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How To Understand Why One Item Has More Then One Price

by Christopher Kent (05/27/08).
More than one price

When people see varied terms listed behind a valuation, most aren’t sure what they mean, and why each ultimately has a different dollar value placed on it. So let me help you through the process with these basic definitions.

Auction Value: This is the price that an appraiser feels that a given object could/would/should bring at auction. It is based on comparison of like items and recent past history of sales. And frankly has NOTHING to do with the actual value of the item.

Retail Value: We get this, usually. A competitive price is applied to a single item; the item is expected to be sold for that marked price. The retailer has purchased the product from one source at one price, adds his mark-up and sells the item at a profit. Appraisers never, or hardly ever, express values in this manner.

Insurance Replacement Value: A value is placed on any given item based on this definition which is universally known; “the amount of money it would take to replace a given item if it were lost, extensively damaged or stolen.” The dollar value applied to this item would be what an individual or agency would be expected to pay to replace from a retail source in the appropriate venue within a limited time frame.

Appropriate Marketplace For Replacement: Appraisers use this term in the valuation/insurance replacement process and in written documents to say, in essence, if you have a 1948 Rolex Oyster wrist watch purchased at Aspreys in London the insurance replacement value would be for a value for it to be replaced at the appropriate marketplace, not, for example, Happy Pappies Watch Shop.

Fair Market Value: Thank goodness our friends at the IRS have a definition of this term; “ the price that property would sell for on the open market between willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts.” Now, lets’ break down the meaning even further. This above definition is important because it defines/forms the basis for charitable contributions, estate, resale, and equal distribution appraisals.

Cash Value: Sometimes appraisers use the term cash value to be used synonymously as fair market value. THIS IS NOT ABSOLUTELY CORRECT! The correct term for cash value should be called the marketable cash value (Or resale value). It is fair market value minus the expenses of selling the item. The expense might include the commission, which may run as high as 40 to 50 percent, advertising of the item and or moving expenses.

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