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weird value question

  • 1.  weird value question

    Posted 06-02-2021 20:52
    Client asking what he should carry for his piano on his homeowners policy.  Not an appraisal, just wants to call out replacement value of certain high ticket items in his policy.

    Piano is a 2005 Chinese stencil grand I put a fair amount of rebuild work into before selling it as a spec piano.  6' grand came out sounding and playing quite nice, because of the amount of work I put into it. However,because of the Chinese provenance of the original instrument, my asking price was, of course, much lower that I would have asked for a Steinway which would have received absolutely identical rebuild work. This meaning, I took on the project to see what I could do to an entry level horrible chinese grand, selling it as a higher than entry level performing piano, but priced as a slightly elevated entry level price. Price was slightly elevated from the cost of an entry level Chinese grand, but still seriously discounted from what a comparably performing US piano would fetch...irrespective of my rebuild work. I made short money on the deal...not something I will be doing again for numerous reasons, but an interesting project to see how good or bad these pianos actually were. 

    So that leads to the question from the insurance angle, what is the replacement value of this instrument?  Is it the cost of a new chinese 6' entry level grand, regardless of out of the box musical qualities?  Or, is it the value of a almost worthless core, entry level Chinese 6' grand, plus the expense my considerable rebuild work.  Said another way, is the replacement value a sheer monetary value, independent of musical value, or is the replacement value, primarily comparable musical performance, even though the sales price was discounted relative to that performance level. (basically, I took the hit in the discrepancy between sales price and performance level.)

    If its value is sheer new Chinese 6' grand regardless of performance, full replacement, for a musician, results in a "musical performance loss".  If its value is combination of the provenance of the core, plus quality of the rebuild work, then client gets a replacement performance value, exceeding the discount he originally realized because of the Chinese provenance. Bit of a conundrum.

    Any thoughts on this?


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    Jim Ialeggio
    grandpianosolutions.com
    Shirley, MA
    978 425-9026
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  • 2.  RE: weird value question

    Registered Piano Technician
    Posted 06-02-2021 21:45
    Hi JIm:
    I used to work for a company that fixed items which were damaged in a home move. We had to know what the insurance was on an item, and make an assessment as to how much it would cost to fix (our labor) and the value of the item in view of the insurance policy. Often it was only $.60/lb, so only heavy items were considered repairable. On occasion, the shipper would decline the repair and we would then offer a payment based upon what we would have charged to fix it. Sometimes, if the repair would have reduced the value of the item, there might be some compensation for loss of value, apart from the cost to repair it. I would suggest that since you added value by improving it's performance, some compensation for loss of value might be considered. You could not get the same performance even from a new piano of the same brand out of a box, and so extra compensation would be warranted.
    Just a thought..
    Paul McCloud
    San Diego




  • 3.  RE: weird value question

    Registered Piano Technician
    Posted 06-02-2021 22:53
    Jim, I started thinking about valuation during the recent thread when you and others were discussing the cost/value of the complete high-end rebuilds you are doing. 
    First of all I think rebuild is a bit of a misnomer, perhaps remanufacture or customization are better terms, at any rate when new soundboards are redesigned along with action geometries, scaling etc this is in another class than simply replacing old parts for new. You aren't the first high-end rebuilder I've met that says they don't really make money on the extensive work they do. The status/value of this type of work and the practitioners needs to be established as a classification not just as individuals. This special status is not uncommon in the musical instrument world but less so with regard to pianos.

    Where this merges with the insurance issue is the value added by what I think is the remarkable work you all are doing. Because the number of people doing this level of work is small and spread out across the country, and this level of work has only come about fairly recently it lacks the status it deserves. There are people restoring/redesigning cars who have attained a special status whose work far exceeds the value of the originals. We all know the name Shelby for instance, now there are reality tv shows about shops customizing vehicles and motorcycles, the value of customized vehicles is through the roof. It approaches the way art is evaluated.

    I came away from the earlier thread thinking that you folks should organize and think about how to market yourselves with an eye to enhancing the value of your work; after all, these are musical instruments and the ultimate value of fine musical instruments is more akin to art than as a commodity. Certainly the top instrument manufacturers are leveraging the intrinsic value of their brands above a normal markup. As well they should and I think you as a group should try to position yourselves to claim that type of enhanced value yourselves. Whereas the PTG does this in general, this area of remanufacturing/customizing is more specific.

    Actually this insurance issue is an opportunity to do so based on the musical value you've added to the instrument, it has measurably more work invested into it than a stock item, why shouldn't that be included into the valuation? I'm sure you have the documentation to back that fact up should it be contested (which would be good publicity by the way). It shouldn't be valued in the same category as washing machines and sofas.


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    Steven Rosenthal
    Honolulu HI
    808-521-7129
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  • 4.  RE: weird value question

    Posted 06-03-2021 09:32
    I think the question is, if you replace, redesign, and rebuild, the whole piano is it still the original piano or something new. 

    The ancient Greeks debated about the Ship of Theseus. If you had a ship but over time replaced each board on the ship as it rotted, is it the same ship?

    Perhaps you could stencil redesigned pianos with a "Theseus Piano Company" label. 


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    Gannon Rhinehart
    Santa Fe NM
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  • 5.  RE: weird value question

    Posted 06-02-2021 22:47
    If the piano brand and model is still being made, then I use the current msrp as replacement value for insurance.

    If the make/model is no longer being made this all becomes more difficult (whether for insurance or resale) and involves: 
    comparing new prices of similar quality/size pianos, listing prices of similar quality/size pianos from dealers or online sites.
    Your own perception of quality and musicality...
    I will use LFine's depreciation schedule as a rough guide but have made my own version that is more precise.

    Outside of sheer replacement value (piano still being made) then even rebuilding enhancements show a diminishing
    value after some 30 years methinks.

    Joël Weber





  • 6.  RE: weird value question

    Registered Piano Technician
    Posted 06-03-2021 01:19
    Jim

    When I did some research on appraising pianos, I found that, as we all know, the IRS wants an "official" appraisal of any item if it's value is more than $5000 when it's donated to a non-profit organzation.  What I also found out is that while the insurance industry does not have to follow the same guidlines as the IRS, they are using that $5000 value when they look for an excuse not to pay an insurance claim. 

    In other words, what you and I, and the rest of us on this list, might think the piano is worth because of all the work you put in to it, it won't mean a thing if the appraisal isn't an official one. Therefore, I would like to suggest you work with Leo Holder and have him come up with an official appraisal.  Leo will work with you and because he's an RPT, he speaks our language. But he knows how to write up an appraisal using legalise language, which is what insurance companies like.  

    He's got an ad in the Classified section of the Journal. But in case you can't find your copy. 
    Leopold Holder.  646-637-2266.  Leoholder3@yahoo.com

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    Willem "Wim" Blees, RPT
    Mililani, HI 96789
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  • 7.  RE: weird value question

    Posted 06-03-2021 07:13
    I have had Holder do an appraisal.  No aspect of the piano regarding musical qualities has anything to do with the appraisal. Its just a collection of commodity related physical attributes...like a potato. He never sees the piano, or much less, has any interest in what it sounds like.  Its purely a commodity. The commodity approach does include, to some degree, "perceived value", but only in the sense of historic brand value. In this case, used brand value would be close to nil, given the original Chinese provenance. If the client were to pony up for an official appraisal, I think he would be sorely disappointed, in what the insurance world thought his piano would be worth.

    This setup is designed to favor the insurance company, of course, so, in the event of a loss, one must be prepared to argue the definitions actually contained in the policy.  Regarding the definitions, there will always be points of interpretation in assessing what the definitions actually mean, in a particular case, as per my first hand experience of dealing with a shop fire claim. If I were arguing my case with the adjusters, which is part of the deal, one does not simply accept their assessments as un-discussable. I personally would argue that musical value was, part of "making me whole" again, and given my previous experience, if I went to the mat, I think I would prevail, as long as it did not appear I was trying to pad the claim...trust was important in my claim.

    At one point in my shop fire claim, I did have to go to the mat, not with my adjuster, but with the insurance company's head adjuster. I prevailed since I knew the policy better than he did at that point. The adjusters actually manage so many different policies, even within their own company, that they really don't often know your entire policy, so nailing one's claim down, will always end up being a rather unpleasant full time job for a couple of months.  So that also has to come into how to approach the valuation, because the claim is more complex and negotiable than often presented.  

    Leaving the question still open, of what to do. I think I am going to tell him his best strategy is to recoup the funds he paid me to purchase the piano in the first place.  The commodity approach will leave him way short, and he/I in the event of a loss, can back up the work and original costs with documentation. I do think, recouping the value of the instrument in this case, will require negotiation, as its too non-standard a valuation.




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    Jim Ialeggio
    grandpianosolutions.com
    Shirley, MA
    978 425-9026
    ------------------------------



  • 8.  RE: weird value question

    Registered Piano Technician
    Posted 06-03-2021 13:14
    "(he) has any interest in what it sounds like.  Its purely a commodity like a potato."

    Unfortunately, that's the way the insruance industry works. Your rebuilt piano is like a work of art. It's hard to put a value on it, until someone with knowledge about art pays $XX for it. To you and your customer it's the sound and feel of the piano is what makes this piano worth whatever you and your customer think it's worth. It's 90% emotional. But the insurance company takes the emotion out. They only care about the actual dollars it will take to replace it.

    The closest you're going to come to the actual value from an insurance perspective is to add the initial purchase price of the piano to the parts and your labor you put into it. Keep the emotion out of the equation.

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    Willem "Wim" Blees, RPT
    Mililani, HI 96789
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  • 9.  RE: weird value question

    Registered Piano Technician
    Posted 06-04-2021 08:23
    It is not uncommon for us to be in virtually the same type of position as the insurance company. We get called to assess a "family heirloom" and have to deliver the news that it has no value whatsoever due to the current state of affairs in the market, the industry, etc. The owners emotions are involved, but ours are not. Therefore our assessment is different from theirs.

    Insurance people don't think the way we (or any other human beings) do. Facts, figures, dollars and cents...and that's about it (of course always in their favor or they'd be out of business).  It's just the way it is. 

    Pwg

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    Peter Grey
    Stratham NH
    pianodoctor57@gmail.com
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  • 10.  RE: weird value question

    Posted 06-04-2021 09:12
    One gets penalised for under-insurance, not over-insurance.

    So provided the premiums are what one wants to pay, value at the maximum. That might be cost of piano plus commercial cost of doing the works so that one would fund the same again to achieve the same quality of piano again. Provided the case can be argued one can argue it.

    Best wishes

    David P






  • 11.  RE: weird value question

    Posted 06-04-2021 09:35
    That is the approach I took.  Valued as the work the piano received plus the core. Core price was minimal, because of the Cinese provenance, great majority of the work was my rebuild. 

    There are at least two ways to approach this question, as in most everything in life. Some folks will look at an insurance company as an authoritative "they" and accept "their" pronouncements, as if "they" have some unilateral power. Others, as I have shown in my own serious loss claim, have read the policy and forced the insurance company to comply with the exact words, descriptions and definitions we both agreed to in the policy. The policy and the actual definitions are what determine the outcome, and are the only legal authority in a claim...not some unquestioned authority behind a desk.

    When there is ambiguity, a position which defines our non-standard position as artisans in a commodity driven world, there is room for discussion, as ambiguity can be used to our advantage, and should be used as a tool. If necessary, legal force if required, and supported by the definitions must be used, but it doesn't necessarily come down to that. This is why "public adjusters" are an entire category of service for insurance claims. They force resolution of ambiguity. I did not need to use a public adjuster in my shop claim, because Judy and I read the terms the insurance company and we agreed to in the policy, and forced compliance. As long as one is being truthful and not trying to pad the claim, it is easier to force one's claim than, if ione appears to be gold digging.
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    Jim Ialeggio
    grandpianosolutions.com
    Shirley, MA
    978 425-9026
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  • 12.  RE: weird value question

    Registered Piano Technician
    Posted 06-04-2021 16:15
    Jim,

    While I am not a certified appraiser, there are some common terms used that relate to your
    situation. The rule of thumb when appraisers consider market value, intrinsic value and 
    replacement value is a "like item in similar condition". In  your case, there would also be
    value added proportionate to the upgrades done. And it would be considered a new item
    since it was made "like new" on the date it was delivered and any depreciation for age and
    use taken from that date. 

    Hope this helps.

    Dave

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    Dave Conte
    Owner
    Knoxville TN
    817-307-5656
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