According to the Wall Street Journal the art market has officially burst. With prices dropping 30 percent and auction houses' stocks plummeting, layoffs are inevitable. Galleries are closing. And the effects are rippling through the community of collectors, dealers, and the artists themselves.

Mary Boone keeps telling us that last week's disappointing auctions were actually relatively encouraging. Only 20 percent of works sold at auction '89 she says, so this, in comparison, is not so bad.

But what does this all mean for those who have funneled money into outrageously priced contemporary and modern art works in the past decade, hoping to flip them?

Well, it seems that the auction houses are trying to adapt to the new market, particularly in light of the auction of recently "terminated" Lehman Brothers CEO Richard Fuld's collection of 15 postwar drawings that included works by Arshile Gorky, Willem de Kooning, and Barnett Newman. Christie's estimated the works to be worth $20 million, and even went so far as to guarantee that sum to Mr. Fuld and his wife, Kathy. (Until very recently, guarantees were not uncommon.) But the works, sadly, ended up selling for $13.5 million, leaving the auction house $6.5 million in the hole (not to mention the commission they would've made on the higher price).

According to Sotheby's CEO William Ruprecht, those days are probably over.

From the article:

They're also likely to push more of the risk of selling art onto collectors. In recent years, in a booming market, auctioneers often offered sellers guarantees of minimum amounts -- but the auction house would profit on the upside. Mr. Ruprecht told the analysts that "going forward, we will generally not be using our capital for guarantees."

Sellers, of course, may not let the auctioneers off easy. They'll increasingly be requesting clauses in their contracts allowing them to take art off the block if market conditions change and promises regarding catalogue entries and the touring and exhibition of their works, says Jo Backer Laird, art-law attorney at Patterson Belknap Webb & Tyler and former general counsel of Christie's. If they're smart, she says, they'll insist that specific marketing proposals for their pieces be included in their contracts.

Better be smart and hire an art attorney.