HOW NOT TO GET STUNG BY ART Collecting can be hazardous to the pocketbook, but homework and caution can reduce the risks.
By MARILYN WELLEMEYER RESEARCH ASSOCIATE Barbara Hetzer

(FORTUNE Magazine) – Saturdays bring gallery-goers to Chicago's West Superior Street, to Boston's Newbury Street, and especially to New York's more than 400 art showcases, uptown and down. The buying and selling adds up to a huge worldwide market in art and other collectible items. A. Alfred Taubman, 60, chairman of Sotheby's Holdings Inc., which owns leading auction houses in London and New York, estimates the market at up to $25 billion a year. With so many collectors chasing a limited supply of fine art, the chances of getting stung are numerous. To protect themselves, canny collectors specialize, learning everything they can about their period, genre, or artist from art courses, museums, periodicals, other collectors, dealers, and auctions. Above all, an art lover looks and compares, developing an eye for style and quality. Two gallery-goers who have enthusiastically adopted this protective stance are Herbert Glantz, 55, president of an electrical supply company, N. Glantz & Son, in Brooklyn, New York, and his wife, Kitty, 48, a volunteer lecturer at Manhattan's Whitney Museum of American Art. Saturday morning regulars at the Soho and Madison Avenue galleries that feature contemporary American artists, the Glantzes do their homework and deal only with reputable dealers and auction houses. Says Glantz: ''We don't want to get ripped off.'' Neither does Gilbert Butler, 47, head of Butler Capital Corp., a New York investment firm specializing in leveraged buyouts. He has spent several years learning about old master prints, but says he's still ''an amateur at the beginning stage.'' A more advanced collector, Dave H. Williams, 52, chairman of Alliance Capital Management, part of the Equitable Life Assurance Society, devotes some of every weekend to enhancing his knowledge of prints. He looks for what he likes. ''I react to my stomach,'' he says. Williams bought his first print 16 years ago and has assembled and catalogued a collection of 240 mostly black-and-white prints by American artists of the early 20th century. His collection hangs at his firm's headquarters in lower Manhattan. The best way to avoid buying works that are inferior in condition or quality, or that are not authentic, is to deal only with reputable dealers and auction houses. Buying directly from another collector may fetch a better price but can be risky without the advice of an expert. Both dealers and auction houses sift through a multitude of wares, and both offer warranties--sometimes limited--that what they sell is as they describe it in their catalogues or bills of sale. Sotheby's and Christie's, another leading auction house, have large staffs of specialists available for consultation. Dealers can also provide vital information. The Art Dealers Association of America publishes a list of its more than 100 members, with the specialty of each (575 Madison Avenue, New York, New York 10022; telephone: 212-940-8590). For a minimum $400 charge, a New York nonprofit organization, International Foundation for Art Research (IFAR), will get top scholars to authenticate paintings, prints, and small sculptures (46 East 70th Street, New York, New York 10021; 212-879-1780). In 1981, George Elvin, 42, a New York lawyer, bought half a dozen antiquities in Jerusalem. One piece aroused suspicion: a Faiyum portrait, named for an area in northern Egypt rich in archeological relics. These images of the deceased, painted on wood, were customarily placed in tombs. IFAR consulted New York's Metropolitan Museum of Art and sent a photograph to the world's leading Faiyum expert, in East Germany. The Met and the German expert pronounced the piece a fake. The Jerusalem dealer refunded the $2,000 purchase price, minus shipping costs. THE IMPORTANT FACTORS affecting the value of a work, besides authenticity, are condition--whether the piece needs restoration or has already been heavily restored--and aesthetic quality. On request, major auction houses will supply a condition report on important works put up for sale, with far more information than is in catalogues. A buyer may determine the extent of restoration on a painting by examining it under ultraviolet light in a darkroom. Ray Hender, 41, a mutual fund portfolio manager in Boston who buys American impressionist paintings from dealers, says he would never purchase a painting without a black-light examination. Dave Williams always asks to have a print taken out of its frame, so that he can see from the back how much restoration has been done and whether there are tears, or burns from exposure to light. Once satisfied with authenticity, condition, and quality, the chief components of value, the collector looks at price, which can be the ultimate sting. The standard measure of worth is the auction-price history of similar works. The presale estimates published in auction catalogues are based largely on past sales. At the low end, they are close to unpublished reserve prices, below which consignors will not sell. Dealers' prices are rarely, if ever, published, and may be negotiable. Prices paid at auctions are easy to determine. International Auction Records, published annually by Editions Publisol in New York, records worldwide auction prices. In West Newton, Massachusetts, Leonard's Index of Art Auctions, published quarterly, records prices from American houses. A three-year-old service called Telepraisal in Garden City, New York, offers art buyers a computerized shortcut. By dialing 1-800-645-6002 or 516-747-8730 and giving a credit card number, a collector may get a five-year history, adjusted for inflation, of prices paid for the artist's comparably sized works. The charge: $30 a report. One satisfied customer is Nathan Smooke, 75, president of Wellman Properties, an industrial real estate firm in Los Angeles and a trustee of the Los Angeles County Art Museum. Smooke says that when he has to make a quick decision about purchasing one of the early-20th-century paintings he collects, Telepraisal provides a useful check. Experienced collectors say that commitment can be as important as homework. ''There's nothing like getting some money involved to get your attention,'' says Dave Williams, who in March bought a signed Winslow Homer print at Christie's for $27,500. ''If you get some money on the line, that will certainly heighten your consciousness and interest. Plunge, is my advice.'' But keep your eyes open. BOX: ARTFUL LEVERAGE < When the estate of railroad heiress Florence J. Gould puts Van Gogh's Landscape with Rising Sun on the block at Sotheby's New York sales-room in late April, the firm expects bidding to pass $5 million. Six works may go for over $1 million each. To encourage bids, Sotheby's is offering something new: yearlong credit, arranged in advance, with an interest rate at or close to prime. Sotheby's has usually required payment within three days, but sometimes has stretched the period to 90. For future sales the firm plans to offer bigger, longer loans, at an interest rate three or four percentage points over prime, with the art as collateral. Some major New York dealers have long advanced a year's credit to favored clients, even on purchases of $1 million or so, usually with no premium over the prime rate. Stuart P. Feldt, 49, director of the Hirschl & Adler Galleries in Manhattan, says, ''There are some clients I would never say no to.'' Banks usually aren't enthusiastic about loans on art. But Citibank accepts major art works as security, generally with other collateral, for loans that can reach tens of millions. ''The purpose of the loan could be to buy more art, to buy a boat, a company, or real estate,'' says Stewart B. Clifford, 56, senior vice president in charge of Citibank's private banking and investment division. ''We consider lending against art very good business.''