entire collection.

Toni Alexander, president of InterCommunicationsInc, a marketing firm in Newport Beach, Calif., has built her collection, primarily works on paper, over the past two decades. She blames indiscriminate demand by nouveau speculative buyers for making it harder to acquire important works for her collection. Alexander has seen buyers still learning the basics of managing fine art. "One of the first things I’m sure the interior designer says is, ‘Well, you can’t have art that matches your couch,’" she says. "A lot of these people might not have known otherwise." Ironically, the booming interest in art is actually fueling Alexander’s business. One of her clients is marketing high-end commercial buildings by selling them with art collections already assembled. She shrugs at the incongruity. "It will benefit the art market to have broader interest," she concedes.

Carried Away
Martin Harding is exactly the kind of art buyer who at first blush might appear to be the type of indiscriminate buyer driving up valuations. A former managing director with Lehman Brothers, Harding has been collecting for three years. He went on a buying binge during March’s New York Armory Show, purchasing 10 pieces in five days; he likens his take to the waterfront parcel he recently purchased in Sag Harbor, N.Y.: "I know I overpaid, but in five years, this will look like a bargain."

"I know I overpaid, but in five years, this will look like a bargain." –Martin Harding

While he says he is not "a gluttonous Wall Street type," Harding does admit to getting carried away at times. The week after the Armory Show, he acquired two Christopher Williams photographs–a diptych–that were included in the Whitney Museum of American Art’s Biennial 2006 exhibit. He plans to build a new house on the Sag Harbor property because his collection is outgrowing his present home in the area.

TOP: COLLECTOR Sara Tirschwell, spurred by both her desire for a painting and a competing bidder, paid $125,000 in March for Louis Valtat’s Maternité, a 1908 oil on paper with a presale estimate of $18,000 to $25,000. (Photograph courtesy of Christie's Images Ltd, 2006.)  Bottom: Edward Steichen’s The Pond-Moonlight, a 1904 multiple process platinum, sold in February for $2.9 million, triple the estimate of $700,000 to $1 million. It set a record for a photograph at auction. (Photograph courtesy of Sotheby's.)

But Harding is no mere speculator; he aspires to assemble an important collection. He hired an advisor, Clayton Press of Berwyn, Pa., and immersed himself in the study of fine art. He also established three rules to guide his purchases: First, the work must have some independent critical or financial validation. Second, the price must be fair, which he gauges by tracking the costs of comparable works. Third, he must like a piece; he refuses to be talked into something that does not naturally appeal to him. This discipline helps ensure Harding’s acquisitions are personally important to him rather than a reflection of market consensus.

Other collectors pursue offbeat strategies meant to unearth overlooked, but important, works. Bruce Palmer, owner of Bruce Palmer Galleries in New York, seeks out the works of talented artists who have died and whose work is no longer sponsored by other galleries. "Hopefully, you can catch a sweet spot where they’re close to or just beginning to be rediscovered," he says. Such pieces might flood the market in the event of an estate sale immediately following the death of an artist, pushing them out of favor. For example, the landscape paintings of John W. Bentley, a member of the Woodstock Art Colony, slid in value following his death in 1951. But over time, his works have reemerged as collector favorites.

"It’s not a democratic process. I want the people who buy with their eyes, not their ears." –Iwan Wirth

Despite the heady valuations, passion for a piece will occasionally trump the conservative leanings of even the most sophisticated buyers. Tirschwell’s Valtat now hangs over her mantle. The day after acquiring it, her office colleagues teased her about buying at auction, knowing she must surely have overpaid. "It’s funny," she admits. "I didn’t lose sleep once. I actually have been very sanguine because I love the painting. I love it so much."

Elizabeth Harris is a staff writer for Worth.

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