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How Do Pawnbrokers Determine Value?

The pawnbroking business has a rich and colourful history that has existed for in excess of 3,000 years. Many are family businesses with the benefit of information and knowledge that has often been passed down from generation to generation. This ensures successful business models, but how do pawnbrokers determine value of an item you wish to pawn or sell?

Pawn or sell?

Taking items to a pawnshop gives you two options. These are pawning item(s) for a cash ‘loan’ with the option to redeem at a later date, or selling the goods at a price acceptable to both parties.

Pawn:

Your chosen pawnbroker gives an amount of cash based on what they are prepared to ‘loan’ you on the item in question over a set period of time. This is generally a 3-month period, but in most cases, can be extended on the same terms as the original agreement. You will receive a standard ‘contract’ outlining specific terms and conditions which will be signed by both parties. To redeem your item, you produce the original agreement document which is known as a “pledge”, pay the amount owed plus interest at the previously agreed rate and take the goods back.

Sell:

As the term suggests this is a once-off transaction whereby the pawnbroker offers an amount to purchase the item(s) you are looking to sell. Once accepted and a contract of sale is signed by both parties, you take the amount agreed and the pawnbroker becomes the new owner of the property.

Do not expect full market value:

It is only reasonable to understand that you will not receive the full, current market value of the goods in question. This is because the pawnbroking establishment is in the business of making money and to do so they need to sell purchased or unredeemed goods at a profit. In terms of pawned items, storage and security costs also need to be taken into account.

Valuation experience is vital:

For a pawnbroker to remain in business it is essential that they understand how much the current value of a wide variety of goods are. Experience is vital and this can take years to accumulate. They also have the advantage of referring to such sources as e-bay to understand current values.

Condition and quality of items:

This as a major factor when presenting goods to a pawnshop   Bear in mind that the condition of any goods presented will have a major fact on the price offered. If the items you have are damaged in anyway or have pieces missing this will lower the price offered. Another significant devaluation factor relates to any goods that have initials or names engraved on them. Not many people wish to buy items engraved with letters that have nothing to do with them.

Have an idea as to what you are prepared to expect:

Doing a little research will help you ascertain what the current true value is of a comparable item in comparable condition. E-bay and Amazon can be good reference sources, but remember, the pawnbroker will also have access to such a mine of information, and will certainly not pay the average going rate. They will consider such figures and then reduce their offer to the customer by around 40-60%. This method of pricing relates to pawned items. If an outright sale is requested then the percentage of the perceived current value will increase by around 15-20 %.

Win-Win situation:

The question we posed at the beginning of the piece: How do pawnbrokers determine value of goods? is not based on rocket science, but on a business model that gives both parties benefit. In terms of pawning goods, the customer receives a short-term loan while retaining ownership of the goods concerned while the pawnbroker receives interest on that transaction. In terms of a sale, the customer gets immediate cash with the pawnbroker looking to resell that item at a profit.

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