The Factors of Value
By Mark Prendergast
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In order to properly value an object, whether for a formal appraisal or for estimates of value at auction, a number of factors must be considered. The primary determinants of value are provenance, rarity, condition, quality, and fashion/market trends. No one feature alone can determine a value, though there are occasions when one aspect is much more heavily measured. The more desirable and prized each factor is in the particular market, the more 'valuable' an object will be.
Provenance — The provenance of an item is the record of the people and places that an object has encountered throughout its existence. Provenance is not just who owned it but also where it has lived, where it was exhibited and who handled its sale in the past. An objects association with a famous person or renowned collector can greatly increase its desirability in the market, and thus its value. The prices achieved during the highly publicized auctions of the personal property of such iconic figures as the Kennedys, Marilyn Monroe or Martin Luther King do not necessarily reflect the inherent values of the objects themselves but much more the value of the connection the object has to the famous person — and ultimately history. Martin Luther King Jr.'s cane rocking chair is being offered for sale in November 2009 at Heritage's 20th Century Icons auction. The chair was used by Dr. King during the writing of some of his seminal late 1960's books and comes to auction through the family of his literary editor. A similar chair from the period is worth a few hundred dollars, while the King associated chair is expected to bring some $12,000.
Rarity — Rarity is a consideration that can truly drive up the price of an object but can also be limiting in extreme instances. The rare "Inverted Jenny" stamp is heavily sought by collectors as the holy grail of stamps. A mistake in the 1918 printing of the two-color stamp has the image of a Curtis JN-4 "Jenny" airplane mistakenly depicted upside down. Only a single sheet of 100 of these stamps survived the initial erroneous printing. When government officials demanded the stamps back, the original buyer wisely held his ground, and later sold the sheet of stamps, which were subsequently split apart and sold individually. The fact that there have only ever been100 of these stamps creates a limited and finite supply. Individual "Inverted Jenny" stamps see six figure prices, while the best preserved examples come close to a million dollars.
Without a traceable history of related sales, the value of an item might be undeterminable or minimized. Independent rarity — being the only example in the world — can be limiting in the fact that there is not an identifiable market for the item. If you have the only one of something — without relative comparable examples in the market, the likelihood of finding a willing buyer at a healthy price is difficult, if not unlikely.
Condition — Condition of an object can bear heavily on value. Using the "Inverted Jenny" example, the value of each stamp, or group of stamps, is based on the condition. Whether they have been hinged, damaged, creased, worn or the gum has been disturbed, all factor into the desirability to collectors. For stamps and coins, where there are means of formalized grading of condition, the condition is rated in a numeric scale that can mean the difference of hundreds, thousands, or, as in the case of the "inverted Jenny", hundreds of thousands of dollars in value.
In art and antiques, condition also can play a key role in determining value. We have all heard the stories of early American furniture pieces being heavily cleaned by an eager owner only to find that the value of the piece was washed away with the years of grime and dirt — more eloquently referred to as the 'patina'. Paintings and antiques can often be restored to return them to a pristine or at least more marketable state. A heavily soiled painting cleaned professionally can look like a completely different work of art and become much more desirable to collectors. Of course, a painting or antique requiring no assistance will hold the most value, but in many instances value can be increased and recouped through the conscientious attention of a skilled restorer. Auction houses and art experts can provide insight into the benefit — or detriment — of having an item's condition improved.
Considered by collectors to be the top quality 'pin-up' artist, Gil Elvgren paintings are selling at record prices in Heritage's Illustration Art auctions.
Quality — The intrinsic quality of a work of art or collectible can determine whether it will retain or increase its value over time. The best quality items tend to appreciate and retain value most easily. Quality is sometimes very subjective as it can be maximized or minimized according to the tastes and appreciation of an era. Top workmanship, the best means of production and the most skilled artisans — no matter the period, category or collectible — will result in the highest quality object. A painting regarded as a very high quality example of its style, independent of the artist associated with it, can fetch very high prices on its artistic quality alone. Conversely, a very poor quality work by a famous artist will be much lower in value than a painting that is considered one of their masterpieces. Many artists had bad days or even periods when their production is not recognized to be of the best quality.
Fashion — People's tastes and opinions of worth can vary from decade to decade — if not year to year. Collector's must be careful not to be too swept up in the trends and escalating prices in certain markets. Changes in attitudes and styles will be reflected in swells and corrections in values. The Post-War and Contemporary Art market saw staggering increases in value consistently from 2004 to mid-2008. It was in vogue to buy works by the "hot" artists of the moment — with collectors driving prices at auction to many multiples of the pre-sale estimates. Some speculative and aggressive collectors are known to pay trendy artists in advance to be on a list for works that have not yet been produced or even conceived. The question now remains if the fashions and trends that drove prices during the heady times of economic potency will continue into a more subdued, cautious market.
The art and collectibles market is directly affected by the larger economic trends, but as in any market there are higher risk/reward areas and more consistent 'blue chip' segments. The rare coin market as a whole has not seen the dramatic effects of the economic downturn, and is proving to strengthen as the price of gold and interest in diversifying portfolios increases.
Today's expansive access to information allows for almost anyone to find databases that chart and record the sales or market prices of objects and art. From coins and stamps to artwork and diamonds, there are internet sources to track the going markets. All these resources are crucial in determining value. What becomes more of an art in itself is using the aspects of value discussed in this article to see where a particular item fits into the hierarchy of value. That is the art of appraising.
In some instances, rarity, condition, provenance and quality all converge during the ideal moment of fashionablilty. When all factors of value are embodied in the right object, incredible prices are achieved. Such a 'perfect storm' of value is seen when over $3.7 million is paid for a silver dollar (1804 Class I Original), $20 million is paid for a crystal egg (Imperial Fabergé) and $140 million is reportedly paid for a 1948 painting (Jackson Pollock's No. 5).