The Specialized Art of the Appraisal
By ANN CARRNS
Published: October 18, 2011
Whether it is fine wines, vintage movie posters or abstract paintings, some people spend a great deal of time and money compiling collections of valuables. Even if they’re collecting out of personal passion, rather than as an investment, it makes sense to keep tabs on how much the collection is worth.
“You need to know what you own, and to know the value of what you own,” said Nancy Harrison, a fine art specialist with Emigrant Bank’s fine art financing unit in New York and the president of the Appraisers Association of America.
Whether an appraisal is done for tax purposes, for an insurance policy or to divide property in a divorce, the most important first step is finding someone who has broad, deep knowledge about the kind of pieces you collect. “All appraisers are not created equal,” said John Cahill, a lawyer in New York who specializes in art. “And even the good ones are not good at everything.”
You can, of course, ask for referrals from lawyers or wealth management advisers. But even then, you should check the appraiser’s qualifications. Personal-property appraisers aren’t licensed, but reputable professionals are affiliated with at least one of the three major appraisal organizations: the Appraisers Association of America, which focuses on personal property; the American Society of Appraisers, which includes specialists in real estate and other areas; and the International Society of Appraisers.
These groups require members to keep up to date with appraisal practices, called the “Uniform Standards of Professional Appraisal Practice,” and to adhere to a code of ethics. That means, for instance, that they charge only fees based on an hourly rate, or a negotiated project rate, rather than on a percentage of the appraised value.
You can search for an appraiser by name or expertise, and review information about his or her background, on each group’s Web site. “If an appraiser says they know it all, run as fast you can,” said Jane Jacob, an appraiser who specializes in American and European fine art from the 19th through 21st centuries.
Collectors have a variety of options for getting pricing information for artwork, collectibles and wine at online sites that primarily track sales at public auctions. Appraisers consult those sites too — but only as a first step. Gayle Skluzacek, a New York appraiser who evaluates both artwork and wine, says a knowledgeable expert can interpret the nuances of a given sale. Why did it sell above or below the estimate? Was it offered before? Only a professional, she said in an e-mail, knows ”what questions to ask when discrepancies appear.”
Expertise is especially important with appraisals that are submitted for tax purposes, because the Internal Revenue Service has detailed requirements for appraisals submitted as documentation for donations or estate tax calculations. The I.R.S. requires a written appraisal by a qualified appraiser for any deduction taken on items valued at more than $5,000.
The agency’s own appraisal staff reviews valuations, and some appraisals are subject to further review by its Art Advisory Panel, a group of 25 volunteer experts. The panel meets periodically to review appraisals and may decide they are too high (or, in the case of estate tax valuations, too low). Last year, the panel reviewed 475 items valued by taxpayers at a total of nearly $235 million, and recommended adjustments on more than half, according to its 2010 report.
Arthur Fleischer, a New York lawyer and arts patron whose collection includes prints by the artist Elizabeth Murray and images by the Dutch photographer Hellen van Meene, said he didn’t spend much time worrying about the value of his collection because his motivation was not to make money. When he has made gifts to museums, including the Whitney Museum of American Art and the Solomon R. Guggenheim Museum, he has worked with the appraisal service of the Art Dealers Association of America, for the documentation the I.R.S. requires. “I know from my experience in the art world,” he said, “that they’re a well thought of, responsible and reliable organization.”
Susan L. Brundage, the director of that group’s service, said it focused primarily on appraisals of fine art for tax purposes. It draws on the records of its member dealers, she said, to supplement data on prices for works sold at public auction.
The appraiser will often — but not always — examine an item or collection physically to determine its condition, before conducting research into previous sales of similar works to determine a value. Personally examining an object allows for a thorough assessment of its condition, but sometimes appraisals are done from photographs and other documentation although that must be disclosed on the appraisal report.
“You have more gravitas if you’re substantiating something you’ve seen in person,” said Elizabeth von Habsburg, managing director of the Winston Art Group.
Even with a thorough appraisal, fluctuations in the art markets can lead to surprises. Collectors must understand that there is not “one mammoth market” that determines a work’s value, said Ms. von Habsburg, adding, “There are many submarkets, and they move at different rates.”
Lately, for instance, Chinese collectors have been bidding up the prices of Chinese artworks. Ms. von Habsburg’s firm was asked to appraise a collection of 20th-century decorative jade and porcelain pieces from an estate. Previous sale records led to an estimated maximum price of roughly $124,000, but they sold for more than $1 million on the online auction site iGavel.
The market for collectibles, like Hollywood or sports memorabilia, is also volatile; prices can surge when there is a “landmark” auction taking place, said Leila Dunbar, an appraiser who specializes in such items. The auction earlier this year of costumes owned by Debbie Reynolds, for instance, increased the value of outfits worn by Marilyn Monroe, Audrey Hepburn, Grace Kelly and others.
Because markets can change quickly, insurance companies encourage collectors to have works reappraised periodically to make sure coverage is adequate. Mary L. Sheridan, assistant fine arts manager for Chubb Personal Insurance, said collectors with extensive inventories typically worked with professional curators and kept their appraisals current. Those with smaller or lower-value collections — say, less than $10 million — are sometimes reluctant, however, to spend the money for regular appraisals, which can cost as much as $300 an hour, along with the higher premiums an increase in valuation might bring.
“They do not see a need — until there’s a claim,” she said.
Failing to keep up with rising values can prove risky. Ms. Sheridan recalled an owner who had a painting by the French artist Raoul Dufy, illuminated by a picture light attached overhead. The screws came loose from the light, allowing the bulb to fall into the painting and burn a hole through the canvas. “It was a total loss,” Ms. Sheridan said. The painting was insured on the collector’s homeowner’s insurance policy, for $18,000. The market for Dufy’s work had grown, she said, and the so the painting’s value at the time of the damage was close to six figures.
Bill Edgerton, a wine appraiser in Connecticut, said roughly half of his appraisals were done after failed marriages. “Usually — not always — it’s the man who has bought the wine,” he said. “The woman wants her share of the value of the wine in the divorce settlement.”
Sometimes, Mr. Edgerton said, he was hired simply because a collector wanted to sell a bottle or two and wanted to know what kind of price to expect.
James Salmon, an entrepreneur in Jacksonville, Fla., recently had Mr. Edgerton update an appraisal of his collection of about 1,000 bottles. Mr. Salmon first retained Mr. Edgerton a decade ago, after reading about him in Wine Spectator. “I asked him to step in, just to see what I had,” Mr. Salmon said.
Mr. Salmon provided Mr. Edgerton with an inventory of his collection, along with documentation of proper storage and details about the condition of the bottles and their labels. He declined to reveal the value Mr. Edgerton placed on his wine, but said he was satisfied with his investment. “I don’t flip them,” he said of his wines. “I like to collect them, and keep them.”