HOW TO BEGIN...
Normally we agree on the type of appraisal that will serve your needs (Insurance, charitable contribution, estate settlement, inheritance taxes, selling, etc.). We determine whether you need a formal, certified, written appraisal – or whether you can manage with a “verbal opinion”.
DETERMINING WHAT KIND OF APPRAISAL YOU NEED
There are several types of appraisal. An insurance appraisal is different from an appraisal for income tax or inheritance tax purposes. An appraisal to help you decide how to sell a work of art is different as well. One appraisal will not serve the purposes of another. You cannot use an insurance appraisal for IRS purposes. So you should determine why you want an appraisal in the first place. If you have multiple needs, you may need several appraisal reports, each addressing a different appraisal question. This is not unusual, and you can save money by determining your needs at the outset.
Insurance and charitable contributions and estate settlement and inheritance taxes require formal, written and certified appraisal reports. Mere curiosity or the thought of selling a work of art may not require a written report. If you do not require a written report and have only one to three objects, a Verbal Opinion may serve your needs and will cost much less.
After you have determined what the purpose of the appraisal is, you can arrange for me to examine the works of art, or for a verbal opinion, you can email images in .jpg format, and descriptions to me. For verbal opinions I will require $175 (one hour fee) retainer before I begin work, and this is often then only charge. For all opinions, or formal, written, certified formal reports, the fee is $175 per hour. After we discuss your needs and agree on a procedure, you pay me a retainer.
For formal, written, certified appraisal reports (banks, insurance, IRS, estate planning and tax) I require 1/3 the estimated cost of the appraisal project in advance. Formal, certified appraisal reports involving many objects usually cost more than a thousand dollars. If needed, I will phone or email you for further information or to discuss your project in more detail. Retainers can be made by mailing a check to Randolph Osman for $175 (or an agreed on amount), or payment can be made with your credit card via PayPal (logo on my website home page).
When I receive the retainer, I begin work on your project. When the appraisal is complete, you pay the final amount and I deliver the appraisal report to you.
“Verbal opinions” are not appraisals. They are consultations. They are appropriate for single works of art or small groups intended for planning estate sales and selling. They are not certified and do not serve the needs of the insurance, banking, IRS or legal professions. . They can be conducted via email and telephone and cost much less than a formal, written report. Verbal Opinions can usually be conducted in a few days, sometimes a few hours, and there is no written record, and no letter of engagement and no written report for your records. They are faster; and in many cases they are all you need to move ahead with your project. Both verbal opinions and written reports follow guidelines and requirements of the Uniform Standards of Professional Appraisal Practice (USPAP).
If you are more than 100 miles from Salem, the Oregon State Capital, I can estimate your valuation needs using telephone, email, and digital photography. If a visitation on premises is needed, we can arrange that later.
For formal, certified and written appraisal reports, I begin to do the research on each object after I receive a retainer and submit a letter of engagement (contract). This takes some time, and involves thorough examination of the artwork, measurements, consulting databases, other experts, books, archives, sale catalogues, individuals in the appropriate market, etc.
by Randolph E. Osman
Randolph Osman is an appraiser of fine art living in Oregon.
Almost everybody owns works of art. If you own a work of art, you probably need an appraisal. If for no other reason (sale, charitable contribution, inheritance tax, estate distribution), you need to give your insurance company a certified document by an accredited appraiser, specifying that you own such-and-such work of art, on a certain date, examined, described in detail, confirmed on a certain date, and valued at a specific amount. Such a document will assure that you will receive reimbursement at the appropriate value in case of a future loss.
An appraisal is a legal document; it is as important as a will. It is the only way to accurately describe the value of your artwork. A properly prepared appraisal by a qualified appraiser will clarify questions of value under all circumstances.
There are several different types of appraisals employing different types of value, and each one serves a specific need. Mixing them up or confusing one for another can lead to serious legal and economic consequences for the unwary consumer. An accredited appraiser will know the difference between Fair market Value and Replacement Value and Marketable Cash Value. He/she will know how to determine each one, and which one is appropriate to a specific appraisal assignment. If your appraiser cannot talk intelligently about these types of value and cannot describe the research method used to determine these values, then you might want to consider looking for one who can.
Unlike refrigerators, automobiles, stereos and commercial furniture, it is often hard to place a dollar-and-cent value on artwork. Doing so involves research and calculation and documentation. This is the nuts and bolts of the appraisal profession. The value of an artwork or antique is rarely what you paid for it when you bought it. The appropriate value of a work of art is rarely what the seller’s “certificate of authenticity and value” says it is worth. Published “Price Guides” (Susan Theron’s, Davenport’s, Leonard’s etc.) are useful guides for the amateur, but they do not offer sufficient information to conclude a certified appraisal. Estimating Fair Market Value or Replacement Value for one-of-a-kind works of art (by definition, they are irreplaceable!) is difficult and complex. That’s why you hire a certified, accredited appraiser. You don’t entrust your health to a snake charmer; you shouldn’t entrust the valuation of your fine arts to amateurs or voyeurs either. Hire an appraiser who has been trained, tested, and certified through peer review by a respected national appraisal organization.
There was a time when the value of a painting or sculpture, like the value of art itself, was believed to be "in the eye of the beholder". That is no longer the case. The appraiser has to translate the appreciation for art into dollars and cents.
The appraiser has to be able to defend his value conclusion in writing and often in a court of law, before the rigors of Internal Revenue Service investigators, and attorneys representing a contrary view.
One of the key topics of appraisal certification by national organizations involves ethics. Certified appraisers have to take and pass an ethics exam. Uniform Standards of Professional Appraisal Practice spends several pages on ethics. Accredited appraisers are rigorously coached in adhering to ethical standards. The reason is obvious. If I tell you your painting is worth $500 and I buy it from you for $600. You are delighted. If I sell it for $6,000 you may never know. For this reason, appraisers who also buy and sell works of art they appraise have an inherent, built-in conflict of interest. An appraisal is an objective opinion, based on specified research criteria.
There are two types of value in common use by art appraisers, Fair Market Value and Replacement Value. Another type often used is called Marketable Cash Value. There are other types of value as well, (liquidation value, actual cash value, etc.) which are rarely used in fine art appraisals.
Fair Market Value is required by the IRS (for charitable contributions and inheritance tax), and is the norm or apposite value employed in the banking industry, and by the IRS
Fair Market Value is a legal term (defined in Black’s Law Dictionary), and defined by the courts. The ASA Personal Property handbook defines it 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 sell and both having reasonable knowledge of relevant facts.”
Other definitions of FMV specify that no time constraint is imposed on the sale and that the appropriate and relevant marketplace for the artwork be employed.
Fair Market value is a hypothetical value, yet is the value that sophisticated people will agree to trade on. It is not necessarily wholesale or retail value, but it could be. What matters in setting Fair Market Value by professional fine arts appraisers is what a person with the money is willing to pay for the artwork when he or she knows all the facts about it, and is under no pressure to buy or sell. In other words, what a willing buyer is willing to pay a willing seller.
Replacement Value is primarily used for insurance appraisals. It is “the price in terms of cash or other precisely revealed terms that would be required to replace a property with another of similar age, quality, origin, appearance and condition within a reasonable length of time in an appropriate and relevant market.”
Replacement Value is the amount of money that an owner will charge for a desired item on short notice. It is usually high-end retail value. There is usually a very great distance between FMV and RV, two important value types in the world of personal property appraisal. It is important to distinguish between them and to have the skills to do that in a written report.
Paintings and sculptures are often one-of-a-kind items, and are not replaceable from a cache of exact replicas in a manufacturer's catalogue or warehouse. So "replacement value" has to be based on the current retail value of some very similar work of art. That is where the expertise of the accredited appraiser comes in. The appraiser must understand the artist, the style, and the relevant market in order to determine appropriate comparable works of art for use in calculating a replacement value for the one being appraised. The appraiser must be able to identify the relevant market. The local Good Will store is not the same market as Sotheby’s international. A local auction in rural Kentucky is not the relevant market for a cutting edge avant-garde drawing. The appraiser must have the education and experience to determine the appropriate market place for a specified item. He must also have access to the many databases of sale information from which to examine the thousands of sales that occur annually.
Unfortunately, there are no federal or state laws regulating personal property appraisal. While dentists, plumbers, real estate appraisers and butchers are regulated, licensed, and monitored by government agencies, personal property appraisers are not. Anybody, for whatever reason, can call himself an “appraiser of art” and many do. All that is about to change.
Within the last few years, several laws affecting fine arts appraisal have been passed. And several more are pending. This will affect the testing and certification of appraisers. These laws will effectively eliminate the employment of amateurs, conflicts of interest, and self-appointed "experts". * (footnote)
For now, the way to avoid the faux appraiser is to make sure your appraiser is certified by one of the three major appraisal accrediting organizations, ASA, AAA, ISA.
These organizations offer classes, provide testing operations, and require peer review before awarding accreditation. They certify and re-certify their accredited members. An appraiser with the “ASA” designation after his/her name has gone through a rigorous series of tests and a demanding peer review process. He/she has had to submit two appraisal reports (one for Fair Market Value, the other for Replacement Value) to a national board of reviewers. He/she receives the ASA designation only after having passed an ethics exam, four academic course exams, the Uniform Standards of Professional Appraisal Practice (USPAP) exam, and after having submitted two written reports to a peer review committee. Lawyers and accountants undergo similar certification. ASA accreditation is enforced. The American Society of Appraisers recently withdrew its ASA certification from a long-time member precisely for violation of ethical practices.
In my experience, QPAs working in fine art are often ex-museum curators and university faculty. They are often highly educated (MA or PhD) art historians, with years of research, publication, travel and commercial gallery experience who prefer to be on their own, as independent contractors. Some also teach, some broker fine arts. Most belong to one of three professional accrediting organizations, which administer examinations and require their members to adhere to strict ethical codes and regularly require re-certifying exams in specific fields. You find QPAs, by calling the best professional appraisal organizations to locate the appropriate appraiser in your area. Here's a list of some of the best appraisal organizations, which test and accredit personal property appraisers:
AMERICAN SOCIETY OF APPRAISERS (ASA)
P.O. Box 17265
Washington, DC 20041
Phone: (703) 478-2228
ASA is the largest and oldest (founded in 1936) professional society that educates, tests and certifies personal property appraisers. With certified members in over 20 countries, the ASA is an international body whose 6,000 members are accredited in designations such as fine arts and antiques and decorative arts. The ASA offers a referral service. Call the above number with a description of the item you need appraised and they will give you the names of appraisers in your area. Or consult the website, go to ”personal property” and follow the instructions. Personal Property is distinct from Real Property. Often you will be linked directly to an appraiser’s own website and email address. Talk to the appraiser on the phone about your needs.
THE APPRAISERS ASSOCIATION OF AMERICA (AAA)
386 Park Avenue South, Suite 2000
New York, NY 10016
Phone: (212) 889 5404
Fax: (212) 889 5503
The AAA is another widely recognized professional organization which tests and certifies professionals. Founded in 1949, the AAA has more than 1,000 members located throughout the United States. AAA also offers a referral service. A call to the above number prompts a computer search of members in your area, the results will be mailed to you. The website puts you in touch directly with an appraiser of your choice.
INTERNATIONAL SOCIETY OF APPRAISERS (ISA)
1131 SW 7th St Suite 105
Renton, WA 98055
ISA tests and accredits its members. The website allows you to search for and contact individual members.
A consumer should never be shy about checking an appraiser's credentials and reputation. A good appraiser will send you copies of his or her credentials. Museum personnel, gallery owners, bank trust departments, insurance companies and auction houses are all possible sources for references and referrals to certified fine art appraisers.
A good indication of the quality of an appraiser is the quality of the written report. There are a number of components that should be included in the written appraisal report. A single page letter with no reference to the required elements of the Uniform Standards of Professional Appraisal Practice (professional appraisers refer to it as “USPAP”) is simply not acceptable.
ARE ANTIQUE SHOPS AND ART GALLERIES QUALIFIED PROFESSIONAL APPRAISERS?
The kind of appraisal that will stand up in court and under IRS scrutiny is one that is well researched and documented by competent scholarship. It will be well reasoned in writing, organized according to USPAP standards, and documented according to verifiable data. While commercial art galleries can assist a professional appraiser, providing market records for artists and artwork they sell, few commercial galleries are qualified to authenticate, evaluate, describe or analyze the market for works of art outside the specific fields in which they deal.
The Internal Revenue Service (IRS) has very specific and detailed guidelines for what it defines as “qualified appraisers” for personal property. In IRS Publication #561 the definition of a qualified appraiser is clearly stated. The publication describes five (5) types of individuals who cannot be qualified appraisers. These five types are those with potential conflicts of interest: a party to the transaction (the gallery who sold the property after a specified time; the owner of the property; a relative of the owner; the person who received the property as a gift; or a “hired gun” appraiser who is an employee of the property owner and does not appraise for others on a regular basis. In essence, the IRS strongly encourages adherence to USPAP and ASA guidelines. It is worth reading that section of the publication -available from any IRS office or on line at:
A gallery selling contemporary art, for instance, would be an unlikely appraiser for a work of the Italian Renaissance or from 19th century Alaska. In addition, commercial art galleries are rarely disinterested in sale prices of artists and works they deal in. They usually have a built-in conflict of interest. Some galleries actually “guarantee” that an artist’s work will appreciate at a certain rate. They offer “certificates of authenticity and value” to back their claims. Beware of any seller who guarantees future value. Appraisals by such dealers (because they rarely employ analytical narratives and rarely involve documented market research) are usually worthless.
While a few commercial art galleries have highly trained art historians on staff, even those that do are reluctant to allow their sales staff to spend time researching appraisal information and preparing lengthy reports following USPAP criteria. There are a few notable exceptions – and these galleries have staff with appropriate ASA, AAA, or ISA credentials. The few galleries or antique sellers with accredited appraisers on their staff may be qualified professional appraisers.
So while accredited professional appraisers may need to consult the records and market expertise of commercial art dealers, and to depend on the opinions of museum curators, critics, auction house staff and university faculty, the actual appraisal and the written report is best done by a qualified professional appraiser, who analyzes and evaluates opinions, whose allegiance is to professional standards, and whose responsibility is to his client. A qualified professional appraiser will avoid conflict of interest and will give honest values regardless of the consequences. If an art gallery employee or an antique dealer is a tested and accredited member of a major appraisal certifying organization, and if the appraisal report conforms to USPAP criteria, it is probably okay. If not…not.
A written appraisal report should follow specific guidelines, based on USPAP.
Here are the basic elements :
CONTENTS OF A QUALIFIED PROFESSIONAL APPRAISAL
1.DETAILED AND ACCURATE DESCRIPTION OF THE PROPERTY WHICH IS THE SUBJECT OF THE APPRAISAL REPORT ALONG WITH MEASUREMENTS AND PHOTOGRAPHS OF EACH OBJECT.
2. STATEMENT OF THE REASON FOR THE APPRAISAL REPORT.
3.STATEMENT OF THE CONTINGENT AND LIMITING CONDITIONS TO WHICH THE APPRAISAL FINDINGS ARE SUBJECT.
4. DESCRIPTION AND EXPLANATION OF THE APPRAISAL METHOD USED.
5. STATEMENT OF THE APPRAISER'S DISINTEREST.
6. NOTATION OF CONDITION OF THE OBJECTS APPRAISED.
7. APPRAISER'S COMMENTARY ADDRESSING RESEARCH METHODS USED, VALUATION FACTORS CONSIDERED, AND PLACEMENT OF THE ARTWORK WITHIN THE ARTIST'S MARKET.
8. SUMMARY OF PROVENANCE (OR A HISTORY OF THE OWNERSHIP AND EXHIBITIONS IN WHICH THE WORK WAS SHOWN), BECAUSE IF KNOWN THIS CAN AFFECT VALUE.
9. A CERTIFICATE OF APPRAISAL, APPRAISER'S QUALIFICATIONS (RESUME), ALONG WITH A STATEMENT OF THE CODE OF ETHICS UNDER WHICH THE APPRAISER PRACTICES (NORMALLY USPAP).
10. SIGNATURE OF THE APPRAISER AND INCLUSION OF DISSENTING OPINIONS, IF ANY.
If all of these pieces of information are included, you have a good chance of receiving a qualified professional appraisal. Don’t hesitate to ask if a prospective appraiser follows the USPAP code. Don’t hesitate to ask to examine a past (anonymous client) appraisal report to determine if these guidelines were followed.
HOW DO APPRAISERS DETERMINE THE VALUES THEY ASSIGN TO WORKS OF ART?
The appraisal methodology for Personal Property, including works of art, is not so different from that used to determine the value of real property. It is based on careful examination of the property in question. Everything is examined, studied, analyzed, described in writing. Such considerations as style, condition, previous ownership, authorship, subject matter, size, authenticity, all play a role in assigning a value. Once the appraiser knows exactly what he/has has, he/she can determine which of many is the appropriate marketplace for the subject property. Then he/she can consult that market to determine if the subject artwork has ever sold. The appraiser also looks for comparable works that have sold recently. He/she adjusts values of the comparables to compensate for differences between his subject piece and the comparable he is evaluating. Such things as quality, size, date, subject matter, complexity may all be different.
During this process of identifying and analyzing comparable sales, the appraiser may consult experts, or art historians specializing in a particular period or style. He/she may ask questions of museum curators, commercial gallery personnel, auctioneers, artists, and technicians such as employees in bronze foundries, printing shops, architects and graphic designers. Sometimes there may need to be technical analysis of paint or canvas, or infra red or ultra violet light examination to assist with determining condition or authorship. Sometimes ex ray is necessary to answer questions that affect value. For some works of art the appraiser will consult the Art Loss Registry and other databases to try to determine if the work was stolen.
After deciding what kinds of questions to ask and what market to consult, the appraiser will perform the research and will gather data to guide in estimating what the subject work of art would sell for in the appropriate market at a given date. The appraiser will consider levels of taste, availability of like objects, rarity, cost of cleaning or repair if needed, and the history of sales of close comparables. He/she will summarize these findings in a narrative that will serve as a convincing argument to defend his assigned value for that particular work of art.
In sum, “the appraisal process” calls for due diligence and considerable skill in carefully examining the subject work of art, properly identifying the work of art (author, style, medium, support, date, quality), then determining which of many is the “relevant market”, selecting appropriate comparables, analyzing the subject work of art and the comparables, adjusting for differences between the two, drawing value conclusions from these analyses, and writing a convincing narrative to defend the conclusion in a report that conforms to USPAP guidelines.
ARE THERE VALID ALTERNATIVES TO FORMAL, WRITTEN APPRAISAL REPORTS?
For an appraisal to stand up against IRS scrutiny, or to withstand cross-examination by attorneys and their expert witnesses, a good written report following USPAP is necessary. Unfortunately, there are no quick and easy solutions to determining values for works of art. You have to do the research.
There are times, however, when a client may want to obtain an idea of what a work of art is worth on the open market in order to guide a possible sale or to assist in deciding to purchase a work of art. In such cases, the client simply wants to consult with a certified appraiser to decide whether to engage a formal appraisal. This consultation process can often answer many questions that will determine whether a professional appraisal is necessary. I have consulted with many individuals who tell me they have a signed “painting” by a famous artist, only to learn after consultation that they have a reproduction doctored up to appear to be a painting. In such cases there is no need for a formal appraisal. The client pays a small fraction of what a formal appraisal would cost.
Such verbal consultations are offered all the time on programs like Antiques Roadshow broadcast on PBS. What is often not made clear to the audience is that the values offered do in fact benefit from most, if not all, of the accepted professional standards and USPAP regulations. You don’t see the appraisers doing their homework, but they do it. These are not unresearched opinions. The appraisers are usually highly trained experts. They confer with colleagues, consult databases, read periodicals, are familiar with the relevant market on a daily basis, and are aware of the difference between “auction values” and “replacement values”. The works they comment on have been carefully examined and researched – usually by several appraisal experts.
I offer such verbal consultations, not certified appraisals, based on discussions with the client and on examination of photographs when distance is a factor. Verbal consultations are billed at the same rate as written appraisals, but they proceed much more quickly. They are appropriate to help in plans to buy and sell. They are not appropriate for insurance, IRS, loan collateral, or for divorce settlement. I do this work with the understanding that a fully certified researched and written appraisal report may alter the values estimated. These verbal consultations are not appraisals; they are consultations, informal opinions based on limited information.
WHAT DOES A PROFESSIONAL APPRAISAL COST?
The only acceptable fee schedule is either an hourly rate, or an amount based on a “per object” fee, or a fixed amount for the complete report. Never pay a percentage of the appraised value, or agree to a fee contingent on the results of the appraisal or its application. Fees vary from appraiser to appraiser, but typically average $150 to $200 per hour, usually with a minimum charge of about $300. Time spent depends on the complexity of the project, documented provenance of the work being appraised, the possibility of works being faked or forged, and on the quality of records kept regarding acquisition or purchase. Insurance appraisals of artworks by a local artist, purchased from a local gallery within the last 20 years, never sold on the secondary market, always housed locally, are relatively simple appraisal assignments. Older, European or Latin American works of art, works by high profile artists, antiquities, often-imitated artists, all these require much more diligence and research. If the records for acquisition are questionable or absent, due diligence requires more thorough research, and this research which involves skill and more time, also costs more money. The insurance and banking industries, as well as the U.S. Government (IRS) depend on accredited appraisers to come up with solid factual data to document their appraisals. You shouldn’t suffer or pay for anything less.
The fees charged for an appraisal are an indication of the quality and professionalism of the appraiser. Again look for the ASA letters after your appraiser’s name. Confirm (www.appraisers.com) that that person does indeed have current accreditation.
If I charge you for an appraisal based on a percentage of the final appraised value, I will be tempted to appraise the work of art at the highest possible value. For these reasons, the Uniform Standards of Professional Appraisal Practice and all of the national certifying and accrediting organizations, as well as the IRS, specifically forbid charging on a percentage of the appraised value.
The appraisal profession is neither well known, nor well-understood, but it is a profession, providing invaluable service to the art community while maintaining the credibility of the art market. Be sure to do your homework, however, and be sure the appraiser you hire has appropriate credentials, stands behind his or her work and is worth the fee you pay.
* (footnote) - Sarbanes-Oxley Corporate and Auditing Accountability, Responsibility and Transparency Act (H.R. 3763/S. 2673) passed by both the House and the Senate. On July 30, 2002.
Randolph E. Osman, MA, ASA is an Accredited Senior Appraiser with designation in Fine Art from the American Society of Appraisers in Washington, D.C. He received a bachelor’s degree from Bucknell University and a master’s degree from the Institute of Fine Arts of New York University. He has been a university professor in art history and an art museum curator and director. He has published books and articles on art and artists. He has worked for major art galleries in New York and Philadelphia as well as in Portland, Oregon. Currently, he is an independent fee fine art appraiser with clients, including universities, museums and insurance companies in Oregon. California, Washington, Montana, Colorado, and Mexico.
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