The web has created enormous price competition for pretty much anyone who sells anything. No longer are people stuck with the price of a local store. People can get great pricing information just by doing a web search.
A web search gives someone searching for price most of the picture. It racks and stacks different stores’ prices against one another: seller vs. seller. Sellers compete against one another by offering products for less money, or by offering more favorable terms for the same money.
Fair market value consists of offers and bids
At Amazon.com, buyers aren’t given the opportunity to haggle. The price is the price — an offer by the seller – and the buyer can decide whether to take it or not.
But on eBay, buyers can compete against other buyers by trying to outdo one another with successively higher bids if the sale is auction-style. If the sale is without reserve and starts very low (like a few percent of the value of the item), then the highest bid wins.
Fair market value — the price at which a willing sell will sell an item to a willing buyer — is best approximated when both parties in the sale can counter-offer and arrive at a price somewhere in the middle of what each would want individually.
To find fair market value of some item, one must answer the question: “What did this item sell for recently when there was little restriction on the ending price?”
Ebay has made fair market value determination much easier than it used to be
eBay lets people search the outcomes of auctions that have ended recently. This used to be done by searching “Completed Listings” for the item of interest. If there was a lot of activity on the item recently, then there would be a range of prices that the item sold for, and this would give a range of what fair market value was for the item.
Since an auction could end without a sale, this would mean slogging through all of the completed listings to see which ones sold. eBay did give visual clues by making the sold items’ prices green and the unsold items’ prices red, but it still could mean screens and screens of items.
I don’t know exactly when eBay brought this feature in, but it’s really nice: Sold Listings. It amounts to taking the search above and getting rid of all of the unsold items. Every price is a good price!
Determine fair market value on eBay, step by step
Here’s how to use this new feature to determine fair market value:
- Perform your search on eBay so that the listings offered consist mostly of the product you want to buy.
- Consider checking the “New” or “Used” box for condition if that’s important.
- Go to the left sidebar and check the “Sold Listings” box. This will list all of the items that sold — and their prices!
- Sort the listings “Price + Shipping: Lowest First.” The first auctions in this list that match what you’re looking to buy are close to fair market value for that item.
Now, you’re in a position to do one of the following:
- Use the pricing information to bid on an eBay auction. If you’re looking for a rock-bottom price, then you can set your sights below the price that the item just sold for. Try for a bargain!
- Use the pricing information to evaluate whether an offered price is good. If the item is available on Amazon, or as an eBay “Buy It Now” item, or anywhere else, you can say, “This price is pretty close to what I’d get it for fighting other bidders.” Or, “No, it’s too high. I’ll wait.”
- Use the pricing information as a basis for “value added” by the seller. Price isn’t everything. If a seller offers a nice return policy, or offers extra goodies like gift wrapping or premium shipping, then knowing the fair market value of the item gives a better idea what the extra cost buys you (“The overnight shipping is costing me $10 extra.”).
Do you have any other ways that you determine fair market value?