The concept of an appraisal seems simple enough, yet many people confuse an appraisal with an asking price or a purchase offer.
An appraisal is an opinion of value provided by an educated, ethical and experienced expert in the field. The appraiser’s opinion is based on a current sales record of a similar object that has sold on the open market. An appraisal is based on a sale in which someone has paid for an object like the one that you own. This is how an appraiser arrives at an appraised value. Remember, someone’s “best guess” is not an appraisal and not all appraisers are created equal.
An appraisal is based on a transaction in which there is no forced sale. That means both the buyer and the seller must be willing participants in the exchange of the object for an agreed-upon amount of money. The appraiser must not act as a dealer or auctioneer but as an appraiser. Appraisers are paid for their expertise in authenticating objects, conducting market research and knowing the variations of the market — where to sell and where to buy.
Appraisals are not the same as asking prices. An asking price is a price ... a hope, a wish, a stab in the dark, a dream. An asking price is the number that a dealer comes up with taking into account how much money he thinks he can command in his market for the object. The asking price also is based on how much the dealer has paid for the object and how much he wants to gain from its sale. The dealer hopes he can get a buyer to pay a significant amount for the object that is more than he paid to own the object.
And a purchase offer is not an appraisal. A purchase offer is the amount that a dealer or reseller — not an appraiser — is willing to pay you for your object. Typically, that amount is not the same amount as an appraisal, which is based on a sales record. If someone makes you a purchase offer, it usually is a low amount of money. A purchase offer allows the dealer to make a good profit from buying and, later, reselling your object.
For example, an antique pocket watch is appraised at $10,000 based on a sales record for a similar watch that sold recently. That $10,000 is the amount that someone has paid for a similar watch on the open market. It is not the amount that a dealer will pay you for that watch. Why not? The dealer doesn’t want that pocket watch for his own collection; he wants to resell it for a hefty profit. The $10,000 is not the amount that a dealer will give you for the watch when you want to sell it. Typically, a dealer will make you a purchase offer for the watch of $1,000 (or 10 percent of its appraised value) because he wants to resell it for a profit. The dealer’s asking price for the pocket watch once it is in his shop is $12,000 (even higher than the appraised value) so he can either sell the pocket watch over the market value or he has room to negotiate to the $10,000 appraised value with a serious buyer and still make a profit on the watch that he purchased for a mere $1,000.
This is why your appraiser should not also be a reseller or dealer. The goal differs.
When getting an honest appraisal, a few things should be in place:
There are many upstanding appraisers and dealers and just as many folks who will benefit from your lack of information (e.g., market data, value and history) about your antique. Make sure you know the difference before you act.