As an appraiser, the question I hear most often is: what’s it worth? I don’t just hear the question at work; I expect to get the question there. I mean I hear it at the mall, in line at the grocery store, at parties, and sitting in the doctors office. What is my antique furniture worth? What’s the value of my art? What can I get for my collectibles? In a social setting, I find the question annoying; I feel a bit like the doctor who, when at a party, is always asked for a free diagnosis. To many, I’m sure my answer is equally annoying. I always tell them that it depends.
You see, value is a moving target; it changes constantly. You know from shopping in retail stores that prices are subject to change from store to store and season to season, but when it comes to antiques and collectibles, people tend to think that an objects appraised value is like money in the bank. Not so. The value of an object is dependent on the market demand for the object, the supply of the object, the condition of the object, the usefulness and/or significance of the object, and the circumstances under which the object will be sold. No matter how beautifully made something is, if it’s too big, the wrong color, is commonly available, or must be sold in a hurry, the value of the object drops precipitously. Ultimately, the value of an object is what someone is willing to pay for it. What one is willing to pay will vary with how badly or how soon they need it. When would you pay the most for a household generator: when the weather is calm, or when a hurricane is approaching? I’m sure you get the picture. My intent in this article is to give you a broad view of the key valuation aspects involved in an appraisal. In future articles, I will discuss each aspect in detail.
When approaching a personal property appraisal, there are four valuation aspects that an appraiser will consider. First, a description of the object itself, discussing in detail its condition, utility, age, and quality. Secondly, the object must be placed in its historical context. Is the object genuine, or a fake? What is the style? Are the materials appropriate for the time period? Thirdly, the intent of the appraisal must be established. Value cannot be assigned until the purpose of the valuation is known and stated. A value for insurance purposes will be higher than a liquidation value. A fair market value will differ from cash value. Estate value will be lower than divorce value. Lastly, the market in which the object is located or sold will affect the value. Where there are a lot of potential bidders for an object, the value increases. Farm tractors sell better in farm country than in the city, because there aren’t any farmers in the city. Consequently, a tractor will likely be worth more in Hillsville, VA than in Los Angeles, CA. This market area aspect of valuation often escapes people who use blue books and price guides to value their objects. If no one in your market area will pay the price listed in the blue book, then the blue book price is wrong for your market area and does not correctly represent the objects value.
Finally, know that appraisals for estate purposes, insurance, divorce and other reasons are all time-sensitive. The value provided is for right then, right there. Don’t think that the value assigned will be good next year or the year after, because value is a moving target.