Rinker on Collectibles

RINKER ON COLLECTIBLES — Column #1722

Maximizing the Return When Selling a Collection of Antiques or Collectibles - Part III

This is the third part of a four-part series on maximizing the return when selling a collection of antiques and collectibles. Part I dealt with the realities a collector must accept when it becomes time to sell his/her collection. Part II focused on the questions of when is the best time to sell from the collectors’ viewpoint, the process of making the decision to sell, what steps need to be taken when collectors decide not to sell. Part III explores what happens once the decision to sell is made. The positives and negatives of various sale venues and other sales considerations will be examined in Part IV.

Making a decision to sell is easier than accepting the decision to sell. Accepting the decision is agonizing and excruciating. Only after the mental leap is made from deciding to accepting can collectors move forward.

The first step is separating what is to be sold from what is to be kept. No matter what collectors tell people, collectors never sell their entire collection. An executor or heir might but collectors never do. Collectors possess pieces with which they will never part until they die.

[Author’s Aside #1: A future “Rinker on Collectibles” column is entitled “The 10 pieces with which I plan to die.” The subject is a continuing research project. I continue to share the concept with collectors and carefully note their responses I have started my list. The column will follow once I have my head completely wrapped around the topic. Meanwhile, I welcome my readers’ thoughts. Email them to me at harrylrinker@aol.com.]

When deciding what to sell from a collection, most collectors consider saving the ultimate units (masterpieces) and upper echelon objects, especially when collectors believe less than 5 identical examples survive. This is a mistake. These are the very pieces that are needed to attract high-end buyers at auction or in a private sale. If collectors want to keep a few examples, they should come out of the middle of the pile and not the top.

Most collections contain large amounts of secondary and support material. These include period advertising and ephemera, research files, auction catalogs, and reference materials. They need to be included in the collection(s) dispersal planning. This material can easily represent over 5 percent of a collection(s)’ value.

Overvaluing the potential resale value of a collection(s) is one of the biggest mistakes that collectors make. It is even worse for executors, heirs, and others who continually have been told by collectors: “Someday this will be worth a lot of money.” That someday usually is in the distant past.

Wholesale and retail are two separate markets, especially in the antiques and collectibles trade. Developing a realistic view of what a collection(s) is worth is an arduous task. First, the collector must totally ignore current retail market prices. More often than not, collectors’ retail market price knowledge is long out of date. Selling focuses on what can be obtained now and not what something sold for 10 or 20 years ago. The worth of any object is the amount for which it can be sold at the moment of sale—nothing more, nothing less.

Collectors are not dealers. There are collector-dealers who sell primarily to support their buying habits. Their merchandise is often overpriced. If collector-dealers doubt this premise, I challenge them to look at the large amount of unsold inventory they have in stock. Unsold inventory is worthless inventory.

Collectors and dealers have one thing in common. Neither wants to sell any object for less than what was paid for it. Dealers want to make a profit. Collectors want to obtain a higher price as a means of demonstrating their buying prowess. The is no God-given right to a profit in the antiques and collectibles business. Given this, it is impossible for collectors to be objective when trying to understand the value of their collection(s) in the current marketplace. Collectors are too close to their objects.

Smart collectors engage independent professionals with no ties to the selling venues of the trade. These individuals focus on the client’s (in this case the collector’s) best interest. They are in a position to present multiple disposal options, discuss the pros and cons of each, and allow collectors to decide. Such independent individuals are scarce but they do exist.

When considering selling, a simple but painful approach is to cut retail value in half. In today’s marketplace, half may not be enough. Depending on the quality of the collection, I often recommend cutting retail by two-thirds to create a realistic return estimate.

[Author’s Aside #2: When evaluating auction prices and asking retail prices, collectors often do not ask two key questions: (1) what percentage of the sale price represents the cost of sale and profit to the seller and (2) how much was the asking price discounted to complete the sale. The value of an object is not worth what collectors pay when they walk out the door. The correct value is the amount for which the object can be resold immediately following the purchase. Collectors also almost never factor in their overhead costs involved in buying an object.]

Where does the value rest in a collection? 75 to 80 percent of value rests in the top 20 percent of the objects. Think of value like a pyramid with six divisions : (1) ultimate units (masterpieces) – a dot at the top of the pyramid: (2) upper echelon pieces (the top 50 to 100 objects in the collecting category) – a line near the very top of the pyramid; (3) hard to find objects – a line about 5 percent down from the top; (4) above average objects –a line about 15 percent down from the top; (5) common objects – a line that ends at 60 percent down from the top; and (6) all material, normally referred to as junk, below the 60 percent line. This pyramid is used to analyze the secondary market for a general category but applies to a collection(s) as well. Applying it to a well assembled collection(s) shifts the lines slightly downward. Expecting the junk section to be eliminated is not reasonable. Every collection(s) contains junk material from another collector’s perspective.

Looking at the percentage volume represented by each of these subdivisions and comparing its percentage with the total volume percentage of the pyramid provides a greater understanding of the small amount of material within any collection(s) that has strong buyer appeal. Ultimate units and upper echelon pieces sell well. Hard to find objects might, but getting maximum dollars is difficult. The rest can sell but for amounts well below traditional expectations.

Condition, desirability, and scarcity are the three value keys. Collectors have a tendency to over grade objects in their collection(s). Collectors are best advised to lower their grading assessment by one to one and one-half grades. The same applies to scarcity level. The market decides desirability.

Full retail is a myth. There are no fixed prices in the antiques and collectibles business. Retail is an arbitrary resale price put on an object. If the object sells for that price, it is a reasonable retail price only for that moment. Ten minutes later the selling circumstances may change.

If collectors or others can develop retail prices that have a high percentage of accuracy, then the following retail versus wholesale expectations are valid. If the retail value is above $250,000.00 expect 80 to 85 percent, above $100,000.00 expect 75 percent, above $2,500.00 expect 70 percent, above $1,000.00 expect 60 percent, above $500.00 expect 40 percent, above $250.00 expect 30 percent, above $100.00 expect 12 to 15 percent, and below $100.00 expect 10 percent or less. Collectors need to examine their collection(s) and assign the objects in the collection(s) to one of these value groups. Once done, a realistic expectation of what the return from a collection(s) will bring to collectors can be estimated.

When selling a collection(s), collectors should set realistic expectations. Think collection as a whole and not individual pieces. The idea is to exceed the goal. How this is achieved is irrelevant. When collectors set expectations for individual pieces, they only remember the pieces that sold for less than they expected and never the pieces that far exceed expectations.

Once all the above factors are resolved, the final step is to create a dispersal plan that determines where, when, and how the collection(s) will be sold. This process will be discussed in Part IV, the final column in this series of maximizing the return when selling a collection of antiques and collectibles.

Harry L. Rinker welcomes questions from readers about collectibles, those mass-produced items from the twentieth and twenty-first centuries. Selected letters will be answered in this column. Harry cannot provide personal answers. Photos and other material submitted cannot be returned. Send your questions to: Rinker on Collectibles, 5955 Mill Point Court SE, Kentwood, MI 49512. You also can e-mail your questions to harrylrinker@aol.com. Only e-mails containing a full name and mailing address will be considered.

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