Determining the value of an item like a bulldozer is often
straightforward as there are formulas to calculate life cycle and
depreciation as well as sales on similar pieces of heavy equipment to
look to for estimates. But, how do Auctioneers find values to sell those
difficult pieces of property? Whether assessing a piece of memorabilia
or evaluating a rare treasure found in grandma’s attic, how do you
determine what priceless items are worth?
“I’ve had to come up with strategies through trial and error, listening
to other people, and finding resources to find a way when there is no
other sale to find the value,” Megan Mahn Miller says.
While memorabilia, works of art, and collectibles might seem so precious
that its worth cannot be determined, everything has a value, according
to Miller. That value is most often determined by comparing like quality
items that are for sale or recently sold in the market.
Miller calls it the “Concept of Parallel Properties.” Appraisers and
Auctioneers should look for something of similar magnitude and
characteristics for direction on the item they are attempting to
evaluate. If you are selling the Declaration of Independence, for
example, and The Constitution recently sold at auction, then an
Auctioneer can use the sale of the latter historical document as a
benchmark for their sale.
From this point, Miller says “The X-Factor” needs to be applied. “The
X-Factor” is the basic value of an item plus journalism’s 5 W’s. The
who, what, where, when, and why of an item. Appraisers and Auctioneers
must research an item to know its property characteristics. What are the
elements that create an X-Factor value beyond the intrinsic value?
Items that are historical, belonged to a celebrity, are trendy during
the time of sale, invoke nostalgia or infamy may be worth more.
“Each piece of property has some intrinsic value. Let’s say this chair
is worth $25 so its intrinsic value to be sold at auction is $25. What
if I told you it was Ringo Starr’s chair?” she says. “Well I’ve sold
Ringo Starr’s chair and I can tell you it’s not still worth $25 because
people will pay more.”
Auctioneers must use the current market, X-Factor, and parallel
properties to price difficult items, adjusting the price up or down
depending on the elements.
“It becomes an art because there’s not a direct equation I can lay on
top of it,” Miller says. “If this chair is worth $25, but it sells for
$100, I can’t say everything across the board is worth 4X its intrinsic
value. I’d love it if I could, but we have to take into consideration a
whole bunch of different elements.”
When conducting research to price a difficult item, it is better to be
over-informed. Expand your study by going out of your comfort zone of
where you normally look for values. Increase your knowledge and
resources by networking and collaborating with other Auctioneers. Using
Miller’s tips can help auctioneers have confidence in their ability to
establish legally defensible values and valid arguments on price points
Increase your knowledge and resources by networking and collaborating
with other auctioneers. Using Miller’s tips can help Auctioneers have
confidence in their ability to establish legally defensible values and
valid arguments on price points for priceless property.
This article was an excerpt from a presentation given at the 2017 NAA
International Auctioneers Conference and Show. Want even more tips on
diversity or hear more regarding this topic? Full audio of the
presentation will be available in the NAA Knowledge Center