THE APPRAISAL PROCESS

THE APPRAISAL PROCESS The International Society of Appraisers

introduction Membership or Education Questions: Call 312.981.6778

our audience • Professionals – who rely on appraisals and accurate value information • Community Residents – who purchase appraisals to solve problems, i.e. insurance coverage, estate planning, charitable giving • Collectors, Librarians, Curators, Registrars – who must wisely manage assets, investments, archives and heirlooms • Students and Teachers – who research objects in social and historical contexts and design new curriculum

Professionals • Better serve your clients by • Understand what makes an appraisal compliant • Know what you are asking your clients to provide • Be able to qualify the documents for review • In many cases lawyers and estate planners do not understand the appraisal process • Reduce the risk of making decisions based on faulty value conclusions or hiring an unqualified appraiser • Expand your professional practice with additional value added services such a personal property valuation, art advisory contacts, collection management, etc

Professionals Financial Planners and Advisors Need to Look Beyond Real Estate and Securities and Assist Clients with “Other Assets” from the Balance Sheet • Personal Property Values & Passion Investments • Art/Antique Collection • Automobiles • Luxury Goods • Wine • Jewelry/Watches • Coins/Stamps

Community Residents Solve immediate problems such as • insuring art and antiques • determine estate tax liability • making charitable donations • processing damage claims • distributing assets equitably • settling divorce or bankruptcy litigation

Community Residents • Become a savvy consumer by knowing what should be included in the appraisal report • Understand the appraiser’s credentials so you can hire the right appraiser for the job • Understand the various levels of value for your intended use

Collectors, Curators & Librarians • Understand the true value of your collection or the holding for which you are the steward • Learn to increase or downsize collections intelligently by being an informed trader, buyer and/or seller • Expand your network of resources to become a sophisticated champion for your collection

Students and teachers • Discover new topics for scholarly research • Expand the curriculum by designing new courses and enhancing existing classes • Be part of the emerging and interdisciplinary academic field of the study of material culture

Do you know your collection? Membership or Education Questions: Call 312.981.6778

Know your collection Documenting a collection will not only enhance the value of individual objects in the collection but add context and interest to your collection. • Where was it purchased, when and for how much? • Is the original invoice on file? • Who owned it previously? Was it inherited? • How did the original owner come by it? • What is known about the maker or artist?

Know your collection • Has it been appraised? When, by whom and at what valuation (insurance, market, replacement)? • Has the object been published? Where, and by whom? • Has it been included in any exhibitions? When, where, curated by whom? • Where is it now? • When was it sold, for how much? • Does it have any unique identifying numbers from previous owners? (museums call these “accession” numbers)

Evaluating Your collection Membership or Education Questions: Call 312.981.6778

14 points of Connoisseurship forthe Decorative arts Developed at Winterthur and published as a book called Evaluating Your Collection by Dwight P. Lanmon from the Winterthur Decorative Arts Series.

14 points of Connoisseurship Developed at winterthur • Overall Appearance • Does it work • Ornamentation complement the form • Pleasing form • Graceful • Unity of parts to the whole • Form • Shape • Mass • Proportions

14 points of Connoisseurship Developed at winterthur • Ornament • Color • Figure of wood • Texture, • Turnings • Carvings • Engraving • Enameling • Printed design

14 points of Connoisseurship Developed at winterthur • Materials • Woods • Surface coatings • Adhesives • Hardware • Know what was used and during each decorative arts period • Finish • Original • Color • Layers

14 points of Connoisseurship Developed at winterthur • Color • Color Changes • Exposure to air • Pollutants • Sunlight • Craft Techniques • Quality of craftsmanship • Techniques and practices of the period • Congruency of parts (single maker, mixed parts)

14 points of Connoisseurship Developed at winterthur • Trade Practices • How items are marked or labeled • Excise and Tariff laws • Craft Organizations • Function • Reason for existence • Why was the object made • Intent of the artist • Style • Features define style • Features may link object to a period (i.e. Baroque, Rococo, Neo Classical)

14 points of Connoisseurship Developed at winterthur • Attribution • Signatures • Labels • Stylistic • Take caution as labels can be applied and signatures can be fraudulent • History of Ownership • Sales Receipts • Sales Catalogs • Exhibitions • Family history

14 points of Connoisseurship Developed at winterthur • Condition • Natural aging such as softening of edges • Wear (logical pattern and location) • Patina • Repairs/Restoration –Sympathetic/Unsympathetic • Level of acceptance of wear and damage • Evaluation • Aesthetic value • Intrinsic value • Is it culturally important • Rarity • Worthy of Purchase

14 points of Connoisseurship Developed at winterthur Conclusion and Determination based upon the 14 points

Appraisers & appraisal organizations Membership or Education Questions: Call 312.981.6778

Appraiser definition • An appraiser is a professional who specializes in providing opinions of value (appraisals) and valuation services in an independent, impartial and objective manner • Professional appraisers have taken courses and have been trained in appraisal theory and methodology as well as specific product and specialty knowledge • ISA appraisers must take classes, pass exams, and subject their reports to peer review as well as meet USPAP and minimum experience requirements

Why hire an appraiser • Purchase Insurance Coverage • Property Damage or Loss Claim • Donations and Gifts • Selling an Item/Purchasing an Item • Estate Planning • Equitable Distribution for an Estate • Estate Taxation • Collateral for a Loan • Desire to know

Why hire a designated appraiser • Education • Training • Experience • Legitimacy • Code of Ethics • Current and up to date in • Appraisal Standards • Market Trends

Four Recognized Appraisal organizations • International Society of Appraisers (ISA) • Appraisers Association of America (AAA) • American Society of Appraisers (ASA) • Royal Institute of Chartered Surveyors (RICS) We recommend to only hire a designated appraiser from one of these four recognized appraiser organizations.

International society of appraisers • Largest personal property appraisal organization • Best appraisal principles, theory and methodology in the profession • Appraisal Foundation Sponsor • Code of ethics • Only personal property • Training/Annual Conference • Requalification requirements • Professional development

International society of appraisers • National Network of Qualified Appraisers • Industry recognition for the best appraisal theory and methodology program • Antiques and Residential Content Programs • Fine Art Programs • Specialty Studies Pathway • USPAP Trained and Tested • Website specifically designed to search for appraisers • The best annual conference

Other appraisal organizations • Typically smaller organizations • Lower standards • Diploma mills • Lack of training • Lack of professional development • Many are dealer-centric (conflict of interest)

Non-affiliated appraisers • Very Often Lack Training in: • Appraisal Theory • Methodology • Principles • Markets • Many Times Dealer Associated • No/Limited Professional Development • Limited Contact with other Appraisal Experts and peers

Auction Houses and appraisals • Auction Houses • Used to giving auction estimates and not other levels/standards of value • May lack appraisal theory and methodology understanding and experience • Conflict of interest (looking for consignments)

Code of ethics Members of recognized professional personal property appraisal organizations, such as ISA, all adhere to a strict societal and USPAP code of ethics and conduct

The appraisal foundation • Establishes, improves and promotes the Uniform Standards of Professional Appraisal Practice (USPAP) • Disseminates information on USPAP and appraiser qualification criteria • To the profession • State and federal agencies • Users of appraisal services • Related industries • Sponsors activities relating to standards and qualifications • International Society of Appraisers is a sponsor of the Appraisal Foundation

USPAP • Uniform Standards of Professional Appraisal Practice • Comprehensive set of standards for appraisers • Ethics • Competency • Record Keeping • Scope of Work • Jurisdictional Exceptions • Development Standards • Reporting Standards

USPAP Code of ethics • Must not perform an assignment with bias; • Must not advocate the cause or interest of any party or issue; • Must not accept an assignment that includes the reporting of predetermined opinions and conclusions; • Must not misrepresent his or her role when providing valuation services that are outside of appraisal practice; • Must not communicate assignment results with the intent to mislead or to defraud; • Must not use or communicate a report that is known by the appraiser to be misleading or fraudulent;

USPAP Code of ethics • Must not knowingly permit an employee or other person to communicate a misleading or fraudulent report; • Must not use or rely on unsupported conclusions relating to characteristics such as race, color, religion, national origin, gender, marital status, familial status, age, receipt of public assistance income, handicap, or an unsupported conclusion that homogeneity of such characteristics is necessary to maximize value;

USPAP Code of ethics • Must not engage in criminal conduct; • Must not willfully or knowingly violate the requirements of the RECORD KEEPING RULE; and • Must not perform an assignment in a grossly negligent manner.

Warning signs Membership or Education Questions: Call 312.981.6778

Do not hire an appraiser if • The appraiser claims to be associated with an appraisal organization and they do not come up on the site’s appraiser search • The appraiser belongs to a lesser recognized organization or does not hold a designation from a recognized organization • The appraiser does not belong to an appraisal organization

Do not hire an appraiser if • The appraiser claims to be USPAP “Certified” (USPAP does not certify appraisers) • The appraiser has no appraisal theory or methodology training • The appraiser is not USPAP tested and requalified every two years • Is banned from practicing before the IRS • If the fee is based upon a percentage of the valuation • The appraiser values and offers to buy

The appraisal Membership or Education Questions: Call 312.981.6778

Appraisal definition • An appraisal is the act or process of determining value, estimating cost, or calculating the present worth of forecasted earnings • An appraisal report is a written documentation of the same • An opinion of value which can be express as a specific amount, a range of numbers, or a relationship to a previous value opinion or set amount • Appraisals are opinions based on an informed judgment which are supported by facts, analysis and processing of relevant factors

Intended use • Insurance - Collection • Insurance Damage/Loss Claim • Donation • Estate • Equitable Distribution • Estate Planning • Liquidation • Acquisition • Loan Collateral • Pre Move Inspections

Elements of a qualified appraisal • Name and Address of the Client • Intended use • Intended Users • Name, Contact Info and Qualifications of the Appraiser • Signed Certification • Scope of Work narrative • Effective date of the report and value • Appropriate Market • Objective • Value Being Sought and Definition

Irs qualified appraisal (Donation) • Detailed Description of the Property • Physical Condition of the Property • The Expected Date of Contribution • Terms of Agreement Relevant to the Property • Name, Address, Tax ID # of Appraiser & Fee Arrangements • Appraiser Qualifications • Statement Appraisal was prepared for Income Tax Purposes • Date of Which Property Was Valued • Appraised for Fair Market Value, Basis for Value, Comps • Method of Valuation used to Determine FMV

Irs qualified appraiser • Appraisal Designation from a Recognized Professional Appraiser Organization or • Has otherwise met minimum education and experience • Regularly Performs Appraisals for Pay • Meets other requirements as prescribed by IRS Regulations • Is not been prohibited from practicing before the IRS at anytime over the three year period ending on the appraisal date

The appraisal process • Initial Consultation • Scope of Work and Intended Use • Inspection & Inventory • Critical Assumptions & Limiting Conditions • Research • Comparable Data • Value Adjustments and Value Conclusions • Report Writing • Compliance and Ethics Reviews

Other services • Consultant • Brokerage (Acquisition or Disposition) • Advisor • Collection Management • Downsize Assistance • Oversight Services (conservation, framing, shipping storage) • Condition Reports and Annual Inspections

Other services Litigation Services • Support appraisal report • Appraisal review • Technical analysis • Assist client in a legal matters (integrity and objectivity must be maintained) • Expert Witness • Serve as arbitrators or mediators in disputes

THE APPRAISAL PROCESS