A Collector’s Guide to Appraisals

No one wants to consider the unthinkable – like theft, damage or loss – happening to a prized possession, but the reality is that these things happen. Whether you own fine art, jewelry, antiques or even classic cars, having a current appraisal is an important component of collection care.

An appraisal is an opinion or statement of value. It provides the necessary documentation to substantiate the existence, condition and value of your collection. An appraisal can serve to inform a sale or a donation of a collectible item or help settle an estate. It will also help ensure that a valuable item is insured to its current replacement value, thereby providing protection against market fluctuations and value loss.

Fair Market Value vs. Retail Replacement Value
It may be surprising to learn that one item can have five different values and that the valuation used will depend on the purpose of the appraisal. Two of the most common values are Fair Market Value (FMV) and Retail Replacement Value (RRV).

  • Fair Market Value is the price at which 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 reasonable knowledge of relevant facts.1 This value is often used for IRS appraisals or to inform a sale.
  • Retail Replacement Value is most often used for insurance. It is the highest amount 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.2 RRV accounts for the fact that in the event of a loss, an item would need to be replaced as quickly as possible. This means that often an item would need to be replaced in a retail setting instead of in a secondary market such as an auction. RRV also accounts for fees, taxes and services such as framing. Due to these factors, RRV is often higher than FMV.

Appraisals should comply with the Uniform Standards of Professional Appraisal Practice (USPAP), which are the Congressionally-authorized and widely recognized standards for appraisers. A comprehensive appraisal report includes:

  • Client name and address
  • Appraiser’s contact information and qualifications
  • Purpose of the appraisal (insurance, estate, etc.)
  • Method of valuation (market comparison, cost approach, etc.) and the market in which valuation is applied
  • Type of valuation and its definition
  • Relevant dates including date of inspection, appraisal and report issuance
  • Assumptions, disclaimers and limiting conditions
  • Thorough description of objects including artist, origin, style, media, marks, signatures, measurements, age, condition and provenance
  • Firm statement of value (not a valuation range)
  • Valuation support including comparable examples, market analysis and sources

In addition, the appraisal document should not be handwritten and but should always be signed by the appraiser.

Choosing an Appraiser
A qualified appraiser has a formal education in appraisal theory, methodology, principles and ethics. The appraiser should also have specialized expertise in the material being appraised. For example, an appraiser who specializes in contemporary art may not be the best choice to appraise an Impressionist painting.

There is no government regulation of appraisers. Therefore, the best way to find a qualified appraiser is through one of the major accredited appraisal organizations — the Appraisers Association of America, the American Society of Appraisers and the International Society of Appraisers. To obtain and maintain membership in these organizations, appraisers must complete courses and exams and demonstrate years of experience. Additionally, members must also strictly adhere to set ethical standards as outlined by USPAP.

Tema McMillon is a Fine Art & Collection Specialist and Senior Risk Consultant with Chubb Personal Risk Services.

1 IRS publication 561
2 Appraisers Association of America, Definitions of Value, 2017

The opinions and positions expressed are the authors’ own and not those of Chubb. The information and/ or data provided herein is for informational purposes only and is not a substitute for professional advice. Insurance coverage is subject to the language of the policies as issued.