It’s an innocent question: What’s it worth?
And I always answer: That depends on whether you’re buying or selling.
An object’s “worth” can relate to price, or it can relate to value. These words are not interchangeable, although collectors may use them as if they were. But there is a big difference between the price of a painting, and the value of a painting – and it’s a difference which becomes relevant when you ask “what’s it worth?”
Those who deal in products like refrigerators, bathing suits and orange juice routinely use words like “wholesale” or “retail,” or “net price” and “list price” when buying and selling. These terms also are used by those who deal in art prints and posters, and commercially sold “collectibles.” But they aren’t commonly applied to original fine art or illustrative art (or if they are, it’s not a blatant use). . . possibly because buyers and sellers in these arenas aren’t comfortable with viewing unique items as commodities, but more likely because our collecting field hasn’t evolved in a way which would make such distinctions relevant. Price is only one of several variables that influences our decision to buy . . . or sell . . . and that we use to assess overall value. But because we are happier thinking about art in terms of it’s value to us, rather than understanding pricing, we’ve been able to avoid having to deal with financial terms like wholesale and retail . . . and that has added to the slippery slope we call “worth.”
But I assure you, the concepts of “retail” and “wholesale” have a place in all areas of collecting, and understanding how they apply to buying and selling of stuff like art will go a long way towards lessening confusion between “the price” of something, and it’s “value.” Not to mention getting a handle on what buyers and sellers are really saying when they use words like “asking $$$” and “offered at $$$” and “valued at.” We begin by grasping this fundamental rule of collecting:
When you buy, you are buying retail; when you sell, you are selling “wholesale”.
There are costs associated with producing, distributing and promoting (selling and marketing) stuff like art and collectibles that apply no matter WHO is selling, WHAT is sold, or WHERE. These costs will differ, depending on the channel of distribution (e.g., eBay, Heritage Auctions, or me), but they also are related to what you will “net” as a seller, or will pay as a premium, as a buyer. SOMEONE (either the buyer, the seller, or both) has to pay these expenses of doing business. It may cost you less to sell on eBay (let’s say 9% ave fees plus paypal, another 3-4%), but it also may net you less than if you had sold your art through an auction house such as Heritage, despite their higher seller’s premium. By the same token, you may believe eBAY is a place for getting bargains, i.e., art for less than you might have paid otherwise. But eBay is a true retail channel….whether you buy outright or “win” an auction you have literally paid “the going rate” – or, as we say, “fair market”. Ignore sellers who say (to the effect) “You are special – that’s why I am giving you the wholesale price!” No one who is in business, stays in business by “breaking even.” 😎
Unlike the term “price,” which at least superficially (and to our American ears) sounds like something solid, fixed, and specific, a “value” does not. Values are fuzzy, vague and in practice are a moving target, dependent on who is making the valuation. For that reason it’s common for values to be stated as “ranges” vs. particular amounts. Indeed, you can value artworks at any level you choose, which is their “intrinsic” value (their value to you, based on your preferences and circumstances) until that day comes when you genuinely wish to sell them. At that point, a realistic estimate of the market value of an object is made, to determine its fair market value (FMV) – what a knowledgeable, willing, and unpressured buyer would likely pay to a knowledgeable, willing, and unpressured seller on a given day. Fair market value may be founded either on precedent or extrapolation; indeed, that’s how I priced the preliminary study below. [Experience/historical results show that good quality color prelims sell for about 10% of the price of the (related) finished paintings.]
However: There is a big difference between the price of a preliminary rough sketch, for example, and the value of that preliminary rough sketch to YOU. That is why you must be on the ALERT when a seller says “This prelim is valued at $275.00” instead of saying “The price is $275.00” – whether or not it’s followed by the words “but for you, today, I can make it $$$” 🙂 They are phrasing their offering that way ON PURPOSE to get you to mentally focus on “value” (the greater the perceived benefits, the more the price will seem reasonable) rather than price – because they believe if they said “I am pricing this at $275.00” you will be forced to consider only one aspect of the entire offering. And if that particular factor is critical to you in making a purchase decision (that is to say, more important than personal, psychological or social reasons for wanting to own the art) – and you can’t afford it – you would be less inclined to buy. Price suggests a product or commodity; value elevates the “worth” above mere market value. And suggests that it’s higher power (some invisible evaluator) that has conferred that worthiness, not the seller who has merely come up with a price.
Go on line, and you’ll find many examples of how “valuation” is used to enhance the “worth” when attempting to fix, or even judge, market value. One of the most “valuable” of Rembrandt paintings is a painting titled “Portrat of Jan Six” The text accompanying this work (see www.theartwolf.com/articles/most-valuable-private-art.htm) reads “Not only the most important work by Rembrandt still in private hands, but also one of the best portraits from the Dutch Golden Era. In the 1650s Rembrandt created some of his most accomplished masterpieces, such as “Aristotle with a Bust of Homer” (1653, Metropolitan Museum) or “A Woman Bathing in a Stream” (1654, National Gallery). And what is this painting’s estimated value? $120-180 million. And how has this been determined?
Explanation provided by “The Art Wolf”: “Some “good” Rembrandts have appeared on the market recently, including “Portrait of a Man with Arms Akimbo” (offered at TEFAF for $47 million) or the “Minerva” (sold for $45 million). However, none of them are comparable to this masterpiece, valued by art dealer Otto Naumann “in excess of $150 million”.[my bold highlighting added to draw your attention to the choice of words here]
OFFERED AT (brought to market/asking price but not sold)
SOLD FOR (purchase price – not necessarily what was asked/offered at)
VALUED AT (3 times more! by whom? One art dealer’s opinion)
When you ask me the price of a painting (as you probably can guess) that’s how much it would cost you to buy it from me. The “price” is whatever the artwork is selling for on the open market, or its “retail” price. And if you buy it, you have confirmed its value. This is NOT the price, however, that I would pay to buy it from you, the next day. In order to maintain an “orderly market” I want to maintain that market value. But the only way to do that is to buy it from you for less than you paid for it. It’s value to you may remain unchanged, but for me, things are different. I must pay for the costs of doing business. Has the value of what you have purchased changed in a day?
Prices are set by many different factors, a discussion I’m going to leave for another day. For now, let’s just say that if you are after a price guide that can operates like the “blue book” and “red book” does for coins, i.e., “blue” guides to what you can expect a dealer to pay you when you want to sell, and “red” guides to what retail price a dealer would ask when selling, you are going to be disappointed. Because price guides developed for objects produced in MULTIPLES – like coins or cars – have no similar equivalent (and cannot be created) for objects which are “one of a kind”.
Bottom LIne: Don’t be misled by sellers or buyers who use “value” to mean “price” – when it’s to their advantage. The ‘value’ of something cannot be assessed independently of price, but is influenced by factors beyond price. And whether labels like wholesale/net price or retail/list price are used, it’s probably best to plan on selling whatever collectibles you own for LESS than whatever you would have to pay to replace them, if you ever wanted or needed to replace them, whatever your perceptions of their value.