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gobbledygookThere is a long-standing tradition of auctioneers teasing the public that they will get a deal at their auction.

In fact, we coined the term, “prospect of a deal” to explain why people attend auctions.

There is also the term, “market value” which is commonly known in the auction business to indicate the price at which an asset would trade in a competitive auction setting.

In other words, when a well publicized and/or well-attended auction takes place, the property being sold is being sold at, “market value.” Market value reflects the current supply and demand of whatever is being sold.

We’ve previously discussed market value at auction in contrast to tag sales and also discussed if any items at an auction can sell for less than market value.

Which brings us to what I am calling, “market gobbledygook.” Take a look at this passage (edited for proper syntax and punctuation) from a recent auction advertisement :

    It’s a buyer’s market. There has never been a better time to start or build on a collection. So many pieces are far below their market value in this economy.
    I have talked about the Serigraph market in the past, pieces that originally went for $800 to $1,500 can be had for $200 and under. While most think that’s because there is no demand, the opposite is true.
    A majority of the major art publishers and houses have gone bankrupt in this economy and the courts have flooded the market with their inventory; as the pieces are brought up the prices will rise especially with the top artists.
    The piece shown here in the picture is a Bawo Dotter Limoges Hand Painted Frieberg Dresser Box, artist signed from the 1800’s currently at $26 and the value is $500 to $600. It will go up but nowhere near it’s true value. So look closely as it’s time to make some very special buys.

Let’s analyze this advertisement in parts:

  • It’s a buyer’s market. There has never been a better time to start or build on a collection. So many pieces are far below their market value in this economy.

    I can appreciate it’s a buyer’s market. However, so many prices are far below their market value? The current (low) prices would actually be current market value. Market value isn’t a constant, where items sell for more or less than market value.

  • While most think that’s because there is no demand, the opposite is true. A majority of the major art publishers and houses have gone bankrupt in this economy and the courts have flooded the market with their inventory.

    Market value is a function of supply and demand. If most think there is no demand, and the opposite is true, then there must be lots of demand, which would by itself raise prices. Yet, the courts have flooded the market with their inventory which would increase supply, and by itself put downward pressure on prices.

  • The piece shown here in the picture is a Bawo Dotter Limoges Hand Painted Frieberg Dresser Box, artist signed from the 1800’s currently at $26 and the value is $500 to $600. It will go up but nowhere near it’s true value.

    The item being referenced is at $26 in an auction with time left, so that’s not really significant. In fact, we talked about lower starting bids actually resulting in higher prices.
    Nevertheless, what is more curious is that the value of this item is $500 to $600 but won’t sell for anywhere near that? Wouldn’t the price it sold for be market value? How can the “true value” be so much higher than anyone is willing to pay?

Markets are fluid. At an auction, supply is fixed and then demand and price operate in unison; when there is low or no demand, prices are low and when there is high or significant demand, prices are high. As well, property sells for market value, not more or less than market value.

Mike Brandly, Auctioneer, CAI, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at: Mike Brandly, Auctioneer, Keller Williams Auctions and Goodwill Columbus Car Auction. His Facebook page is: www.facebook.com/mbauctioneer. He serves as Adjunct Faculty at Columbus State Community College and is Executive Director of The Ohio Auction School.