Definitions: VALUE versus PRICE

[oldminer]

A "price" is always set by the seller. It may be any amount depending on the whim of the seller. There may be no way to understand why a given "price" was asked. It is just simply up to the seller to set the price.

A "value" is NOT a "price". A "value" is the MOST COMMON ACTUAL TRANSACTION PRICE, based on researched market data which occurs in the market being investigated. There can be wholesale values, retail values, fair market values, liquidation values, Internet retail values, Internet wholesale values, and many others, There are many different MARKET levels one could research for actual sales transactions.

The most common mumber in a related set of numbers in called a "MODE". A MODE is not necessarily an AVERAGE or a MEAN. While they can be similar, they are different and all have different definitions. "VALUE" ONLY COMES FROM DETERMINATION OF THE MODE...the most commonly occuring number.

We know these terms are used by consumers in an interchangeable manner, but to appraisers they are distinctly different terms.

 

[strmrdr]

price
n.
1>The amount as of money or goods, asked for or given in exchange for something else.
2>The cost at which something is obtained: believes that the price of success is hard work.
3>The cost of bribing someone: maintained that every person has a price.
4>A reward offered for the capture or killing of a person: a felon with a price on his head.
Archaic. Value or worth.

 

[strmrdr]

val·ue
n.
1- An amount, as of goods, services, or money, considered to be a fair and suitable equivalent for something else; a fair price or return.
2- Monetary or material worth: the fluctuating value of gold and silver.
3- Worth in usefulness or importance to the possessor; utility or merit: the value of an education.
4- A principle, standard, or quality considered worthwhile or desirable: “The speech was a summons back to the patrician values of restraint and responsibility” (Jonathan Alter).
5- Precise meaning or import, as of a word.
6- Mathematics. An assigned or calculated numerical quantity.
7-Music. The relative duration of a tone or rest.
8-The relative darkness or lightness of a color. See table at color.
9-Linguistics. The sound quality of a letter or diphthong.
10-One of a series of specified values: issued a stamp of new value

 

[niceice]

And so often "value" is incorrectly determined by the seller in the form of a "feel good" appraisal which is automatically issued at two or three times the retail selling price of the item in an attempt to make the buyer "think" that they got the deal of the century without any real thought into what the item would sell for in a competitive comparable market... And unfortunately this works most of the time

 

[oldminer]

Strmrdr: All good definitions. I just wanted to make the ones jewelers, appraisers, and their customers need to know and appreciate clear. Rather than make it a search for the correct definition to fit our situation, I wanted to define these words in our narrower context.

I had been imagining what your nickname meant. I just never noticed the lightening avatar before. I had a feeling you must be someone that was involved in storm doors, or a steam room doctor... Now I think I have figured it out, you must have an involvment with the weather. Where did those other crazy notions come from?

Thanks for the further definitions. It adds a certain extra for thought.

 

[SFDavey]

hehehe...

This post MUST have been put up here to helps folks that never took and econimics course AND udnerstaood the material, eh?

An example...

I get in an accident in my car that cost me $10,000 one year earlier, new off of a lot. The car is totaled. The insurance company tells me that it was VALUED at $7,500 to the rest of the world and cut me a check for that much. But to me, having to spend an addtional $2,500 to replace that car, the car had a VALUE of $10,000 still.

It's ALL relative.

Even if I am getting "taken" for a couple hundred dollars in my diamond purchasing situation as a consumer buying an engagement ring, the experience has been positive, and I am trying to sell my potential future services as a licensed civil engineer to the jeweler. The VALUE of his services and the potential FUTURE VALUE of him as a client make the entire deal satisfactory to me even if the price is a little higher than I had anticipated.

 

[strmrdr]

note: please dont take this personal I like and respect the appraisers here but well you know me by now I usualy tell it the way I see it.

Real word:
Price = what the seller asks
Value = what the person paid because the value of anything is in the determined by what someone was willing to pay for something and on that day and time that the buyer bought.
The value of the diamond was the price.

Once the money was collected and the person walks out the door discounting return policies the value drops in 1/2 because that is the most someone is likely to consider fair when buying it from the new owner.
So if the real value ie the amount you can get for it has dropped in 1/2 why doesnt the appraiser say so?.
Simple the appraiser is part of an industry that has no bases in the real word.
They are mearly the third leg of the diamond industry and insurance industry triangle that makes up a diamond purchase and they support one another.

Trying to relate either the insurance or diamond industries to any sort of consumer driven real world market is an exercise in frustration.


ot:
Iv got a small bio in the who's who section that explains my nickname.
https://www.pricescope.com/forum/who-s-who/hmmmmm-who-am-i-today-t10083.html

 

[oldminer]

If the insurance company said your original 10K car had depreciated since you obught it to a $7.5K value as a used car, they were doing right. All you needed to make you whole was a year old, used car. If you wanted to supplement the insured amount with your own additional money for another NEWcar, the insurance company is not responsible for the difference.

With diamonds, and no depreciation, you get similar , if not virtually identical replacement in case of loss or damage. Cars are a rapidly depreciating asset, not comparable to diamonds in this respect.

As far as trading off services in the future for present expenses, that adds yet another level of what makes up any individual's mind. For this very clear reasona lon, I never tell people what to do. I present the facts and the results. We then assist them to understand these things. But, I prefer to leave the decision up to them. There is no simple answer that will work equally for all people.

 

[strmrdr]

I want to clarify that I feel an appraiser has a place in the sale of a diamond beyond the insurance requirement and that is to verify that the buyer got the diamond that they were supposed too and that it meets the specs it is suposed too.
I just dont put much weight in appraisal dollar amounts for the reasons stated above.

 

[oldminer]

Strmrdr;

You are a little right, but more than a little wrong. Appraisers do not directly support the value or marketing of diamonds. We report what market exists and how a particular stone fits into it. Some unethical appraisers exist who do support half-truths about phoney values. No denying it.

The values of houses rise and fall historically. Real estate appraisers report these values, but do not set home prices. I did not need to use the automobile analogy. It was just the one already in use. If a home burns down, you get an equivalent replacement provided you have adequate insurance. Old items may be valued at lower than new replacement prices in this process. It makes sense and allows insurance coverage to be a little affordable. You may have the chance to pay extra for new replacement of contents, but many would not choose such a costly option.

I can tell you have the feeling that the diamond market is "supported" by DeBeers and every participant in it, which includes sellers and appraisers. This is partly right and I know where you are coming from. Diamonds have tradionally been costly and price supported. No one really can predict the future or what diamonds would cost if this "support" diminished or disappeared. I think values could decline greatly, but I don't profess that I actually know what would happen. It is deductive reasoning, but not all events happen in a logical manner.

Consumers on the Internet rapidly become far more savvy about the reality of price, value and what one "needs" to buy versus the hyp they may have gotten elsewhere. This is all good for the smart shopper. I can't help the other sort of shoppers.....they don't want to be helped it seems.

 

[strmrdr]

"Appraisers do not directly support the value or marketing of diamonds."

But you do directly support the price of diamonds by happily adding whatever debeers increase is this week to your appraised amount.
While you cant be held accountable for the increased price you do have to take some of the blame for the acceptance of the price increases.
For a lot of people as long as the appraisal comes back more than they paid for it they think they got a bargin never mind because of debeers insane price increases they could have got it 15% cheaper 3-4 months ago.

 

[niceice]

The independent gemologist appraisers who we feel to be the most reputable and impartial always seem to do their homework and check the market for reasonable "Comps" that represent a comparable fair market value as opposed to merely shooting out numbers off of a list

 

[aljdewey]

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On 5/12/2004 9:38:42 PM strmrdr wrote:





'Appraisers do not directly support the value or marketing of diamonds.'

But you do directly support the price of diamonds by happily adding whatever debeers increase is this week to your appraised amount.
While you cant be held accountable for the increased price you do have to take some of the blame for the acceptance of the price increases.
For a lot of people as long as the appraisal comes back more than they paid for it they think they got a bargin never mind because of debeers insane price increases they could have got it 15% cheaper 3-4 months ago.
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Sorry, but this is just "whacked" thinking....the thought that appraisers should take some of the blame for accepting price increases. That's a bunch of hooey. It's not the appraisers' faults that a customer could have bought 3-4 months ago for 15% cheaper!

Look, it's the CUSTOMERS who accept price increases by continuing to purchase things in spite of price increases. If the customer decides at some point that the price has escalated beyond what he's willing to pay, he'll vote with his dollars (by withholding them), and the market will eventually respond with a price correction. The same is true of homes......I've been watching the market for the last 18 months, but thus far, I have chosen *not* to make a purchase. It's certainly not the real estate appraiser's fault that *I* chose to delay purchasing, and in doing so, the price of the homes I'm interested has jumped about $30K.

Bottom line is this: The market simply *cannot* charge more than the market is willing to bear. If the market won't pay the price, it *has* to be adjusted. I'm sorry, but the notion that it's the appraiser's fault!!?? That's just tripe.

 

[strmrdr]

al are you saying that an appraiser's report has nothing to do with making some people comfortable with the price they paid? Even if it was way too much?

Because im saying it does and that allows the prices to be pushed even higher.

 

[aljdewey]

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On 5/12/2004 11:14:40 PM strmrdr wrote:





al are you saying that an appraiser's report has nothing to do with making some people comfortable with the price they paid? Even if it was way too much?

Because im saying it does and that allows the prices to be pushed even higher.

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Wow, there are so many nuances in that question. In the first place, let's keep in mind that *who* the "some people" are is completely relevant. *Some people* would buy the Brooklyn bridge from me today......they aren't the sharp knives in the drawer. *Some people* would feel comfortable with the price they paid if Pee-Wee Herman told them it was a good deal, for God's sake!

Eliminating them from the equation, let's focus on the average public. No, the appraiser's report doesn't *make them feel comfortable* with the price they paid. They were comfortable with the price when they agreed to purchase at that price. The appraiser's report simply allows them to feel (unwarrantedly) smart after the fact. It perpetuates their belief that time spent learning pre-purchase is time wasted.

Oh, and let's not forget......the only people who *fall* for that are the ones who are too lazy, too busy, or just plain uninterested in doing the homework in the first place. It's the same consumer who gets duped by the 50% off sales (when the base price was jacked up 75%!!!). It's not the appraiser's job to save an idiot from himself. Those who do their homework don't *need* an appraiser to tell them how *brilliant* their purchase was.....they KNOW when they are making the decision to buy.

Nor it an appraiser's job to tell a client what *should* be important to him. An example: my father buys from a B&M shop in his local city. He feels comfortable purchasing from that store, and gets a fairly decent product. Their prices aren't the most competitive available, but my dad DOES NOT CARE. He would rather pay a bit more than make a month-long project out of the research. That's HIS value system, and it's right for him.

Prices aren't pushed higher because little Ole John Smith bought a crappy diamond for an outrageously inflated price last week and an appraiser told him he got the "steal of the century". Prices are pushed higher because *the market will bear it*......and the market bears it because they don't bother taking the time to learn about value. They just impulse buy and go on their merry way.

Let's break this down into the most simple form: Diamond A is available today for $5K....and I buy it. At the end of the summer, I'm in the market for another diamond, but comparable Diamond A is now $6k. I'm not happy, but I buy it. At Christmas, I want to purchase another Diamond A, but now it's 10K. I *refuse* to buy it at 10K. THAT is what determines what the market will bear.

 

[fire&ice]

IMHO - "Value" has nothing to do with the issue discussed at hand. An appraiser has nothing to do with what one deems as value - nada. The only "value" an appraiser can assess is a "fair retail market value". Market value (aka price) is not value. Value is intrinsic & differs from person to person. Value can only be determined by the receipient. However, an appraiser's service can be of value.

Value is a combination of price, parameters, service, the experience, confidence level, etc. all rolled up in one. When I talk about value, this is what *I* mean.

 

[oldminer]

QUOTE:

"Value" has nothing to do with the issue discussed at hand. An appraiser has nothing to do with what one deems as value - nada. The only "value" an appraiser can assess is a "fair retail market value". Market value (aka price) is not value. Value is intrinsic & differs from person to person. Value can only be determined by the receipient. However, an appraiser's service can be of value.
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Reply:

The difference between VALUE and PRICE is exactly the point of my initial post.

An appraiser determines VALUE in the appropriate market. That is exactly what an appraiser does. The VALUE is the MODE, the most common price, in the right market.

Appraisers assess VALUE for many different markets, not just fair market value or retail replacement value.

VALUE is NOT intrinsic. It is based on market conditions, demand, supply, fashion, etc. Some things that once were of high value no longer are of value. Buggy whips, etc.

VALUE is a market assessment and is the same for all people. What determines if a particular item is of use to YOU is your own set of needs and desires. If you do not wish to pay enough, then you may not make the purchase. VALUE does not go down because YOU don't want to buy. It might go lower if many choose to decrease demand.

A recipient, a lay person, not an expert, can determine if they like something and if they want to wear it. They cannot determine the market VALUE....
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I don't believe it was intentional, but the post above this one was so over the top with opinion and mis-statements that I did not want it to be the final word on this difficult subject. I realize the lack of concern modern Americans have with the distinct meaning of words, but it of great importance to understand the detail and variety of WORDS and the possibility that they have quite specific differences in meaning to those who care and to the legal system.... For casual readers, this may be trival, but for truly understanding eachother, this is essential.

 

[fire&ice]

----------------
On 5/13/2004 9:37:17 AM fire&ice wrote:

IMHO - 'Value' has nothing to do with the issue discussed at hand. An appraiser has nothing to do with what one deems as value - nada. The only 'value' an appraiser can assess is a 'fair retail market value'. Market value (aka price) is not value. Value is intrinsic & differs from person to person. Value can only be determined by the receipient. However, an appraiser's service can be of value.

Value is a combination of price, parameters, service, the experience, confidence level, etc. all rolled up in one. When I talk about value, this is what *I* mean. ----------------

I completely disagree with your wholehearted dismissal of my post. If you re-read, there is a difference between fair market value & value. I am a consumer/individual. I, and only I determine what I deem valuable & what I value. I am not talking semantics here. When I do an an appraisal I don't say it's value is $xxx. I say it's fair market value is $xxx. It's not semantics in my book.

If my definition of value is so far off, then why would someone buy a diamond from Tiffany's at an incredible premium? In that case, why would I shop at the local grocery store, whose prices are higher than some others, but they carry my groceries to the car. We make judgement based on value every day.

I'm quite surprised since many vendors talk about the value of their services they provide - i.e. cost involved.

BTW, my view of value is pretty mainstream. It's discussed often on this forum. I think you are mistaken & misguided that my "opinion" is over the top. I don't think it is an appraisers job to place "value" on anything. Value is subjective. IMHO, an appraisers job is one of fiduciary responsiblity to place "fair market value - which is the current fair market price of what an item would trade for given concrete parameters". I know when I do appraisals - I have to find comps - i.e. prices that such item has sold for on a more consistent basis.

BTW, while that buggy whip may not be used anymore for it's intended purpose, it has value - be it in a different market.

On a note, this discussion of value is not in a vacuum and strikes a nerve with me. I have to deal with this on a regular basis. I have to tell people that the items that they "value" aren't worth much money. Doesn't make them any less "valuable" to the person. On the flip side, they get to hold on to this item and sell the dopey vase that is holding umbrellas which will fetch a good price.

 

[valeria101]

This should be my favorite PS thread so far

Now, taking Value = Mode of effective price (those at which actual transactions are conducted), all opinions on value are comprised in this definition already (including F&I's "expected value" or "perceived value”, if I interpret the posts right...).

Appraisal value is not an effective price: since no transactions are actually done at it. Even the insurance company will not buy a replacement stone at that number. However, one can speculate that the appraisal value has something to do with the perceived value of the object, but this is yet another story (remember the good old theory that current futures prices are predictors of future current price? - something along that line I had in mind...). If anything, at least some (be it LV, Cartier, Tiffany, and such) dare sell diamonds at the likwise prices, with endorsement and expectations going both ways.

There is one little issue with this Value = Mode (or prevailing, consensual transaction price)... It can't just "occur", someone must be there to make it happen! But I would wholeheartedly exonerate all diamond retailers of this "fault": none of them is big enough and definitely no internet retailer (at below 1% of the market max as some stats posted by CutNut some time ago say). One may argue that public lists like PS's may actually help control (and hike) prices through seller's collusion without actual market share backing - but such Hell is not even there in theory, and using PS is still toooo complicated for that...


Besides, one could complain that diamonds' prices rise only before buying a stone. But after? Noooo! And most PS posters are about to buy, or have bought or will buy diamonds. Rising prices should be good news here! hey just say "the best time to buy is NOW"

and "keep you diamond forever". What can be bad about that?

 

[fire&ice]

----------------
On 5/14/2004 11:02:35 AM valeria101 wrote:


Now, taking Value = Mode of effective price (those at which actual transactions are conducted), all opinions on value are comprised in this definition already (including F&I's 'expected value' or 'perceived value”, if I interpret the posts right...).

<----------------

Yes, Val, you are interpreting my post correctly. And, my whole point is that price & fair market value are indeed more closely related. Fair market value is determined by current pricing trends. However, the "price" in dollars & cents one pays doesn't necessarily jive with current market pricing or fair market value. But, value (in my terms) can effect the "price". More often than not, I have seen record prices reached simply because one must have it. The "value" is place on must have it right now & no one else must have it right now either. I could try to sell the *exact* same thing a month from then with results more keeping with "fair market value". I am trying to understand Dave's dramatic reaction to what I perceive as "market" -not necessarily *fair* market value. To me, that is the art in appraising - each situation could be relative - each situation could be an anomoly.

"Value" is a whole other animal all together. And, one that is frequently discussed on this board as in direct relation to price "comparison" relative to other factors.

 

[oldminer]

QUOTE:
"....When I do an an appraisal I don't say it's value is $xxx. I say it's fair market value is $xxx. It's not semantics in my book."

Reply:
If you would look into the definition of FAIR MARKET VALUE you would see it is defined by the IRS and primarily a special appraisal only for inheritance, donation or casualty loss appraising. One may use it for a divorce, but it would not be a requirement in Pennsylvania. A use of the term FAIR MARKET VALUE relating it to a general appraisal or the result of a retail replacement value appraisal would be an incorrect use of the words. Ask someone who teaches this that you believe, if you don't believe me....

QUOTE:
"If my definition of value is so far off, then why would someone buy a diamond from Tiffany's at an incredible premium? In that case, why would I shop at the local grocery store, whose prices are higher than some others, but they carry my groceries to the car. We make judgement based on value every day."

Reply:
People see the added value Tiffany adds to their products by giving service, reputation and the famous blue box. They have become a symbol of what Branding is all about.
Buying from your service oriented grocer makes sense, too, as supporting local merchants has a value to you. Adding value to products is what service encompasses.

The FAIR MARKET VALUE of items would possibly take into account the prices actually charged by value added sellers, but it would more generally take into account the discount prices and regular prices gotten by other sellers in other places. It would be primarily weighted in favor of the actual prices that the current owner might be able to obtain under optimum conditions. That is realy the FMV.

A perception of value in your terms is just fine, but it is not what the post initally was about... The point of the initial post was to clarify the specific difference between VALUE and PRICE, not how they are mixed around and confused....

This is not a personal argument and I apologize for making it sound rather personal. You may be a super appraiser and one of the good guys/gals....I want to make friends here, never enemies or be hurtful....

 

[fire&ice]

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On 5/14/2004 1:04:02 PM oldminer wrote:

QUOTE:
'....When I do an an appraisal I don't say it's value is $xxx. I say it's fair market value is $xxx. It's not semantics in my book.'

Reply:
If you would look into the definition of FAIR MARKET VALUE you would see it is defined by the IRS and primarily a special appraisal only for inheritance, donation or casualty loss appraising.
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This is what I do for museum donations. It's the only formal appraisals I will do. Our museum/charitible donations must have this in the language. Our paths will always be parallel. I have no agenda except to discuss what has been an issue over & over on this board -unrelated to the art of appraising.

I didn't know that I couldn't bring up a point *unrelated to appraising* regarding the very issue of value as we discuss it daily on this board in the abstract. I will no longer add anything which may be perceived as irrelavant.

Geez, I'll go stand in the corner. I thought this board was about wholesale discussion. I was just making a point. Please except my apology that it didn't match your discussion. To me, the difference between value (in your terms) & price is a no brainer. I was only trying to add something else to the mix. Didn't mean any harm; and, certainly didn't think my post would be dismissed as a unintentional rantings of a child. I wasn't picking a battle.

I was only trying to evoke possible discussion of value & what one sees as value. I will accept your definition in relation to this thread; but, I didn't think I would be called over the top for a little out of the box discussion. I still have no idea what I did to evoke such a strong reaction. My opinion was never intended to be directed at fair market value. I clarified that to separate the "fair market value" from the discussion.