People need to define the “value” of an artwork for many purposes: insurance, probate, auctions, private treaty buying and selling. These values are not the same. Partly, this is because of the function of the price: auctioneers may require the lowest estimate they can justify to draw people into a bidding war, while insurers want to be certain that you can replace that work of art with something similar in the retail market. But this variance reveals a truth at the heart of valuing art: nearly all values are someone’s best guess.
For the art adviser, this inexactitude around a work of art is part of working life. If an art adviser is working with a certain genre or artist there might be the added complication of a very volatile market (as with all markets, bubbles can rise and cause sudden shifts in value) which only adds to the imprecision. A good art adviser will be aware of this economic context and it us up to the adviser to manage client expectations and to navigate their way through this landscape.
Valuing a work of art works on the most basic of principles: supply and demand. The valuer is having to estimate what the demand for a work of art is. Trying to figure out how many more people are going to want a Peter Lely rather than a Charles Jervas can only ever be a guess and there’s no guarantee that the supposed audience for a painting will appear on the day that something is for sale. The old cliché that something is only worth what you can get for it is a cliché precisely because it is true. What this really means is that because there is no yield on the value of a work of art alone it is an inexact science establishing what it could be worth.
The added complication is that nearly every work of art is unique. While people in the art business frequently refer to works by the name of the artist, “We’ve got an auction with three magnificent Picassos etc.”, no work by the same artist is itself the same. In every case you are comparing apples with oranges. To prove the value of each of these unique works you do need to sell them otherwise there is no realisation of true value.
Yet even selling a work is not a pure way to establish value. As the heat of an auction reveals, the theatre and excitement of a bidding war can carry a work of art beyond any proper value the art should hold. Equally, the presentation by a gallery or a dealer with whispers of interest and guarantees of quality can appear to artificially inflate the value of a work. This relationship between buyer and dealer can reach such proportions of distrust over the value of certain pieces that it comes to law: just think of the lawsuit(s) between Yves Bouvier and Dmitry Rybolovlev.
One of the essential considerations when trying to yield the highest value possible for a work of art is, in fact, managing that asset at exit. To achieve that value it is vital to work with someone you trust to manage the process and not over-expose the work/s. Likewise, if you are buying a work it is necessary to trust the seller to ensure you are not being sold a pup. But since you are dealing with a commodity whose greatest problem is its liquidity, it is probably sensible to appreciate the object you are dealing with for its other merits beyond price.