Your price is too low!

Your price is too low!

On a rare occasion, a collector will discover an  item of interest and find that it is being offered at a price lower than expected. BONUS! What a deal!

There are a number of reason for an item to be offered at sale at lower than the ‘going rate’. The seller may through their own ignorance, lack of research, unfamiliarity with the product, downsizing, may not realize they are ‘taking a hit’ on the item or they may just wish to get it out of their inventory and are prepared to take the hit.

The collector may think they are getting a great deal when it may very well be that they too are ignorant, lacking in experience or may just fall victim to an emotional purchase.

I recall a manuscript collector telling me that an 18th century manuscript on offer seemed to be below the market price (your price is too low).  He was not interested in buying as this particular item was not close enough to his collecting focus however, he felt he had to share his pricing ‘expertise.’ When I thought more about it, I did not increase nor did I decrease my asking price as I believed it to be a fair and reasonable price supported by my cataloguing information as well as it’s historical importance.

The selling key is in finding the right collector at the right time. It is normal for an expensive item to take a lot longer to sell as there are fewer collectors buying at the higher end. It has also been my experience to have some one watch a much desired item delaying their purchase for whatever reason and then ‘the’ day arrives and the purchase is finally made.

In first setting a listing price for an item, there should be no correlation on the cost of the item to the seller . When I have paid too much for an item in hind site that is my problem, that is my error.  Attempting to recover from a poor purchase by overpricing is poor judgement and can lead to a “overpriced” reputation. As a collector for many years I know how I felt when I saw an item that seemed far too expensive in relationship to the going market value and comparable auction prices. The difference between being higher priced and overpriced is constantly being judged. If the retail price of an item is well thought out and researched a higher price is totally justifiable, at least at the time of offering the item for sale.
Added Value
Selling today, primarily on the internet, has certainly changed dramatically the way collectors buy and how sellers price and sell. The seller and the buyer are dealing in a dynamic selling market.  In a relatively short time, a ‘comparable’  item may be offered that is presented and priced  in a manner that makes your item look perhaps over (or under) priced.

I am very aware of a few other sellers who spend an inordinate amount of time (based on Google reports) probably checking out my write-ups and prices in order to adjust theirs and accordingly to attract collectors. Do I check out others, of course I do but usually only on new items. It’s the older ones don’t get checked on that are the challenges. Thankfully, the collectors that I have worked with and for over the years, and with whom I have a relationship based on trust and respect understand this. If there is a concern, they will contact me with their questions or concerns regarding pricing, both mine and those they find that appear too have too much of a gap which I thank them for. Not often when the “price is too low” but a few do and again, appreciated.

This brings us to another another market dynamic – collectors offering to purchase below a retail asking price. This is happening more often and I believe will continue to grow. I don’t wish to encourage a steady diet of this tactic. I will always ask someone the basis for offering less. I try to understand their reasoning and if  I find it beyond the natural human desire to pay as little as possible and has credible support, I have been known to reduce the price on an item. I take pride in the research and effort I invest in pricing each item so unless I there are reasons of my choosing, including my pricing is not reflect current market asking price (not Fair Market Value),  then I am quite comfortable in declining an offer.

What is the difference between fair market value (FMV)  price and retail price (RP)?

A few years ago as a dealer of fine, rare and usually quite valuable materials, I felt the need to raise the bar when it came to my education, understanding and training in the field  of ‘appraising’. I enrolled in not one but two courses to learn and become proficient at appraisals. Upon successful completion of these challenging  and informative courses I was then eligible to become a proud member of  the Canadian Personal Property Appraisers Group (CPPAG) and International Society of Appraisers (ISA in Canada). The  professional national book industry association in which I formerly belonged still has no such courses or education offerings on professional appraisals. As a member of CPPAG and ISA, I am now held accountable in performing professional appraisals at the highest acceptable industry standards including following the Uniform Standards of Professional Appraisal Practice (USPAP) Industry standards.

USPAP manualThe Canada Revenue Agency’s guidelines also stipulate that appraisers should be accredited, independent and knowledgeable about the principles, theories, and methodologies of the applicable valuation discipline. They must also follow the current version of the Uniform Standards of Professional Appraisal Practice (USPAP).

A good article called “What to know when Donating Art” located at the ISA Canadian Chapter web site offers informative and interesting insight into this appraisal area.

Fair Market Value (FMV) is based on what an item  actually sold for for in a relevant market place. This value is used in establishing a FMV for the purposes of  making a donation or the desire to sell an item. The primary place in which these prices are obtained are from are Auction Houses where there is a public recorded history of prices at which comparable items have been sold. Retail price based appraisals are usually prepared for Insurance purposes when an item needs to be replaced from the appropriate market, usually retail, and in a relatively quick time period. The primary sources of these prices are retailers such as dealers in which items of like kind and quality are listed at retail. The fact remains many dealers buy at auction houses and then increase the price, or mark it up when they offer it for sale at retail.  There is usually a good price variance in the FMV of an item and the retail price. This is primarily because the Auction price is more of a “wholesale” sold price versus the dealer which is a retail unsold price.  The other fact is dealers rarely published sold prices and make them available publicly so items sold by dealers simply are no available. This is a very simplified comparison but makes the point that when collectors are comparing prices. Collectors should clearly understand this difference in FMV and Retail prices. Unfortunately, many do not  and this leads to the the rationale for feeling a dealer’s price is too high.

Many dealers, myself included are sensitive to the auction price and the retail price gap “reasonableness”. Auction house public sold prices continue to put pressure on establishing a closer gap between FMV and retail price. This is a growing factor in  market pricing for any sellers.

C. Francis Jenkins signed book and two very early circa 1923 transmitted visual images by radio (Radiovision)

C. Francis Jenkins signed book and two very early circa 1923 transmitted visual images by radio (Radiovision)

A real LDRB example I will use to demonstrate FMV and retail  difference is a C. Francis Jenkins signed book and two very early circa 1923 transmitted visual images by radio (Radiovision) presently being offered. An item reasonably similar to the  Jenkins items we offer was sold at auction for $3,500 USD on June 18, 2014 Auction in England thereby establishing a FMV price for similar items.  This was new information since we had originally priced this item.   In order to respond to  the dynamics of the industry and upon further research a price revision was determined to be appropriate LDRB revised our retail price to $6,000 USD.  The revised adjusted retail price reflects a desire on my part to be competitive in the retail market. If interest in seeing specific details about this extremely fastinating Jenkins item, please click here.

Collectors  today witnessing a retail price gap of 4 or 5 times greater for an expensive item (knowing what someone paid for it at Auction) just do not “feel good” about this level of price gap.  This bad collector feeling will continue to drive more buyers to the Auction market versus dealer retail market to buy. Buying at an auction is not always the best for the collector and certainly not good news for the dealer. (another topic for another day)

 

Click here to browse almost 50 of our “featured” items – all retail priced –  a few maybe priced too low?!

 

Article written by Duncan McLaren (duncan@LDRB.ca) and reviewed by Julia McLaren, The Lord Durham Report editor (julia@LDRB.ca )

© text Lord Durham Rare Books, all rights reserved.

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