Any "rarity" can be sold to that rich guy (Fornival?) For a pretty penny. Also used for up-grading possibly.
But mostly, rarity items you just sell to that guy.
I always wondered about why he asks If I have any rarities for him, I just never made the connection, figured it would be something set aside in your inventory specifically for him. I usually just toss everything in my inventory and forget about it unless it's spare equipment to sell off or something for a side quest --- GT: Pheonix85435