Perhaps the most commonly asked question I hear is; „So, what’s it worth?“ The question may pertain to a four language ship’s paper signed by James Madison and James Monroe, a signed photograph of movie star and sex symbol Marilyn Monroe, or a hand-written letter by Union General (posthumously promoted) Samuel K. Zook. Frequently it is an innocent request for a „ball park figure“ on a specific item. As a professional appraiser it is difficult to formulate a simple one-word answer.
Each item has many different values. The Madison / Monroe document, for example, will be shown to have at least four different values — and each one will be correct. How can that be? It depends upon the market.
You are probably familiar with the term „market.“ A market is any place or system for exchanging property between buyers and sellers. A market can be a retail gallery or a flea market. It can be a bankruptcy liquidation sale or a mail order catalog. The internet and other on-line services are markets for the buying and selling merchandise. The „value“ at which the item is sold may be different in each market. The term „Fair Market Value“ is a legal definition used in a variety of instances. Charitable contribution, dissolution of marriage, or estate tax liability, may be circumstances when fair market value is required. „Fair Market“ does not mean „reasonable.“ The term „fair“ comes from old English law, meaning open and free market, as in a „market“ or „fair“ where goods are bought and sold.
This value may be very different than retail value. In situations when someone is interested in insuring an item, a retail replacement cost may be most appropriate. It all seems quite confusing, but once you identify the reason you want to know „what its worth“ then a value can be provided. The „reason one needs to know“ is referred to in appraising as the „function“ of the appraisal. It is also called the „intended use“ or the „assigned use.“ With a known „use,“ the appropriate market can be researched.
Markets range from high-end, high-quality, retail autograph galleries to flea markets and garage sales. Various quality and all types of material can be found within any market. An example is the multi-million dollar Dunlap copy of the declaration of independence reported to have been found behind and old picture at a garage sale.
Here are some examples of situations where the value is dependent upon „use“ or „need.“ The market researched is based on the use and value required.
If the report’s function is to obtain insurance coverage, the appraisal will identify the estimated replacement cost. The market to research is the gallery where the item was purchased.
If the report’s function is to liquidate a bankrupt business, the appraisal will identify the liquidation value. The market is the courthouse steps.
If the report’s function is to establish a potential tax deduction for a charitable contribution, the appraisal will identify the Fair Market Value. The market is most likely a well advertised auction.
As an example, we’ll use Madison/Monroe four language ship’s paper. If an owner and the insurance company need to know what it will cost to replace the item with a similar piece, an appraiser might research its original source, the gallery where it was purchased. The Estimated replacement cost in a mid-to-high-end market is $7,500.00. This may be the valid value for this need.
If that same owner filed for bankruptcy and the U.S. Bankruptcy Court Judge ordered the sale of the item, it may bring $1,200.00. This may be a valid value for this situation.
If the owner decided to donate it to the National Archives, it might have a value of $3,350.00. This may be a valid value for that appraisal „use.“
Finally, if the gallery owner was robbed his insurance company would compensate him at his or her cost. This value could be $1,750.00. Perhaps an accurate value for this
As you can see, the same item has four different values. Each may be accurate and appropriate for the „intended use“ and „purpose“ of the valuation. There is more to determining value than picking a price. Anyone providing values must understand the autograph, manuscript, and historical document market as well as the reason for asking the question; „So, what’s it worth?“