What is an appraisal?

An appraisal report answers questions of value. It is a cohesive, logical, readable document that addresses the intended use and approach to value and defines the appropriate and relevant marketplace context in which the value is determined. 

Why do I need an appraisal?

There are a number of reasons to have your fine art appraised.  First, for any appraisal, it is critical to ask: What is the purpose of the appraisal? Though this is a very basic question, answering this will determine the correct value of the object. There are many purposes for appraisals, and the purpose determines the type of valuation that is used. Perhaps you are donating one of your pieces to a charity; the IRS requires a professional appraisal on all items exceeding $5,000 in value. Insurance coverage is another common reason for an appraisal. Professional appraisals can also help with divorce settlements, estate planning and probate. If you are planning on disbursing or building a collection, it is wise to know the value of the pieces you own. Together we can determine the purpose of your appraisal.  Kimberly is committed to ensuring that the client fully understands the appraisal process.

How can one object have a multitude of values?

The value of your object changes according to the determined purpose of the appraisal. To illustrate, the value for insurance coverage may be different than the value for estate tax, charitable donation or consumer resale.  A qualified appraiser understands the many different types of values, assigned uses, and market levels.  K.E. Hereford will work closely with you to choose the property is valued correctly for its intended use. 

Here are some of the most common definitions of the different types of values used in the appraisal of personal property. (Source: Appraisers Association of America)

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)

Auction Replacement Value (ARV)

While very similar to RRV, this value refers to the appropriate and relevant auction market. If a client regularly and routinely buys at auctions and if the auction market is where the object being appraised is most commonly sold, the appraiser in consultation with the client may decide to exclude the retail marketplace from any analysis. (Usually for Insurance Purposes)

Retail Value (RV)

Unlike RRV, retail value excludes all fees or additional costs associated with purchase of a particular item, such as taxes, framing, conservation, restoration, and additional commissions. (Used to Establish a Price Guideline for Retail Pricing)

Fair Market Value (FMV)

FMV is the value required by the IRS for tax evaluation purposes.  It is loosely 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)

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 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)

How often should appraisals be updated?

Art appraisals are an important aspect of owning and protecting your art. As market conditions can affect the value of art, it is recommended to have an appraisal completed or updated every three to five years in order to keep your insurance and personal records current.