In the appraisal business there are several types of valuation, but the most common is “Fair Market Value.” A typical definition of this type of valuation describes it as “The amount at which an item of property would change hands between a willing buyer and willing seller, when neither is under any compulsion to buy or sell and both parties having reasonable knowledge of relevant facts.” The question most people have is “How do you establish that value?”
There are two primary criteria that you can use to evaluate secondhand goods. Firstly, recent sales of similar goods and secondly, overall supply and demand for the goods.
How accurate this appraisal needs to be depends on its final use. If it is being provided by a professional appraiser to a paying client, all possible reasonable measures must be taken to ensure an accurate evaluation. If, however, this is a valuation for personal use or for a private purchase or sale, significantly more leeway is allowable. This article will explain how to approach the latter situation.
There are many ways to establish recent sales prices of similar goods with one important caveat which will be explained in a moment. A secondhand dealer, someone with specialized knowledge, or many people who dabble in flea markets, and buying and selling secondhand goods, will have their own experience to draw upon. Others will need to learn some of the best places to find recent sales prices.
The number one error of the non-professional appraiser is to use the prices of goods offered for sale rather than the prices of goods that have actually sold. A typical scenario would be to check out similar items for sale in secondhand stores or classified ads. The flaw in this method is, of course, that you don’t know if the items will actually sell for these prices. Fortunately, modern technology has offered us superior, alternative methods.
One source of recent sales prices is eBay itself. Here you can search millions of items including items whose auctions have concluded successfully. Keep in mind that you will need to set up an account in order to see completed sales.
Auctions of the traditional sort are also excellent sources of recent sales prices. Many auction houses post their sales results online. Attending as many auctions as possible in person is another great way to help you to build up a knowledge of values.
Understanding supply and demand for a product can be a little trickier. One clue comes in your research for recent sales prices. Difficulty in locating these may be an indication of low supply. Calling potential sellers and asking them directly about availability and demand can also provide information to assist you in your evaluation.
Like every skill, practice will help you to hone your skills, develop your own unique techniques, and give you the ability to make faster and more accurate evaluations.