Is Buying Art at an Auction or a Private Sale More Profitable? Here’s What Experts Say

Wealthy individuals have been collecting art practically since art was invented. However, treating art as an investment is a more recent phenomenon.

According to Deloitte, the global value of ultra-high-net-worth individuals’ art and collectible wealth exceeded $2 trillion in 2022 and is estimated to grow to more than $2.8 trillion by 2026.

As with any investment, profit is the bottom line. But when it comes to art, investors often have difficulty determining how best to buy it to maximize returns.

Find the Right Advice

Wealth managers prioritize maximizing client returns. A Deloitte survey found that 63% of wealth managers already integrate art and collectibles into their clients’ portfolios, while 89% of those surveyed believed such services should be an industry standard.

“More high-net-worth individuals and family offices [are starting to] turn to art as a serious alternative asset class,” says Danita Harris, CAP, Managing Partner and Director of Philanthropy, of GUICE Wealth Management.

She adds that the art asset class is being used to “offset taxes, generate philanthropic capital, or establish legacy assets,” and that the growing volatility in traditional financial markets has fed into the growing interest in the nontraditional investment sector.

Yet, even though wealth managers have taken note of the importance of art as an investment, they remain divided on how to best serve their clients to maximize value in the space. For example, can you ultimately generate higher profits by buying art at an auction or via a private sale?

Pricing Dynamics, Competition, and Access

Both private sales and public auctions come with a long list of pros and cons, just as with any asset class.

Auctions, for example, are often criticized for price inconsistency. Sometimes, auctions can act as a mechanism for price discovery, allowing buyers to gauge market demand and ensure that they’re paying fair market value.

However, auctions can also frequently overhype pieces and lead to inflated prices. “Auction purchases can offer access to coveted, headline-grabbing pieces and may drive value through market validation—but they also carry risks of overpaying due to competitive bidding and premium fees,” explains Harris.

She adds that private sales offer the potential to negotiate better terms, but this is only when a buyer has strong art market literacy and access to elite dealer networks, two things that are hard to come by. This mirrors a common criticism of private sales, that without the bidding process, most buyers have no way of knowing if they’re paying a fair price for a piece. Of course, a profitable return depends on both the price at which you buy art and the price at which you sell it.

So it’s useful to bear in mind that the chosen sale process can influence the price fetched at resale just as it does the price at purchase. For example, given that auctions provide transparency via sales records and ownership histories, resale values can thereby be enhanced.

Meanwhile, private sales lack visibility, meaning buyers can often be more cautious. This can lead to deflated prices.

The Bottom Line

Both passion and strategy are important for investors looking to diversify their portfolios with art. Curious investors can begin by learning about the art market and understanding notable art movements, artist trajectories, and the difference between auctions and private sales.

By working with reputable galleries, advisors, or auction houses, and always verifying a piece’s origin, provenance, and condition, you can unlock real value.

Just remember that patience is key. While art can offer strong long-term returns and low correlation with traditional markets, it is an illiquid asset. Composure leading up to resale (be it via auction or private sale) is essential.