The purpose of this article is to comment on and clarify the information in Piano Buyer on determining the value of a used piano. (The Piano Buyer article has since been revised to include these comments.)
Fair Market Value
Fair market value is the price at which an item would change hands between a willing buyer and a willing seller, neither of whom is compelled to buy or sell, and each of whom has reasonable knowledge of the relevant facts.
Appraisers of used pianos and other consumer goods typically use three different methods to determine fair market value: comparable sales, depreciation, and idealized value minus the cost of restoration.
The comparable sales method compares the piano being appraised with recent actual selling prices of other pianos of like brand, model, age, condition, and location. Generally speaking, this is the most accurate method of determining value when one has access to a body of information on recent sale prices of comparable items. The problem here is that, with few exceptions, it’s rare to find several recently sold pianos that are perfect matches for all these criteria. There is no central repository for sales information on used pianos, and each appraiser or technician, over a lifetime, sees pianos that are so diverse and scattered as to these criteria that they are likely to be of only limited value as appraisal guides. (Exceptions might be technicians or dealers who specialize in used Yamaha, Kawai, or Steinway pianos, brands that have attained near-commodity status in the piano business.)
Piano Buyer includes a chart, “Prices of Used Pianos,” which was compiled after querying a number of piano technicians about their memories of comparable sales of pianos of various ages, sizes, and conditions. This chart is most useful for determining the approximate value of many brands of older piano for which it would otherwise be difficult to find enough comparable sales to determine a value. Understandably, however, the price ranges shown in the chart are quite broad.
The depreciation method of determining fair market value is based on the fact that many types of consumer goods lose value over time at a more or less predictable rate. A depreciation schedule, such as the one in Piano Buyer, shows how much a used piano is worth as a percentage of the actual selling price of a new piano of comparable quality. The problem here is that so many older brands are now made by companies different from the original, in different factories and parts of the world, and to different standards, that it can be difficult or impossible to determine what constitutes a “comparable” new piano. Thus, this method of figuring value is best used for pianos of relatively recent make when the model is still in production, or for older pianos whose makers have remained under relatively constant ownership, location, and standards, and for which, therefore, a comparable model can reasonably be determined. Note that depreciation is from the current price of the model, not the original price, because the current price takes into account inflation and, if applicable, changes in the value of foreign currencies.
Idealized Value Minus the Cost of Restoration
This is the difference between the cost of a rebuilt piano and the cost to restore the unrebuilt one to like-new condition. For example, if a piano, rebuilt, would be worth $50,000, and it would cost $30,000 to restore the unrebuilt one to like-new condition, then according to this method the unrebuilt piano would be worth $20,000. This method can be used when a piano needs extensive, quantifiable repair work. It’s not appropriate to use this method for an instrument that is relatively new or in good condition.
Other Types of Valuation
Several other types of valuation are sometimes called for:
Replacement value is what it would cost to replace the used piano with a brand-new one. This value is often sought when someone has purchased an insurance policy with a rider that guarantees replacement of a lost or damaged piano with a new one instead of paying the fair market value of the used one. The problem here, again, is what brand and model of new piano to consider “comparable” if the original brand and model are no longer being made, or are not being made to the same standards. Here it may be helpful to consult the rating chart in the Piano Buyer article “The New-Piano Market Today.” Choose a brand whose relationship to today’s piano market is similar to that the original brand bore to the piano market of its day. Whatever brand and model you choose, depending on how high a replacement value you seek, you can use either the manufacturer’s suggested retail price (highest), the approximate street price (lowest), or something in between. These prices, or information on how to estimate them, can be found in each issue of Piano Buyer.
Trade-in value is what a commercial seller would pay for the used piano, usually in trade (or partial trade) for a new one. This is discounted from the fair market value, typically by at least 20 to 30 percent, to allow the commercial seller to make a profit when reselling the instrument. (In practice, the commercial seller will often pay the fair market value for the used piano, but to compensate, will increase the price of the new piano to the consumer.)
Salvage value is what a dealer, technician, or rebuilder would pay for a piano that is essentially unplayable or unserviceable and in need of restoration. It can be determined using the idealized-value-minus-cost-of-restoration method, but discounted, like trade-in value, to allow the commercial seller to make a profit.
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