Selling the Less-Choice Pieces in an Art Collection

Today I spoke with a friend, also a collector. We are both faced with selling our collections because we don’t want our relatives to have to do it for us at some point in the future. My question to him was, “How do you sell the lesser items? Everyone wants the unique or special pieces; the minor ones—not so much.”

A Bright Idea

My East Coast friend had a good suggestion, one he had already executed a few years ago and one he planned to duplicate again. To market the good, and the less so, he makes a contract with a major auction house to do an exhibit featuring him and his collection along with a catalog. Some would call this a single-owner sale (similar to the one described in Landis, 2000).

Social Anchoring, Price Anchoring, and Sunk Cost

My friend’s choice items will be sprinkled among the less desirable in the exhibit and sales catalog. In that way, attention is drawn not only to his outstanding objects but lesser pieces are given consideration at the same time. In other words, there is something for everyone. Some might call this both social (Meub and Proeger, 2014) and price anchoring (Jacowitz and Kahneman, 1995).

The social anchoring is because he has become a celebrity of sorts due to the favorable write-up of him for the sale catalog (or online) by the auction house. Attention is drawn to the seller because of this promotion, and the glow is reflected in both his choice pieces and the lesser ones. The price anchoring relates to potential buyers seeing the high reserves for the better offerings and, with this anchor in mind, adjusting their estimates of the lesser objects in the sale upward.

Those who attend the sale preview or look at the catalog (either paper or online) are exposed to both categories of objects—the stars and their satellites. Since the reveal of the collection, both high-end and lesser are the key, that objective is achieved. In other words, price anchoring is accomplished since the expensive items suggest to the potential buyer that the lesser objects could be worth more.

I believe this social and price anchoring could lead to a sunk-cost phenomenon (Arkes and Blumer, 1985) as well. I describe this in my book, Inside the Head of a Collector: Neuropsychological Forces at Play, explaining when I became susceptible to it (pages 97–99). I bought something of less interest than I wanted because of all the time and energy I spent before the auction preparing for it, then finding my object of choice would sell for more than I could afford. This led me to purchase a less-expensive piece, one I really didn’t desire, because I didn’t want to waste the time and effort I had already placed into the sale. Thereby, I walked away from it with a substitute, a sunk-cost purchase.

Step-Up Basis

Though my friend had planned to give at least some of his beloved objects to his children, at this point, there would be no step-up in tax basis. Step-up refers to the adjustment in the cost basis of an inherited asset to its fair market value on the date of the decedent’s death (Investopedia). This makes sense because my friend purchased many of his objects at a higher price than they can now glean due to unforeseeable market forces. Therefore, the strategy of gifting with a step up in mind would be imprudent. This cinched his belief to sell now in an attempt to glean the best price he could with some creative selling while still alive.

The After Sale

Though my friend did not sell everything in his first single-owner sale, he did sell most of the rest within six months, including the lesser pieces. This left an additional after-glow, this time not due to the attention the write-up of him had garnered earlier but now related to the further financial reward he received for objects sold after the sale.