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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).
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:
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.