Word: buyer
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...auction practice that has attracted the most criticism lately -- and goes to the heart of the nature of auctions themselves and the ethics of the trade -- is giving guarantees to the seller of a work of art and loans to the buyer. If X has a work of art that auctioneer Y wants to sell, Y can issue a "guarantee" that X will get, say, $5 million from the sale. If the work does not make $5 million, X still gets his check, but the work remains with the auction house for later sale. Guarantees are a strong inducement...
Loans to the buyer are made before the auction, and completed after it, at an interest rate that may go as high as 4% over prime. A common amount is 50% of the hammer price -- whatever the work reaches...
Most top private dealers dislike the system of guarantees and loans. "It creates an immediate conflict of interest," says Julian Agnew, managing director of the London firm of Agnew's. "If the auction house has a financial involvement with both seller and buyer, its status as an agent is compromised. Lending to the buyer is like margin trading on the stock market. It creates inflation. It causes instability...
...never said anything specific about its loans in its catalogs, or given any information on its guarantees except that they exist. To Sotheby's, a mere announcement in the catalog that it offers such financial services is enough to comply with the law. But its use to the buyer is nil -- and is meant to be. Disclosure might be chilling to other bidders. Or at least vulgarly explicit. Which auctioneers would rather die than be. One is not, after all, selling rusty tin Mickey Mice and kitchen chairs in a rented hall in Vermont...
...developed an infamous reputation for poor craftsmanship in the 1970s and early 1980s. Yet for every gain the Big Three have made, their Japanese competitors have continued to earn top ratings for quality and to expand market share. In a survey by J.D. Power Associates, a leading automotive analyst, buyers of this year's Japanese imports reported only 119 problems per 100 cars during the first 90 days, while owners of new American cars reported 163 glitches. Even so, the quality competition has drastically boosted value for the car buyer: before 1960 the typical U.S. auto warranty was just three...