When owning one or more artworks it’s crucial to, aside from their intrinsic aesthetic, cultural, historical, or even sentimental value, know how much they are worth. This can come in especially handy if an artwork is lost, damaged, or if one is planning to gift or donating it. While one can google an artwork´s approximate value, the most reliable strategy is to commission a professionally made art appraisal.
However, before contacting an appraiser, it is important to grasp what to expect and what elements to look for to guarantee that the valuation of your artwork, or of one that you are looking to acquire, will serve your purposes. What is the reach of an art appraisal? and Which documents should one have ready when requesting an art appraisal?
What is and what is not an art appraisal?
In broad terms, an appraisal is a thoroughly-researched and well-supported opinion of value by an impartial professional. It is important to know that this opinion can be expressed as a specific amount, a range of values, or in relation to a previous value. Specifically, artworks fit into the personal property category-its main feature being the ability to be moved. This category also comprises furniture, documents, machinery, or textiles, among others.
At least, the US government does not license personal property appraisers. Therefore, it is crucial to pay close attention to the qualifications of the appraiser and to know what to request for before hiring someone for the task. The appraiser should be knowledgeable of art, specifically of the time frame or medium that your artwork fits into, with the corresponding experience appraising art. Importantly, the appraiser should not have conflicts of interest regarding the particular work of art that's been appraised. Even if appraising is not an exact science -and more so in the case of artworks- the process that results in assigning a value to an artwork needs to be backed with well-researched data and expertise.
It’s important to keep in mind that an appraisal is not intended to authenticate artwork. With that being said, if you want to certify the authorship of an artwork you should turn to other types of professionals. Sometimes, appraisers do carry out authentication, but that would result in two separate reports. Likewise, an appraisal is not a Certificate of Ownership either.
Adding on, an art appraisal is not an oral estimation of value given it entails a professionally written report. If you are seeking a general notion of the value of an artwork you may look for a preliminary estimate of value, which some art appraisers or even art dealers or gallerists also conduct, but they are not to be considered as appraisals.
Steps for getting a proper art appraisal
1) Purpose of the appraisal
Before requesting an appraisal, it is imperative to establish its purpose since there are many levels of “worth” or value to be established. Generally, these purposes fall into the following categories: 1) updating or obtaining insurance, 2) managing a loss or damage claim, 3) donating the work, 4) settling a family member’s estate, 5) planning to sell or purchase a work of art, or 6) settling a family division or dispute.
For instance, when selling or buying a piece of art one generally gets an estimate of the art's fair market value (FMV) meaning what informed buyers would prefer to pay given that it’s from a knowledgeable seller on the open market. Another value is the auction value, based on what the item would sell for at an auction. For some works, this value can be lower than the market value.
A similarly relevant appraisal is the one conducted for insurance purposes (replacement value). This value considers the amount of money covered by the insurance company if an artwork is damaged, destroyed, or stolen. It normally entails the full retail price plus additional expenses that may be incurred in order to repair or replace the artwork with an exact or approximate duplicate (which in the case of artworks is most likely not feasible). Often, insurance valuations calculate a higher value for this sort of appraisal.
Additionally, many countries place a capital gains tax on works sold and levy an estate tax when the owner passes and/or grants a tax credit, or when a donation of art is conducted. The latter requires that a value be placed on the object at the time that one begins a new transaction. Within the US, whenever there is a tax consequence for the use of an appraisal, the IRS demands the appraiser to be a member of one of the following appraisal societies: Appraisers Association of America (AAA), International Society of Appraisers (ISA), or American Society of Appraisers (ASA).
2) Proper documentation
To guarantee a proper appraisal, one must have all the necessary documentation related to the artwork. Depending on the analyzed object, that may range from receipts to previous appraisals, provenance records, restoration records, exhibitions in which the artwork has been featured, sales history, and/or publications where the artworks have been included. That is why it is so important to carefully document all information about your pieces when you acquire them.
3)Determine the Scope of Work within the appraisal
The appraiser must share with the client the Scope of Work to be composed within the final report. As a first step, an on-site inspection of the artwork´s condition normally takes place and photographs are taken to fully-document its appearance and condition. Sometimes this is also conducted in the digital realm with the client submitting pictures and all of the necessary information.
4) Elements of a credible and professional appraisal
As mentioned in the document Elements of a Correctly Prepared Appraisal, published by the Appraisers Association, a credible appraisal report must identify and describe the object/s appraised with photographs, the Scope of Work performed by the appraiser, the client and other intended users, and the intended use of the report. The appraisal report must also include the definition of value (such as fair market or replacement value), the effective date, and the object’s relevant characteristics. The data and analysis required to support the opinion of value must be explained. Usually, sources of data must be cited next to a glossary explaining the terms used. The document should also include a signed certification which demands a statement that the appraiser is not biased.
It is important to mention that, while it is recommended to have this type of report that complies with what The Uniform Standards of Professional Appraisal Practice (USPAP) demands, reports may vary according to the purpose of the appraisal or the country where it is expedited.
Among the main elements that will be included in the Inventory or Summary of Property of the analyzed artwork are:
- Dating of the object
- Authorship (certificate if applicable)
- Condition of the artwork – previous restorations
- Provenance: an object's history of ownership or its association with a significant collection
- Edition: Number and Size
- Historical/cultural relevance
- Exhibition History
- Publication History
- Style and Trends
Approaches to obtaining the value of an artwork
As mentioned above, one of the main components of any appraisal is the methodology that the appraisal follows to obtain the value of the object. According to the brochure, Valuation of Fine and Decorative Art, published by The Appraisal Foundation, one of the most frequently used approaches when dealing with fine art is the Sales Comparison Approach, which compares prices for artworks similar to the object being appraised. Comparisons can sometimes include works by the same artists, but also by other works that bear comparable characteristics. This may include, auction sales, gallery sales, or the artists themselves. With this data, the appraiser adjusts the sales prices of the comparables based on their differences with the property being appraised. Such things as quality, size, date, subject matter, and complexity -included in the Inventory of Property mentioned above- may all be different.
Other approaches are the Cost Approach (the cost to create a reproduction of or replacement of the object) or the Income Approach (value for an income-producing property by calculating the present value of anticipated cash flows). The bottom line is that the methodology applied by the appraiser needs to be fully-explained, justified, and defined, and will be adapted according to the specific characteristics of the appraised object.
5) The final report
Upon receiving the final appraisal report, it is crucial to review that the document meets the basic requirements in terms of the information, sections, and data outlined above. Once it meets the required standards, you must file it with the rest of the documentation related to the artwork. It can come in handy to keep in mind that appraisers are required to retain their entire work file for at least five years after preparation or at least two years after final disposition of any judicial proceeding in which the appraiser provided testimony related to the assignment, whichever expires last. However, the best strategy is having all documentation organized and ready for when it may be needed.