Scientific Appraisals:

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WHAT IS IT ALL REALLY WORTH?
This question bothers people all over the world. What is some thing really worth? More and more people do sell more than just once in a lifetime a home or a vehicle. Buyers are affraid to overpay ...

Some people do move more than just once in their life. Because of changes in their job, or health or family situation. Or just to have new perspectives.

Also, many people rather sell things they do not longer use, than to just throw it away. Garage sales are popular, and so do cryout and online auctions.

Many thousands of flea markets all over the world, where bargaining can be fun or very serious, attract people from near and from far.

There are lots of classified advertisements in the newspapers and the magazines, and invitations to auctions.

All this for just one reason: To have an acceptable replacement for something that people offer for a trade. And, usually, it is not an exchange of goods or services, but about money.

Buyers usually want to pay as little as possible for something that the seller wants to get most out of it. The discussion usually goes about what is the damn thing really worth. Is there no objective way to set a price on things? A scientific value estimation could be part of a solution, acceptable for both sellers and buyers. Such a system could be named Scientific Appraisal or Scientific Appraising.

People tend to have different ideas about the same thing. So is it about value, too. What is worth a lot for a certain person, may be very well worth much less for somebody else.

Besides a after market industry where people trade second hand goods, there is an appraising industry where people offer advice about value.

Today, there are not only experts that explain how much one should pay or not pay for artwork or some ancient or recent artifact. Those people offer a scientific appraisal that is based upon a number of elements that they consider important, and that they expect prospective buyers to consider important.
 
The keyword here, is the word they.
Indeed, the so-called scientific appraisals are based upon facts that are considered to be relevant by the people who do the value estimation.

In some fields, like antiques, jewelry, used vehicles and real estate, a number of people have agreed upon certain value ranges for certain items. Value catalogs are circulating. Many people accept the prices as set forth therein to be some kind of a standard. 

Value assessment by some experts or from catalog are often accepted for transaction negotiation, Law Court and Tax Office decisions.

Many people and companies offer valuation of the most common and uncommon things, for fees ranging from free to hundreds or even more dollars.
There are some official resp. unofficial agreements between appraisers in some interest fields. So is it common that a number of people appraise some thing within the same price range.

That means no more or less than that those people have read the same books or that they took the same courses concerning the specific item or interest field. That is all, there is no secret.

Many people, especially sellers and buyers, do have often a completely different idea about the value of what they are negotiating upon, and they do not really care much about third party appreciations.

It happens that a third party explains to a potential buyer that the offer is way too high, so that the offer is retracted, leaving the seller with a understandable frustration and a Mind Your Own Business feeling ...

So, then, how can we find out what something is really worth? What is a honest price? What is a fair market price? How to not overpay? Is an objective scientific appraisal methodology possible? Is the appraising industry correct, useful?

Honesty is the principle that all involved people are correctly informed about the subject of the deal, so that there are no lies about the nature of the trade. That certain elements are not explained if the other party does not ask for it, is not really a lie. But that is a matter for local habits and regulations.

Price is what one receives in return for giving something. Usually, it is money.

Honest Price? A price cannot be honest.  People do, but prices do not.
Market is a place where people sell their things and where other people buy it. It is really necessary to understand that a market is geographically local and limited in time. By example on Times Square N.Y. every Tuesday from 8 am. to 11.30 am.
 
The principal elements of a market are place, time, a number of people selling identical or similar goods, and people that are there with the true intention to purchase the specific items. It must, however, be realized that people come to the market place in the idea that the merchants do will be there and that it is hoped for that the merchants will have the things that the people are looking for.
So is it that many people have a situation, but do not really know how to cope with it. They expect to find an acceptable solution on the market, in shops, on the WWW, etc.

Market price? The easiest way to explain is that a market price for a given item is: All the prices that the people effectively pay for a specific item during the opening hours of the market place. That place can be any place: Street, shop, field, etc.
That people pay different prices for the same or similar products usually depend of the product on the one hand side, but on the other hand side depends of when the product is bought (early or later) or emotional appreciations such as the looks and the behavior of the seller and assistants.

It cannot be denied that some people prefer to deal with people who they like or of who they believe that they know more about a subject.

Anyway: It should be by now clear that a market price is something that really can change in an unpredictable way by the minute, rendering any and all appraisals totally worthless.

It must also be considered that any item purchased can and usually is resold sometimes very fast and for much more money to any person who really wants it, in despite of any whatever advice. It is very important to remember this!
 
Any scientific value estimation must not only explain that the scientific appraisal is based upon elements known and selected by the scientific appraiser, but also that the value of the scientific appraisal is relative.

To pretend that something has an intrinsic value is a complete nonsense. Things have the value that people attach to it. That is it. No less. No more. Any whatever valuation is just what some person or a group of people think, based upon their criteria. 

A scientific appraisal can be based upon any element, including comparison with previous sales of identical or more or less similar items to certain people under certain circumstances (time, place, demand, supply, etc.) but there is little reason to believe that the said item do will sell for a price in the same range to the same people or to other people under the same or different circumstances.




Why should it be believed that people should pay for something a price that is set forth by people that have nothing to do with the deal, or (worse) who expect a commission upon the deal?

How objective can a so-called scientific appraisal be, if the appraiser sells the same kind of product?  

So Fair Market Value is just an idea?
Correct! Some people sell their melons near to the end of the market on a hot day cheaper because they expect that the melons will not last for long, while others expect last minute sales and raise the price because other sellers have no more melons or have left the place. It is all for a great part about recognition of situational signals and salesmanship.

Marketing is not a science, but an art.
It is all about demand, supply, and risk assessment.

Different people usually think about value differently. Companies and institutions are launching theories and rules that are advanced as standards, while a closer look teaches us that for most of the time a number of parameters is not used correctly or just not used at all because seller or buyer does not supply the information to the appraiser.
 
In the example of somebody who runs into a total-loss from a traffic accident, the catalog value of the vehicle is usually insufficient to purchase a similar vehicle.
 
The time parameter in the catalogs usually pretend that vehicles deteriorate in time following certain values, but many 30-year old cars still run safe and smoothly, while they will be considered total loss with ease. This is a proof that value estimation is very relative; Relative to time, place, situation, the statistical tools, and the mindset of the appraiser.

Is the appraising industry worthless, useless, or scam? No, not really. As a proverb says: A well informed man worths two. It is surely not wise to depend upon just one advice if other advice is available. The more information used, the more useful statistics can be. But statistics only talk about past situations, and there is no reason to believe that any situation do will occur a second time ever with the same outcome.
 
To be valid, the results of any experiment must be identical when the experiment is repeated under identical circumstances. Value estimation is never twice the same. Antique potteries of a same lot may look identical at sight, but can have additional elements that make them rare or unique.

Scientific appraisals are simply not possible, however, standards really do can contribute towards effective negotiation. The main condition is that everybody understands that a standard is just an agreement that certain ideas are accepted, and that standards are limited in time and place, and other situational factors.

This article will be continued soon.


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