What Is a Difference Between Price and Value?
And, why should you care.
A price is a data, something that already happened and is now a part of history. Value, on the other hand, is a calculated judgment, an opinion. Another way to look at it is to imagine a transaction between a seller and a buyer. What seller proposes to the buyer for his/her objects is a value, a hypothetical price, at which these objects may be sold. When the buyer purchases the object, the value, becomes a price, a fact, a piece of historical data.
How would this knowledge apply to your situation?
If you contacted your insurance provider to add a painting to your home insurance policy, your agent would insure your art at a value that used to be a price, or many prices, as the value can be comprised of several pieces of data.
Huh? you might say, scratching your temple.
Yes, prices are pillars of statistics and facts, which tell us the financial status of your artwork on today's market, but equally important is quality of your painting, and its condition, and its size, and who owned it before you purchased it, and… One of many tasks, an appraiser has an ability to do—through training and experience—is to choose and compare several, similar to yours, artworks sold on today's market to derive a reasonable value.
By the way, insurance policies, charitable donations and estates (or any other IRS related reporting), assets dissolution(in a dissolved partnership or business), to name a few, all require a value in their reports, not a price. And, those values differ from one type of reporting to another. This is called a purpose of appraisal (a bit more on that in other articles).
What do I mean when I say 'artwork sold on today's market': today or recent are the key-words here. If you purchased your painting a week ago, it is still considered to be a recent purchase, and you may not need an appraiser to evaluate it. Just submit your proof of purchase along with COA––certificate of authenticity, if one is required, to your insurance company. This information should suffice for updating your policy. You're giving your insurance a proof of purchase on today's market.
So, what is not today or recent?
Depending on the type of art, and how volatile its market may be, three months ago may not be today any more. But if you purchased a painting by a 19th century American regional artist six months ago, its price may still be considered recent, and you may use this price as a fact for your insurance value.
Disclosure: The art markets are not normally volatile, as art is not a commodity. I simply wanted to demonstrate a point. For some art, prices stay within the same plane for years, for other they may fluctuate every other year. That's a whole another discussion––stay tuned.
In general, the field of art valuations is complex, but in the end, all goods including art, are sold on the market. Market is where the information resides. In my future articles, I'll discuss where to find that information and how to interpret it, as well as many other appraisal and art related topics. If you have specific questions, shoot me an email. I’d be happy to write article about it.
Yours truly,
Aida