For example, on the Antiques Road Show, the expert will say an item is worth 5-8K and that they would insure it for 10K.
In: Economics
The antique industry is weird because both supply of and demand for antiques is extremely low. Matching someone who has a particular antique to sell with someone who wants to buy it is often difficult, so its rare that you get “full” value for your antique if you have to sell it in a particular period of time.
Appraisal value on an antique is what a dealer will give you for that antique right then. Its less than they could turn around and sell it for tomorrow because their business is buying and selling antiques – they’re not going to buy from you and then sell it to someone at the same price. They’re going to buy it from you, then set the price way higher than what they paid you for it because they’re willing to wait a few years for someone to come by and pay that price.
That increase in price they get has nothing to do with inflation – it just has everything to do with the low supply/demand situation that exists in the market. IE, the antique broker is waiting to sit on an item until they find the right buyer.
Auction value is similar to appraisal value in that its telling you “what can you likely get at the auction you are physically present at today.” That’s going to be higher than appraisal value because the auction house is filled with people who want antiques, so some of them may want yours. Additionally, the auction house’s cut of the final sale price is likely going to be less than the broker’s markup – meaning that you get more of the final sale price.
Insurance value is basically what the value of the antique is to a broker. IE, how much is this antique worth if you’re going to stick it in an antique shop and wait for the right buyer to come by for it? You’re unlikely to make a sale at that value right away, but you probably will if you spend 1-2 years trying to sell the item.
When you insure an item that appreciates over time or is otherwise affected by inflation, your insurance policy does not reflect the impacts of future inflation. The insurance runs for a period of time (typically one year), then renews at a different value to reflect appreciation and inflation.
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