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Platinum Art Lending, Finance (non resource), Loan and Art Capital

Glossary

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APPRAISAL: The valuation of property by a trained and authorized expert. There are many different types of appraisals, such as insurance appraisals, gift appraisals, estate appraisals, equity distribution appraisals, sale appraisals and tax appraisals.

ARTFLOW FUNDING: A Trade Marked method, designed by PlatinumArt that allows art dealers and collectors to access cash with only the art as collateral without any personal guarantees.

ART LENDING: The practice of issuing loans that are partially or entirely collateralized by works of art. Art Lending usually will require a personal guarantee.

AUCTION GUARANTEE: An agreement to pay a consignor a pre-set price for a work or art, regardless of whether or not the property sells at auction or the price obtained. Typically, the consignor will also receive an agreed-upon percentage of any additional profits if the winning bidder pays more than the guaranteed price.

BID: An offer made during an auction to buy a work of art for a specific purchase price.

BLOCKAGE DISCOUNT: The reduction of the appraised fair market value of a work of art, when a group of similar artworks are simultaneously being offered on the market.

BOUGHT IN: If there are no bids on a lot, or if bidding fails to reach the reserve price, the lot is considered "bought in." This means that the lot is left unsold and remains the property of the owner.

BUYER'S PREMIUM: A non-negotiable fee charged by an auction house to buyers on top of the hammer price. This fee is determined on a sliding scale based on hammer price and should be factored in when accounting for the total cost of a work of art.

CAPITAL GAINS TAX: A tax on the profits earned from the sale of non-inventory assets that were purchased for less than the sale price. The Federal long-term capital gains tax rate is typically 28% on “Collectable Assets,” such as art. Small Business Stock Gains are also taxed at 28%. Many other financial assets are currently taxed at 15%, but set to rise to 20% in 2011. In addition, some states and cities charge income taxes on all capital gains.


CATALOGUE RAISONNÉ: A complete listing of all known works by an artist. Each work is listed with an identifying catalogue number, as well as information such as provenance, current location and exhibition history.

COLLATERAL VALUE: The appraised value of an asset that has been pledged as collateral for a loan. Collateral value is typically based on a liquidation (fire sale) value, not the asset's fair market value.

CONDITION REPORT: A form noting the appearance, location and description of any damages or unusual characteristics on an object.

CONSIGNOR: An owner of property who enlists a dealer or auction house to sell work on his/her behalf.

CONSIGNOR ADVANCE / BRIDGE LOAN: A short-term loan that is typically collateralized by property scheduled for sale in the near future.

FAIR MARKET VALUE: What a willing buyer would pay a willing seller in an open market, with both parties having knowledge of all relevant facts. Fair Market Value is typically used for estate and tax appraisals.

HAMMER PRICE: The winning bid on a lot at auction. The Hammer Price is only a part of the total purchase price, since it does not include the buyer’s premium or tax.

LIEN: The legal claim on an asset that has been used as collateral for a loan.

LIQUIDITY: The ability to quickly turn an asset into cash.

LOAN-TO-VALUE RATIO: The ratio used to describe the size of a loan in proportion to the value of the property being used as collateral.

LOT: An item or set of items for sale in an auction.

MARKETABLE CASH VALUE: The anticipated net proceeds that would be yielded from the sale of property, once all costs of sale are subtracted.

NON-RECOURSE LOAN: A loan the only allows the lender to pursue the collateral that was used to secure the loan, even if the proceeds from the sale of the collateral are not enough to repay the loan.

PASS: A term New York auction houses are legally obligated to use when a work fails to sell at auction.

PRE-SALE ESTIMATE: The price range within which an auction house expects a lot to sell. Unlike appraisals, Pre-Sale Estimates are unregulated and cannot be used for insurance or tax purposes.

PRICE INDEX: A tool that measures normalized price fluctuations for a specific class of goods over a period of time.

PRIMARY MARKET: The market for works of art that are coming directly from the artist and being offered for sale for the first time.

PROVENANCE: The ownership history of a work of art. Provenance is often one of the tools used in establishing an artwork’s authenticity, title and value.

RECOURSE LOAN: A loan that that is backed by a borrower’s full credit, not just the underlying collateral.

REPLACEMENT VALUE: The total cost of replacing an item with a like item of similar quality. Replacement Value is typically used for insurance purposes.

RESALE AGREEMENT: An agreement between a dealer and a buyer that obligates the buyer to offer the artwork back to the gallery before trying to sell elsewhere.

RESERVE PRICE: A confidential minimum price that must be reached during an auction in order for a work to be sold.

SECONDARY ART MARKET: The resale market for art. Every time a work of art is sold after the initial sale (primary), it is a secondary market sale.

SELLER'S COMMISSION: The negotiable fee a consignor pays an auction house to sell a work of art. Typically an auction house will charge a consignor a percentage of the hammer price earned by the consignor’s property.

TERM LOAN: Long-term loans that can be used as a cost-effective alternative to selling assets outright.

TITLE: A term referring to the ownership of a piece of property and the right to transfer that ownership.

UNDERBIDDER: The non-winning bidders on a piece of property at auction. Underbidders play a key role in driving and setting auction prices.