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The Segelman lawsuit covered elsewhere in this issue, is just one of a few
scandals in recent years which have been particularly murky due to
problems of widespread ignorance among non- professionals in their
interaction with the
string instrument trade. Likewise, ignorance on the part of those who have
been reporting on the scandals in the news has served to heighten consumer
suspicion of an industry that has always had to weather a degree of
well-deserved consumer circumspection. Perhaps an enhanced understanding
of
the string instrument business and the terminology used in appraisals may
help parties on both sides of transactions avoid the types of
misunderstandings that currently dog the string instrument business.
In order to understand the code inherent in Appraisal Terminology it is first necessary to understand some basic facts about the
string instrument trade itself:
The first fact is the illiquidity in the string
instrument market. Retail sales events are relatively rare and difficult
to generate. Sales events at retail prices nearly always require a
combination of conditions: generally the preponderance of
retail business in the trade occurs when a highly qualified, credible
dealer offers an instrument to a well- qualified customer, with the dealer
prepared to accept considerable trade-in inventory on the transaction.
Because of the illiquidity in the market the difference between wholesale
and retail pricing is often profound. Adding to the confusion is the
frequent wide disparity in desirability of different examples of the
same maker. The confusion created by this disparity is easy to explain: If
an exceptional example of a particular
maker is offered at auction, and two retail level bidders happen to be
competing for the piece, then a price close to retail will be achieved at
auction, where the norm is usually not highest possible
price. Once the record auction price is published word travels to owners
of other examples of the same maker, who inevitably presume that their
much- beloved
treasure is now "worth" the record price achieved at auction,
regardless of the quality of their particular example.
In fact the notion of worth is not so clear cut. To draw an analogy: Barry Bonds brings enormous value as a
baseball player for whomever he plays. Any one Barry Bonds swing at
the plate holds potential value only, yet the potential value is higher
with Bonds at the plate, than with most other players. When Bonds strikes
out, the immediate value goes unrealized even if Bonds' long-term value as
a player remains
undiminished. Any one sales effort may similarly represent unrealized
potential with the potential value directly linked to the sales effort
underway. Occasionally even the best players will bunt or hit a safe
sacrifice fly. This is because, in the judgment of the manager and/or the
player, the situation dictates the need for better odds at a successful
outcome, than an attempt at a home run. The same could be held to be true
of high-end retail sales of string instruments, each one of which is in
effect a home run. Other sales venues, such as auctions and wholesale, are
appropriate in instances where a predictable outcome supercedes the value
of attempting to achieve the longer odds, "home run."
To be thorough appraisals must reflect the needs and realities of the
situation. With clients typically unaware of the myriad issues to
be considered in any one appraisal, appraisers must often make judgment
calls about what type of appraisal is appropriate. These judgments are not
always easy for the consumer to comprehend. A knowledge of appraisal
terminology can at least help the consumer understand what the appraisal
actually says.
There are generally two types of appraisals in common use in the industry
today:
1.)
Insurance Evaluations and
2.) Estate Evaluations.
The author also recommends
that appraisers adopt a third type of appraisal:
3.)Liquidation or Auction Appraisal Evaluations.
An example of appraisal:
"A Stradivari Violin of the period 1720-1727, original in all principal
parts, in a good state of restoration, and a good state of preservation."
> This might produce an Insurance Evaluation of $2.8 million US in
January of 2002.
> The same instrument might produce an
Estate
Evaluation of $1.8-$2 million.
> And the
Auction Estimate or Liquid Evaluation could be $1 million or less.
All appraisals in the string instrument field rely on subjective judgment as
to condition and value. However, to return to the baseball analogy, even though a
manager might ask a player to bunt because the odds are better for a good
outcome, the bunt may still fail. Judgments about how to handle
each situation will sometimes vary from manager to manager. Similarly, the
judgment of appraisers can be expected to vary, as can the actual outcome
of a sale. ###
Stefan Hersh
Stefan Hersh is on the faculty of DePaul University and is the owner
of
Hersh Consulting and Midwest String Rentals
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Glossary of Terms:
Insurance
Evaluations- designed to protect an owner in the event of loss.
Generally at the high end of retail, it should
reflect what one would have to pay for a comparable example
under retail conditions.
Estate Valuations- designed to guide individuals, executors of estates,
attorneys and courts as to what the proceeds of a normal, medium term,
consignment arrangement might be.
Liquidation Appraisals- designed as a guide to what might be realized in a
relatively fast liquidity event, such as an auction or a wholesale
transaction.
Other terms:
State of Restoration- refers to the integrity of the instrument in terms
of maintenance and repair work, and implies that the piece has undergone
prior restorations. Not necessarily a major depreciating factor. Sometimes stated
as:
State of Repair- (typically from poor to
fair to good
to very good.) This term should not be confused with
State of Preservation- (see below.)
State of Preservation- refers to the degree to which the piece is
preserved intact, as it was originally built. State of Preservation is a
subjective evaluation of the number of repaired cracks and the quantity
and condition of the original varnish. (typically from poor to fair
to good to very good to excellent to mint.)
Patina- refers to the condition of the piece in terms of original varnish.
Instruments that have undergone frequent polishing lose their patina and
are somewhat less desirable than they would be with original patina.
Extensive Retouching- refers to the originality of the varnish. More or
less a euphemism for re-varnished. This term implies substantially
degraded desirability and value of a piece, even if the utility value is unchanged.
Ground Coat- refers to the coat of varnish closest to the wood. The ground
coat generally contains little color and separates the later coats of
varnish from the instrument, enhancing the refractive visual appearance of
the piece.
Acoustical Patch- Refers to wood veneered into an instrument in an attempt
to enhance the instrument tonally. This language is used to indicate the
presence of a patch that is not a repair of a crack and so should not
devalue the piece as much as a repair patch.
Post Patch-refers to a patch used to repair a crack in the sound-post
area. On the top of instruments this is common, on the back it is a
major
flaw with consequent effect on appraisal value and liquidity.
Evidence of Wood Worm-refers to damage caused by wood worm. It can be
difficult to detect the extent of wood worm damage as much of the damage
can remain invisible externally for years. Skilled X- ray or CT scan is
recommended for instruments which show evidence of wood worm.
Original in all principal parts - refers to the body and scroll of string
instruments excluding the neck and fittings. Refers to the stick, frog and
button on bows, excludes hair, mother of pearl ornaments, and head-plate.
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