What happens during an appraisal inspection?
The appraiser first gathers all available documents and verbal information (this can be done previously, but is often completed on-site). Whenever possible, the appraiser physically inspects fine or decorative art objects, sometimes using a flashlight or UV light, and through magnification. The appraiser takes measurements, weighs metals, and locates and records any signatures or other identifying marks on the object that may affect value. The appraiser inspects the condition and structural integrity of the objects for any needed repairs or former alterations. Finally, the object(s) are photographed.
What information is useful for the appraiser?
The more information the appraiser can gather about an object, the more credible the appraisal will be. The appraiser will need to know what the intended use of the appraisal will be, or how clients will use the report when it is completed.
During the process of conducting the appraisal, the appraiser may request any available background information about the property being appraised. This could include, but is not limited to, the provenance, restoration records, exhibition, publication, sales history, the property’s title, and previous appraisals.
How does the appraiser develop the opinion of value?
After the appraiser inspects the object(s) being valued, he or she researches the appropriate marketplaces to locate the amounts asked, offered or paid for properties similar to the object(s) being appraised (sales comparison approach). The cost and income approaches are considered, and if appropriate, are developed. The market data is studied, including public, gallery and private sales records. The appraiser may consult additional experts to resolve authenticity issues. After all material research relating to the value of object(s) is carefully considered, the appraiser develops an opinion of value and prepares an appraisal report.
What is a comparable sale?
Opinions of value are frequently based on sales of similar or like objects (sales comparison approach). Comparable sales enable the appraiser to render an opinion of value for the subject property by comparing similar properties that have sold or are being offered for sale in relevant marketplaces. The comparison may include considerations of age, physical characteristics, functional attributes, attribution, provenance, and location of the sale. Realized sales of comparable or like properties may provide the strongest evidence for an opinion of value.
Auction houses, galleries or artists are the sources most commonly-used for obtaining records for fine and decorative art properties. The appraiser often has to pay for completed sales information, such as the sales information available online.
What might attorneys look for and expect from an appraiser?
Attorneys who engage fine or decorative art appraisers should expect to receive a defensible and credible appraisal report. The report prepared should meet the requirements of USPAP and those of any government entity that may be involved in the assignment. Attorneys, as well as all clients, should seek an appraiser with verifiable education and experience in valuing the type of property being appraised.
What can you do if you believe a correction is needed to the appraisal report?
If, after reviewing an appraisal report, the client believes the appraiser did not consider information about the subject property that could affect value, the client should discuss the matter with the appraiser. The client should submit his or her concerns in writing to the appraiser, providing factual evidence that supports the position, and request that the appraiser address them. If the appraiser agrees that pertinent information was omitted and should be included for a credible valuation, he or she may provide a revised appraisal report with commentary.
After asking for a reconsideration of value, the appraisal remains flawed. What are my options?
A client may request an appraisal review assignment or a second appraisal report. A different appraiser may perform an appraisal review, which will include an opinion about the quality of the other appraiser’s work. If the review appraiser does not agree with the opinion of value in the original appraisal report, a new opinion of value may be provided in the form of an appraisal report completed by the review appraiser.
What is appraiser competency?
The COMPETENCY RULE in USPAP requires that the appraiser be competent to perform the assignment, or acquire the necessary competency to perform the assignment, or withdraw from the assignment.
Generally speaking, competent professional appraisers may fall into two general areas:
(1) appraisers who are specialists and have training in principles of valuation and knowledge of the markets with knowledge focused on a specific area of expertise; and (2) appraisers who are generalists and have training in principles of valuation and knowledge of the markets with broad experience in many areas.
It is essential for clients to seek appraisers with expertise relative to the marketplace and type of objects to be appraised.
Why doesn’t The Appraisal Foundation enforce the Uniform Standards of Professional Appraisal Practice (USPAP)?
While the Uniform Standards of Professional Appraisal Practice are standards for developing and communicating appraisals, it is not within the purview of The Appraisal Foundation to enforce USPAP, as it was not granted such authority by Congress.
Formal enforcement of appraisal standards is provided by personal property appraiser organizations, such as those that are Appraisal Sponsors of The Appraisal Foundation. Courts and/or case law may also serve to enforce USPAP.
Appraisers may also simply choose to comply with USPAP, even if they are not otherwise required to do so. Enforcement of USPAP in these situations may depend on jurisdictional or other legal matters. If an appraiser is not required to comply with USPAP but otherwise chooses to comply, a client should ask the appraiser if any enforcement entity oversees the appraiser’s practice.