We concluded then that possibly all property only has extrinsic value (value by agreement) rather than intrinsic value, which is deemed “value in itself.”
Our complete story on that topic can be read: https://mikebrandlyauctioneer.wordpress.com/2009/12/14/what-is-it-worth/.
Here, we’ll expand on that topic.
As we noted previously, of all the questions auctioneers are regularly asked, this particular question might be the most popular: “What’s it worth?” and/or other variations such as:
- “What’s this worth?”
- “What’s that going to bring?”
- “What will they pay for this?”
- “What are those going for?”
I would guess that most seasoned auctioneers answer this question in some fashion such as:
- “What someone is willing to pay for it.”
- “What the market will bear.”
- “All we can get you for it.”
While many clients and customers of auctioneers consider these types of answers evasive, they are in fact more accurate than an answer such as, “This tractor is worth $15,000.”
An item such as this tractor is worth $15,000 only if someone is willing and able to pay that much for it — and often times buyers are willing and able to pay much more (or much less,) thus making the $15,000 appraisal basically worthless information.
An appraisal is an opinion — an estimate — and essentially only a guess what the actual value (worth) of something is. So, if the question is “What’s it worth?” meaning what is an estimate of value, then such an estimate can usually be provided. However, if “What’s it worth?” means what it will actually sell for, such answers are difficult — if not impossible — to proclaim.
A perfect example arrived in my inbox today from the National Auctioneers Association. NAA member John McInnis sold a Dutch still-life painting for $190,000 — the same painting that an appraiser for the Antiques Roadshow had appraised for $10,000 – $20,000.
What is essential to understand from this, and countless other examples, is that this Dutch still-life painting is (was) worth $190,000 and was only incorrectly appraised — rather than the common misconception that the painting was really worth $10,00 to $20,000 and sold for $170,000 more than it was worth.
In regard to what someone is willing and able to pay, the full definition of market value is:
- The estimated amount for which a property should exchange on the date of valuation between an educated buyer and a reasonably motivated seller in an arms-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently, and without undue influence.
However, even with this complete textbook definition, real and personal property is really worth what amount someone actually is willing to sell for, and willing to buy for; maybe a better definition of market value would be:
- The amount for which a property exchanges on a certain date of sale between an educated buyer and a reasonably motivated seller in an arms-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently, and without undue influence.
Next time you hear an auctioneer answer the question, “What’s it worth?” with, “What someone is willing to pay for it,” you should know that’s the best answer for that question.
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 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.