The Dilemma of Values
By Tom Helms ISA-AM
The Dilemma of Values
By Tom Helms, ISA-AM
The most common question we are asked as appraisers is "what's it worth?" A logical question; however, to the appraiser there are different values for the same object, and the answer varies for each value. Confusing?
Most people think that their "Antiques Road Show" item is worth what they hear when the appraiser says, "the insurance or projected auction estimates value for your object is so much". Wow! I am rich you think....for the moment that is...... until the owner learns the definition of the value given!
Insurance replacement value is the estimated cost that it would take to replace the object with an identical object, or if this isn't possible, an object with similar qualities and usefulness in a reasonable amount of time. It includes not only the cost to purchase the object, but also the costs associated with finding and obtaining the item at fair market value along with the possible help of an expert, and the necessary costs of packing and shipping, This is the highest value of an item and generally does not represent what the owner could get in cash.
An "auction value estimate" is what the estimator or auction house appraiser thinks the item might bring at a well advertised national or international specialized auction. An average is given. In many cases if the average is not met, the item is not sold and the estimate was not its value for that auction.
Then there is the most common heard phrase: "fair market value". This is the term associated with the IRS, taxable estates and, at times, estate settlement. The items are not actually sold, but a value is determined by a sale within a general market place. For example, a master artist's work would not glean the highest value in a local market, but would realize its actual value on the international market. This would be its fair market value.
Market value is what most people want. It is the most probable amount of money a buyer would pay for the item in a specific market. It is essentially the price for which the object would be sold in a shop or show; it is the secondary retail market value. (The key word is "sold".) The value can differ from geographic locations. For example, vintage rocking chairs have very little value in our area; however, if that same rocker was valued in the mid west or southern market place, its value would be more. This is what the item is worth in a shop, but most likely NOT what you will get if you sold it. That takes us to another value!
As we appraise estates and work with the heirs or chat with callers or respond to daily inquiries, the same question seems to thread its way through all conversations: "what can I get for this? And not, what is it worth?" In other words, "I have to sell". We now need to look at marketable cash value which can be known as "orderly liquidation value" and/or "forced liquidation value".
If you sell at an estate sale and/or an auction, it is considered an orderly liquidation when a number of perspective buyers have access to the items; therefore, the value can range from just under secondary market to 50% or less than market value. The lowest value is forced liquidation. This is when the seller forced to sell and only one or two people have the opportunity to purchase the item(s).
And, of course, there is "scrap value". At times there is significant value in an object from the standpoint of it parts or materials. Gold and silver are being sold for "scrap value". Parts of equipment, recycled items, and "clunkers" all have a value.
Still confused? If you are bogged in the quagmire of values and drowning in stuff then you might not only need our appraisal services, but our consulting arm of the business. We can help guide you to the right value and the right market to get the most for your treasure. The moral: don't dismiss the offer until you understand which value is being used.