Apr / May
2009
Magazine

Senior Spectrum Newspaper Current Edition

 

The Appraisal Process
by Joyce Newmann

The PBS series Antiques Roadshow has brought the appraisal profession to the public's notice. It's made us all more aware that what we think of as junk might well be a valuable treasure!

But it's also caused us to ask questions about the appraisal process - those Roadshow appraisers never seem to do any research!

I'm often called by potential clients who, rightly so, want to find out how an appraiser works. Whether we take pictures, write descriptions, do we know all the values off the top of our heads or do we do research? The answer to all those questions is yes!

First, a digression. Let's define appraisal. According to the International Society of Appraisers, an appraisal is “the act or process of developing an opinion of value, cost, or present worth of forecasted earnings; a written report documenting same; of or pertaining to appraising and related functions, e. g. appraisal practice, appraisal services.”

I recently completed a certification course offered through the International Society of Appraisers to obtain my certification - one of only 125 or so in the U.S. to have a certification from ISA. We spent two days reviewing appraisal theory, methods, reportwriting standards and professional ethics. There were class members who appraise fine art, those who appraise antiques and even one Nevada appraiser who's a world-class car appraiser. And interestingly, we all use the same theory, methods and standards. Where we differ is our product knowledge: the experience and training that enables us to distinguish an offset print from an original artwork or a real Bugatti from a knockoff.

Before starting to work on an appraisal, I always ask my clients a number of questions:

  • Most importantly, what's the intended use of the appraisal? Is it to secure adequate insurance? File estate taxes? Maybe it's for a charitable donation tax filing. Or it's necessary because the client's possessions were damaged in a move, flood or fire
  • What's the effective date of the appraisal? For estate taxes, it's the decedent's date of death. For a noncash charitable donation, it's the date of the donation. An insurance appraisal effective date is the date of the appraisal itself.
  • Where are the items located? How accessible are they? Is any artwork behind glass?
  • Does the client have receipts?
  • If we're looking at art, is there an exhibition history?
  • What evidence of prior ownership exists? Does the piece have well-established provenance?

The intended use of the appraisal guides us to the type of value we're seeking. An appraisal for estate taxes, for example, requires that we determine the items' fair market value according to the IRS definition. If you want your items appraised to update your insurance, your appraiser should be estimating replacement cost.

With respect to appraisals done for federal purposes, that is, estate taxes or for non-cash charitable donations, the IRS has tightened up its rules. Appraisal reports should now contain additional language about the appraisers' qualifications, method of compensation for the appraisal, any prohibited conflicts of interest, etc.

Now on to the valuation process itself. During the onsite examination of your items, the appraiser is looking for value characteristics. What are the item's dimensions, condition, manufacturer, construction method, quality, age, condition and so on? Your appraiser should also photograph the pieces since photographs should be included in the report.

Antique Toy Car

For some items, the appraiser can indicate the cost or value in his or her notes as the inspection is being conducted. For many others, the work continues once the appraiser returns to the office.

If an appraisal is being conducted for federal functions and an item is valued at $3000 or more, the report must include detailed information on actual comparable sales. Any collection valued at more than $10,000 should include the same information. It's not enough for an appraiser to know that a particular artist's work has sold for $5000; the comparable sales have to be cited in the report. The same holds for valuable furniture, art glass, pottery, etc.

So where do we find those values? Most appraisers subscribe to one or more databases that collect art and decorative art auction data from around the world. We use those websites to collect and analyze data for sales of similar pieces as close in time to the effective date of the appraisal as possible. We then use our judgment to determine the comparable sales that most closely match the items we're appraising in their value characteristics and in time.

After the research is conducted, the appraisal report is prepared in accordance with standards set out both by the accrediting society, like the International Society of Appraisers and also by the Appraisal Standards Board in the Uniform Standards of Professional Appraisal Practice (USPAP.) The report must explain the methodology used, the markets explored, any limiting conditions, and a laundry list of other information to help the client make the best use of the appraisal.

For more information on the appraisal process, you can check out these websites: