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CERTIFIED ESTATE APPRAISER ~ Art & Antiques

Appraisal Methodology ~ Certified Appraiser-Susanne Blackburn

APPRAISAL METHODOLOGY - THEORY & PRINCIPLES

DID YOU KNOW?

.....that the same item may have many different appraised values depending on how you intend to use the appraisal? For instance, a value for insurance may be very different than a value for estate tax, consumer resale, or charitable contribution. Other assigned uses include investment, liquidation, price confirmation, equitable distribution, loan collateral, casualty loss, and many more.

Qualified, educated appraisers understand the many different types if values, assigned uses, and market levels. He or she works with you to choose the proper type of value so that you can use the appraisal correctly and effectively.

METHODOLOGY

The objective of Appraisal Reports is to determine appropriate value of your items at the date of inspection relating to function and purpose of the Appraisal. The intent of the Appraiser is to comply with accepted societal and governmental standards of development and content as well as to professional ethical standards in the preparation of this report.

There are different types of appraisal reports depending on your needs such as Summary, Self-Contained, Restricted Use, Hypothetical and Interim. Relevant information is summarized in the report with the details maintained in the client work file along with a backup CD or DVD.

An Appraisal is not a precise measurement, nor a guess, but rather a relative estimate of value: Relative to the degree of similarity between the subject and the comparable property. Relative to the market conditions at the time the comparables was sold and the effective date of the subject property appraisal; and Relative to the degree of similarity of value characteristics between the subject and comparable properties.

The science of appraising requires the understanding of the basic principles and appraisal standards that pertain to valuation and evaluation. This science of appraising is an inexact science (albeit an inexact science based on facts) Appraisal principles are axioms which apply to the majority of cases, but for which there may be exceptions.

Personal Property is anything one possesses that is both tangible and movable. In addition, certain intangibles (goodwill, legal rights, securities, copyrights, stock certificates, trademarks, customer lists, patents, etc.) are considered personal property as well.

In written appraisal reports, some of the property being appraised may be considered Depreciable Personal Property such as furniture and kitchenware. Other items such as Art & Antqiues may be Non-Depreciable Personal Property. Many of these types of items increase in value.

COM-PARABLES- "Comps" is property having qualities and characteristics sufficiently similar to the property in question that it allows for comparison.

VALUE is the monetary worth which an informed purchaser would offer in exchange for an item of personal property taking into consideration a given market condition, i.e. it is a consensus among interested buyers of what is a reasonable price for that property; that property has value can be attributed to the fact that its owner anticipates the enjoyment of future benefits based on the rights he holds to the property. Note: VALUE is an opinion of monetary worth that is ALWAYS JUSTIFIED by substantiating facts (i.e. comparable sales-"Comps".) Theoretically, however, cost and price are known with certainty from an analysis of the market, but they may or may not be justifiable.

FUNCTION and PURPOSE: Two important appraisal concepts are incorporated in the terms appraisal function and appraisal purpose. The first indentifies how the appraisal is to be used, while the later identifies what information the appraiser has been asked to provide. The appraisers choice of markets and value to explore hinge to a large extent on the appraisal function and purpose.

In appraisal reports, the appraiser may choose to use the secondary markets most often used to buy or sell ANTIQUES, ART, RUGS, SILVER, COLLECTIBLES, DECORATIVE ARTS and RESIDENTIAL CONTENTS. The appraiser also may choose to use retail "new" markets for some items such as china, glass, new silver, appliances and such. The markets considered are whichever market is MOST APPROPRIATE for EACH ITEM being appraised.

DEPRECIATION: Depreciation is also considered in evaluating a few of these items, in appraising, depreciation is a loss in property value between the difference of reproduction cost or replacement cost new and the current market value. Determining accrued depreciation from all causes is subjective and extremely difficult to measure. The appraiser considers depreciation tables used by moving companies, the federal government, and USA States assessors when applicable.

APPRAISAL DEFINITION: BLACKS LAW DICTIONARY defines an appraisal as "a valuation or an estimation of value of property by disinterested persons of suitable qualifications." BLACKS goes on to say that an appraisal is "the process of ascertaining a value of an asset or liability that involves expert opinion rather than explicit market transactions."

REPLACEMENT COST NEW is the cost to replace an item with another having similar qualities within a reasonable amount of time in the most relevant marketplace. Where applicable, this takes into consideration costs incurred by engaging an interior designer, shipping, and the cost associated with purchasing from a specific source.

REPLACEMENT COST USED (comparables) is the cost necessary to replace an item of personal property with an equivalent item having similar appearance, quality, condition, age, authorship, and utility.

REPRODUCTION COST is the total cost of constructing an exact replica by a qualified artist or craftsman using the same materials and construction techniques as the original. (When applicable such as with original art, handmade furniture, custom designer clothing and decorative arts or textiles that are handmade).

DO NOT ACCEPT AN APPRAISAL IF:

It is handwritten, prepared on a retailers letterhead, unsigned or not dated.

It is not written in a professional appraisal format; (jotted down on an Antiques Dealers sales slip)

The appraisers fee is based on a percentage of the value of the subject property being appraised or based on a contingency of sale of subject property. This is highly un-ethical.

The appropriate PURPOSE and FUNCTION of the appraisal are not stated; or if the pages are not numbered.

The appraiser is not willing to defend their report in court, if requested to do so.

IDENTIFY or AUTHENTICATE?

Identification is the scientific determination of quantitative or intrinsic elements.
Authentication is the scholarly determination of qualitative or extrinsic opinions.
Identification is the first step in the authentication process. When appraisers identify property, special emphasis is given to those characteristics that contribute to or detract from its value or cost. The presence of certain characteristics or components of property may add to value. An antique table designed with poor proportions is less valuable than one designed with good proportions. Items of property exist which are known to be authentic. These genuine items exhibit certain known distinguishing features with which the subject property can be compared. If the subject property exhibits identical distinguishing features, then it too can be deemed to be authentic. Appraisers must be able to identify these distinguishing features in order to arrive at a complete understanding of what the property is and whether or not it is authentic. The identification of the nature of the property, along with its distinguishing characteristics, permits the appraiser to rank the subject property alonside similar properties in order to arrive at a sense of relative value. Identification is seldom subject to dispute because it deals with scientific and measurable feathrues.
The public assumes that, by virtue of estimating the value or cost of a property, the appraiser has authenticated the property. On the contrary, while an appraiser must always identify, FEW APPRAISERS AUTHENTICATE! Authentication is rarely definitive or absolute, but rather is a matter of informed and reasoned opinon. Authentication can be facilitated if provenance can be verified. Provenance is the origin and history of the property: past ownership, exhibitions, literature notation and other relevant information.
Authentication is timely and expensive. For most appraisals, an accurate identification will suffice. If the property is deemed to be created by a famous artist or cabinetmaker for instance, then an authentication would be in order.
As a client of the Appraiser, it is beneficial to both if you provide all the information available on your subject property, including: documents, prior appraisals, certificates of authenticity, provenance, and family or historical background that might be known.