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.

Comparable Sales

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.

Depreciation

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.

Acoustic & Digital Piano Buyer, the successor to The Piano Book, by Larry Fine, is a FREE, semiannual piano buying guide that will help you make an informed decision concerning the purchase of a new or used piano or digital piano. Read it FREE online, or purchase it in print at http://www.PianoBuyer.com.

The difficulty of rating pianos has increased over the years. In the early days, there was a huge gap between pianos that were competently made and those that were shoddy in design and/or execution. One didn’t have to be a rocket scientist to place most brands somewhere within a rating system. Over the past decade or so, however, due to globalization and the computerization of manufacturing, shoddy pianos have become a thing of the past, and the quality differences between brands have become very subtle, even as the differences in price have become greater.

The rating system itself has also gone through changes over the years. In the fourth edition of The Piano Book (2001), for example, each brand’s rating was subdivided into individual ratings of its component aspects of performance, quality control, warranty, etc. The number of categories of quality used in the classification system has also varied. Providing rating details and numerous categories may bring a smile to the face of the aficionado, but it makes the novice’s eyes glaze over, creates much more work for me, and generally invites more controversy. Not providing detail, or using fewer categories, on the other hand, makes it more difficult to differentiate brands. Over time, I’ve actually found that a combination of providing less information about each rating and using a moderate number of quality categories better satisfies readers.

Perhaps the biggest change in the rating system, however, has been in the role I’ve assigned to myself. In the days of The Piano Book, I attempted to play judge, using a far-flung network of piano technicians to supply the evidence. That worked well as long as there were pianos with plenty of clear defects by which I could separate good instruments from bad. But as automation has become more sophisticated and companies have cleaned up their acts (or have gone out of business), I’ve come to realize that the differences between brands—and the very definition of quality itself as it pertains to pianos—have become too subtle and subjective for me to feel comfortable in the role of judge. I’ve therefore gradually changed my focus: Now I try to simply reflect, for the sake of the novice, how the piano market is organized.

Of course, the piano industry does not speak with one voice on that subject, so I continue to have to make some judgments to resolve conflicts and to take into account other factors. Generally I begin by laying out the ratings according to how the companies themselves position their pianos in the market—that is, by price and features—noting especially how the various offerings from a single manufacturer compare with one another, and which other companies each manufacturer considers to be its competitors. Then, I make small changes in the ratings to reflect aspects of quality that may be—or, in my opinion, should be—of importance to the consumer, but that are not sufficiently taken into account by price and features alone: the length of a company’s track record for quality manufacturing and warranty service, where various components are made (which also relates to the issue of track record), the depth of its technical know-how, how much dealer prep the pianos require, how much of a U.S. presence the company has (this indicates the future availability of warranty service and parts), and, for high-end pianos, to what extent a company’s name, history, and reputation contribute to the perception of its pianos’ quality and the buyer’s pride in owning one. I still take into account anecdotal reports from pianists and technicians, and my own impressions of a piano when I’ve had an opportunity to try one, but I assign less importance to these than before, and no longer systematically seek them out.

The piano aficionado who is looking for a hardheaded, expert scientific assessment of how one brand compares to another will be disappointed by what may appear to be a shirking of my responsibility. But given the advanced state of piano manufacturing today, it would be dishonest and pretentious of me to set myself up as the final authority on the subject, and to try to make a scientific enterprise out of what is, more often than not, a subjective judgment. Rather, I have chosen to simply provide a road map for novice piano buyers—who, after all, often don’t know a Bösendorfer from a Hobart M. Cable—and to leave the more controversial technical and artistic judgments for aficionados to make on their own.

Acoustic & Digital Piano Buyer, the successor to The Piano Book, by Larry Fine, is a FREE, semiannual piano buying guide that will help you make an informed decision concerning the purchase of a new or used piano or digital piano. Read it FREE online or purchase it in print at http://www.PianoBuyer.com.