Linda said she was keeping it, and that was fine. We still had over 1,000 lots to sell at her auction including some nice antiques and other good lawn and garden equipment.
The fact that it had sentimental value was significant. Is anything worth more than what it is in terms of sentimental value? Let’s look at some considerations concerning value:
First, there are basically two theories concerning value. Value can be viewed as objective or subjective.
- Objective value suggests value is inherent, and the cost to make or produce is a primary consideration when appraising.
- Subjective value suggests that value is in the eye of the beholder; factors beyond the property itself are material when appraising.
Today, most appraisal and value types assume subjective valuation is more reflective of common thinking.
Some specific value types are as follows:
- Sentimental value is based upon the positive personal experiences associated with the property. For example, Linda’s father used to take her for rides on this Cub tractor; there might be no amount of money she would accept for it. Possibly priceless?
- Replacement value is the amount that an entity would have to pay to replace an asset at the present time, according to its current worth. For instance, the cost to find another Cub tractor in like condition right away.
- Indemnification value is the amount the owner would be due by an insurance company in the event of loss of the asset. This value is generally thought to be the value to replace (in function) such as if this tractor was stolen, possibly replaced by another tractor of similar kind.
- Retail value is the value this asset would demand in the open market over a reasonable period of time, frequently accompanied with warranties, financing and/or refund options. For example, if Linda advertised this Cub tractor for sale, over a few months, she might realize retail value.
- Investment value is the value of an asset to the owner or a prospective owner for individual investment or operational objectives. For instance, an owner of a Cub tractor museum or large vintage lawn care company might value this asset accordingly.
- Market value is the highest price a willing buyer would pay and a willing seller would accept, both being fully informed, and the property being exposed for sale for a reasonable period of time. If Linda had us sell this Cub tractor at auction, she could expect market value.
- In Use value is based upon the usefulness of the asset, typically without substantial relocation. A buyer might offer Linda in use value to use this Cub tractor to mow and maintain area yards, for a certain profit. In use values are sometimes calculated by capitalization.
- Assessed value is the value often assigned assets for purposes of taxation. Usually assessed value is less than half of market value. Assessed value is more common concerning real property interests.
- Wholesale value is the amount a buyer might pay for purposes of reselling the asset for a profit. A wholesaler desiring to purchase this Cub tractor for purposes of resale will only pay a fraction of retail or market value.
- Liquidation value represents the probable selling price of an asset when it is allowed insufficient time to sell on the open market. For instance, if Linda just asked a neighbor to offer her a price, with no other efforts to market, that price might be considered liquidation value.
If we considered replacement value our basis (100%) many consider the other value types as a fractional percentage range of that basis. For example, indemnification might be about 80-100%, investment maybe 70-100%, market maybe 50-100%, in use 40-80%, assessed 30-40%, wholesale 30%, liquidation 10-30%. These percentages vary, including by product type.
I suppose we could have sold Linda’s Farmall Cub tractor at auction, but we were certain to obtain a price far below her opinion of [sentimental] 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. He serves as Adjunct Faculty at Columbus State Community College, Executive Director of The Ohio Auction School and Faculty at the Certified Auctioneers Institute held at Indiana University.