An appraisal is an opinion of value.
Why is the purpose of the appraisal so important?
Before you pay for an independent appraisal, ask yourself why you want one. For example, do you want to insure your painting? Are you thinking of selling it? Do you need to divide your assets? Do you want to claim a tax deduction for a donation to charity? Do you need to establish a stepped-up tax basis? Has your painting been damaged and do you need to file a claim?
The answer to this question is important because it is the purpose of the appraisal that determines the value of the object. Make sure the appraiser understands how you intend to use the appraisal so that the property is valued correctly.
What information should be included in my appraisal report?
Every appraisal report should possess the following information and data at a minimum.
- The appraiser’s qualifications and fee structure.
- A description of the conditions and location(s) under which the work(s) were inspected. Objects should be physically inspected at the premises where they are located/installed, whenever possible.
- The name of the owner/client and the purpose of the appraisal.
- A general market analysis for the type of object(s) included in the appraisal that describes current market conditions (volatile or stable).
- The date(s) of inspection, the date on which the report is finalized, and the effective valuation date.
- A description of each object that conforms to ICOM’s Object ID classification as well as a digital image of each object.
Can you authenticate my painting?
Authenticating art is a complex, highly specialized discipline. Scholars and experts devote their entire careers to studying a single artist’s career and artistic achievements. Sometimes this work is so specialized that their research is restricted to only one medium or phase within an artist’s entire body of work. When the results of this research are published, the compendium is referred to as a catalogue raisonné.
Appraisers, on the other hand, are experts in valuation, not authentication. Through careful research and experience, a knowledgeable appraiser can identify and research markings and signatures on a painting or sculpture. They most likely can tell you if your work is not right and the reasons why. They cannot, however, confirm that an unsigned, unmarked work is by the hand of a particular artist. Attestation—the affirmation of what is correct, true, or genuine—can only be done by the recognized expert for a particular artist.
That said, an experienced appraiser can advise you as to whether or not it might be worth getting your work attested. They can guide you through the authentication process by advising as to whom the relevant experts are, what steps are required, and the fees involved. In some instances, a collector who is thinking of having a work of art authenticated would be well served to hire an appraiser as a consultant to help them navigate what can sometimes be a complicated, confusing, and potentially expensive process.
Do you buy and sell paintings? Will you help sell mine?
In order to provide completely independent and unbiased appraisals and to avoid any potential conflicts of interest, McDonough Fine Art Appraisals does not buy, sell or broker the works of art that it appraises.
However, an independent, unbiased appraisal can help you avoid paying too much or too little for a piece of fine art, and also aid in identifying the best and most appropriate marketplace in which to transact.
How can a single object possess more than one value?
The value of an object can change depending on its intended use. Below are some common definitions of the different types of values used in the appraisal of personal property. (Sources: Appraisers Association of America and California State Insurance Code).
• Retail Replacement Value (RRV)
The highest amount in terms of US dollars that would be required to replace a property with another of similar age, quality, origin, appearance, provenance, and condition within a reasonable length of time in an appropriate and relevant market. When applicable, sales and/or import tax, commissions, and/or premiums are included in this amount. (Usually for insurance purposes)
• Fair Market Value (FMV)
FMV is the value required by the IRS for tax evaluation purposes. It is defined as “the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having a reasonable knowledge of relevant facts.” It is sometimes referred to as “middle” or “secondary market value.” It is the value used for charitable deductions and estate taxes. (Usually for IRS purposes)
• Replacement Cost Value (RCV)
RCV is a term set forth in Section 2051.5. (a) of the California Insurance Code, which is defined as “the amount that it would cost the insured to repair, rebuild, or replace the thing lost or injured, without a deduction for physical depreciation, or the policy limit, whichever is less.” (Usually for insurance purposes)
• Actual Cash Value (ACV)
ACV, as it relates to personal property, is a term set forth in California Insurance Code Section 2071 that is synonymous with fair market value, which, in the state of California, is defined as “the highest price that a willing buyer would have paid to a willing seller, assuming: 1. That there is no pressure on either one to buy or sell; and 2. That the buyer and seller are fully informed of the condition and quality of the [item of personal property].” (Usually for insurance purposes)
• Marketable Cash Value (MCV)
Also referred to as Net Value, MCV is the amount of money a willing seller realizes, net of expenses, after disposing of property in an open, competitive market to a willing buyer. The key phrase in this definition is “net of expenses,” meaning the final value is net of any sales commissions or fees that must be paid in conjunction with the sale of the property. These fees can include shipping, insurance, cleaning, framing, advertising, storage, and/or broker commissions. (Usually for equitable distribution, estate planning, or resale purposes)
• Fair Rental Value (FRV)
FRV is the amount of money one person pays another person to use their property. The IRS defines FRV as “the amount which, in a competitive market, a well-informed and willing lessee would pay and which a well-informed lessor would accept for the temporary use and enjoyment of the property.” (Usually for tax purposes)
What is an Appraisal Review?
An Appraisal Review is a qualitative assessment of an Appraisal Report’s completeness, accuracy, adequacy, relevance, and reasonableness. Its purpose is to determine whether or not an appraisal is actionable and reliable for its stated use. Appraisal Review is frequently used in matters involving lending and litigation. To learn more about Appraisal Review, please visit Art Valuation Audit, LLC.