ANTIQUES, FINE & DECORATIVE ART…..DIFFERENT TYPES OF VALUE & MARKETS
By Sarah McCullom
Watching the Antiques Roadshow you hear the expert say “If I had this in my shop I would sell it for….” or “If you are going to insure it, do so for….” or “At auction you could expect to get….”Each of those is a different value.There are different types of value dependent on the use and purpose for the appraisal.In addition, there are different markets where items are bought and sold, and different levels of those markets.There is also a difference dependent on the location.So, let’s take a look at some of the different types of value and markets.
Fair market value is the “price at which the property would change hands between a willing buyer and a willing seller, neither having any compulsion to buy or sell and both having reasonable knowledge of relevant facts”. This value is the one required by the IRS for a charitable donation.It is also the value used for estate valuation, estate taxes, and division of property.There is an assumption here that the buyer is the ultimate user.Market value is similar to fair market value except that the provision for lack of compulsion to buy or sell is removed and assumption of a sale within time frame is added.Market value is used when you desire to buy or sell an item.
Replacement value is the value used for insurance coverage. There are actually 3 types of replacement value.Replacement value-comparable is the one used most often for antiques when the use is for insurance coverage.This value is almost always higher than fair market value since it is the “price required to replace a property with another of similar age, quality, origin, appearance and condition within a reasonable length of time in an appropriate and relevant market.” This value can also be called “insurance value”.
Replacement value – cost new is the cost to replace a property with an equivalent or substitute which is new, using modern materials, techniques and standards.Replacement value-reproduction cost is the cost to reproduce a replica of the property at current costs.
Liquidation value is the price in cash if the item must be sold quickly.Orderly liquidation is when property changes hands in an orderly fashion, generally within reasonable time constraint, frequently advertised, and in a relevant market.A good example would be an estate sale.A forced liquidation is the cash value if things must be sold immediately, for instance if a dealer comes in and buys the entire estate for one price.
Once the type of value is determined, the market is the next to be considered.The first, which we are most familiar with, is the retail market.The retail market has many levels, from stores like Wal Mart up to the higher levels like Tiffany’s or Neiman Marcus.The higher the level, the more expensive the goods. The auction market also has different levels.The most famous auction houses such as Sotheby’s and Christies, major or first tier auction houses, do international business and auction very high end pieces.Regional and local auction houses typically draw bidders from a much smaller or more local area.Also keep in mind that auction houses, particularly at the local and regional level draw dealers who then take their purchases and sell them at a higher level, either retail or auction.There are different bidders; the dealer will not want to pay more than a wholesale price, the individual is there for the “good deal” and may out bid the dealer, and the collector may push the price up because he is willing to pay to own the item.
The location plays a part in the ultimate value as well.The Roadshow expert who has a shop in New York City would be able to sell an item in his high end shop for a lot more than the dealer in a much smaller city with a lower cost of living.
All of this plays a part in determining the value of the piece.In addition to evaluating the item itself, an appraiser must look at all these variables before coming to an opinion of value.It can be a complicated process, and as usual when you are hiring a professional you are paying for that individual’s expertise.