In the mid 1990s I used to spend a lot of time hanging out at a good friend's house. For some reason, his family seemed to accumulate cars in various states of disrepair on their property. My friend was particularly proud of one of these cars - a mid 1980s vintage Jeep Grand Wagoneer. One day while I was wasting time at his house, I idly asked how much the car was worth.
My friend replied with some satisfaction that his family's Jeep Grand Wagoneer was a $40,000 car. Now, granted, the car was in reasonable used condition. More importantly, unlike some of the vehicles parked in my friend's yard, it actually ran. But I still found it puzzling. How could this somewhat unattractive but functional progenitor of today's luxury 4x4 sport utility vehicle be worth a small fortune? I filed this mental tidbit away, determined to discover the answer one day.
Then, years later, I finally figured it out. That Jeep Grand Wagoneer wasn't a $40,000 car - not when it was new and certainly not after it had been used as a grocery getter for 10 years. In other words, my friend was completely delusional. But his fantasy of automotive riches is certainly instructional to those of us interesting in collecting art and antiques.
People have a congenital bias towards overvaluing items they own. It doesn't matter whether it is a house, car, painting or piece of jewelry. As soon as an item enters the average person's possession, it becomes an irreplaceable masterpiece.
Realtors have to deal with this problem all the time. Half of a realtor's job is talking people into listing their home somewhere near its market value, rather than a multiple of it. Sometimes they aren't successful. When this happens, the deranged seller usually fires his real estate agent and lists the property as "for sale by owner" - another name for "extraordinarily overpriced".
This psychological truism is also on full display in the world of art and antiques. If you ever peruse garage sales, yard sales or eBay for your next treasure you are bound to confront this situation. An otherwise reasonable little old lady at a church bazaar will adamantly refuse to sell the deformed plastic ring that she fished out of a Cracker Jack box two decades ago for a penny less than $1,000.
No, a plastic trinket isn't worth anywhere near $1,000, but good luck convincing her of that fact. In her mind it is a priceless artifact and you are trying to steal it from her for a fraction of its actual value. Of course the ugly truth is that most antiques or collectibles have a very modest value. Only the best of the best are really worth big money.
Of course most of these problems of unrealistic expectations can be remedied by purchasing art and antiques from an experienced dealer. With few exceptions, these professionals have to make a living buying and selling. Therefore, they are forced to price their wares at or near market value. If they don't, they don't generate enough revenue to stay in business.
As deleterious as it can be to the buying process, the tendency for investors to overvalue their own holdings is even more dangerous to the selling process. It can render an otherwise reasonable person a raving, obstinate madman. This is especially the case for illiquid asset classes like art and antiques. Keeping an open mind and engaging in careful market research before you list an item for sale can help keep your expectations grounded. Failing that, retaining the services of a professional dealer or auctioneer and selling via consignment or auction can help tremendously.
The story of my friend's $40,000 Jeep Grand Wagoneer has an interesting postscript. To the best of my knowledge, the car was eventually hauled off to the scrap yard. And, no, the scrap yard did not pay $40,000 for it. But at least some people think a pristine vintage Grand Wagoneer may be worth a small fortune. Ironically, if my friend's family had either put their car up on blocks in their garage when it was new or painstakingly restored it to like new condition, it may have actually been worth close to $40,000 today.
