2017 – The Year of Record Setting Auctions: A View from the Appraiser’s Desk

In 2017, numerous auction sales records were broken.  Included on this list was the highest result for a painting at auction when one of the few known paintings by Leonardo da Vinci sold at Christie’s for $450.3 million.  Jean-Michel Basquiat broke the record price for the sale of artwork by an American artist when Untitled, (1982) sold for $110.5 million at Sotheby’s.  The record for a Prince guitar was broken at Julien’s when an early Prince cloud guitar sold for $700,000 in November.  This record is especially close to my heart as I had the pleasure of researching and cataloging this guitar.

At Bonham’s, a recording console from Abbey Road Studios for $1.8 million, the highest amount paid for a piece of recording equipment to date.  In a sale of the personal property of Audrey Hepburn, also conducted by Christie’s, the world record of a script sold at auction was broken when Hepburn’s Breakfast at Tiffany’s script sold for £630,000 in September.  Paul Newman’s Rolex Daytona broke the auction record for a watch when it sold for $17.8 million at Phillips.  Heritage claims to have broken 44 world records at its single-owner wine sale held in September 2017 and achieved the highest sales of comic book art on record.

Throughout all areas of collecting, the auction market is proudly exclaiming record-breaking sales.   While not everyone has a Basquiat laying around waiting to be auctioned, the value of an asset – in any area – could be affected.  As markets change, the value of your art, antiques, memorabilia, etc.., change with it.

Collectors take every precaution to ensure the safety of their property, by investing in proper storage, elaborate displays, and, of course, insurance.  The standard recommendation is to have items re-appraised for insurance every five years and for most collectors this will suffice.  However, collectors of assets in markets that have skyrocketed or on the wane, waiting five years for an updated appraisal may be costly.

Those costs could come from an insurance claim that is too low, based on a previous appraisal, or from an expensive insurance policy, that should be lowered.

My advice to collectors is to communicate with their insurance company to understand what their policy covers.  If an asset owner is fortunate enough to have items that have gone up in value, obtain additional coverage if necessary.

Collectors should also contact their appraiser to determine if an updated appraisal is needed based on the changing market conditions.

A Study of Cost, Price and Value

I provided the following article to The Worthpoint Newsletter explaining the differences between Cost, Price and Value.  You can see the original here.

UNDERSTANDING PRICE, COST AND VALUE – VIEW FROM AN APPRAISER’S DESK

Price, cost, and value likely call to mind certain definitions.  An appraiser’s understanding and the definitions of these words is very specific, and may vary from a common definition.

Here is an illustration: a person walks into an antique shop and finds the perfect item only to look at the price tag and suspect the proprietor is a crazy person.  That person will surely not pay $15.  Would the shop owner take $10?  This is an illustration of price versus cost.  The asking price was $15, the actual cost, if the shop owner agrees to the negotiation, is $10.  A price is always negotiable.  Cost is a fact; it is what a person actually spends.

Think of a used car salesroom.  The price the dealer would like to get is emblazoned on the windshield of each car.  But you and I, and the dealer, know better.  I suspect the buyer will leave having paid a lower cost than the asking price.

Value is an altogether different animal.  I must stress the following: value must be justified.  For appraisers, value is determined by the purpose of the valuation.  Come again?  Value can change based on what the purpose of the valuation is?  Yes, yes it can. Many factors can affect a value, and the purpose of an appraisal assignment is the first thing an appraiser needs to understand before beginning an appraisal.  If the purpose of the appraisal is to find a value for retail replacement, that value is likely going to be much higher than if the purpose is for a liquidation value.

In order to justify a value, the appraiser inspects the property and considers factors affecting value, such as: condition, age, desirability, provenance, use, etc. Once the characteristics of a particular item are reviewed and understood, then comparable sales of similar property are investigated in the appropriate market, sales data reviewed, anomalies identified, and market trends considered.

This process is important for the following reasons:

  • As sellers and buyers we are confronted with false, or unsubstantiated information.  When you understand the concepts of price, cost, and value, you bring clarity to the conversation.
  • By asking the right questions you will not only show yourself as knowledgeable, you will also ensure that whether selling or buying, you have a transparent and intelligent conversation about the transaction.

Consider the following statements:

“I was told this was worth $X.”
Questions I would ask about this statement: By whom?  When?  If it is an item that was very desirable five years ago, but did not hold its value – this statement is unfounded.  Was the item valued at “$X” by a qualified appraiser using a specific approach to value?

“I have seen this advertised for $X.”
As discussed earlier, someone can ask for a price of whatever they want.  That does not mean a customer will pay the advertised price.

“I paid $X.”
There are a number of reasons why a past purchase may have lost its value.  A good salesperson may have influenced the purchase, or a desire to own something immediately at any price drove the sale.  Additionally, changing tastes and technology can make an object obsolete.

As buyers and sellers, there needs to be weight given to each of the preceding statements; however, all that matters is what a person will pay at present.  Fully understanding price, cost, and value can lead to smoother transactions, reduced disappointment, and appropriate expectations for all parties.


Megan Mahn Miller is an appraiser and owner of the consulting and appraisal service, Mahn Miller Collective Inc. which specializes in Rock ‘n’ Roll and Hollywood memorabilia.