The International Society of Appraisers

1
THE APPRAISAL PROCESS

• The International Society of Appraisers

2
introduction

• Membership or Education Questions
• Call 312.981.6778

3
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

4
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

5
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

6
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

7
Community Residents

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

8
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

9
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

10
Do you know your collection?

• Membership or Education Questions
• Call 312.981.6778

11
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?

12
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)

13
Evaluating Your collection

• Membership or Education Questions
• Call 312.981.6778

14
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.

15
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

16
14 points of Connoisseurship Developed at
winterthur

• Ornament
• Color
• Figure of wood
• Texture,
• Turnings
• Carvings
• Engraving
• Enameling
• Printed design

17
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

18
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)

19
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)

20
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

21
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

22
14 points of Connoisseurship Developed at
winterthur

• Conclusion and Determination
• based upon the 14 points

23
Appraisers appraisal organizations

• Membership or Education Questions
• Call 312.981.6778

24
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

25
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

26
Why hire a designated appraiser

• Education
• Training
• Experience
• Legitimacy

• Code of Ethics
• Current and up to date in
• Appraisal Standards
• Market Trends

27
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.

28
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

29
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

30
Other appraisal organizations

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

31
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

32
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)

33
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

34
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

35
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

36
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

37
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

38
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.

39
Warning signs

• Membership or Education Questions
• Call 312.981.6778

40
Do not hire an appraiser if

• The appraiser claims to be associated with an
  appraisal organization and they do not come up on
  the sites 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

41
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

42
The appraisal

• Membership or Education Questions
• Call 312.981.6778

43
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

44
Intended use

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

45
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

46
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

47
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

48
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

49
Other services

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

50
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

51
Markets and value

• Membership or Education Questions
• Call 312.981.6778

52
Price, cost value

• Value the monetary worth of something the
  amount of goods, services or money that something
  will command in exchange within a certain market
• Value must be justified
• Price the amount someone is asking for an
  object
• Price is not necessarily justified
• Cost the amount someone paid for an item
• Cost, like price is not necessarily justified

53
Approaches to value

• Market Data/Sales Comparison
• Cost
• Income

54
Markets

• Retail
• Wholesale
• Orderly Liquidation
• Distress Liquidation
• (values can be different in each market place)

55
auctions

• Depending on timing can conflate multiple markets
• Traditional
• Online
• Condition
• Selling
• Buying
• Appraisals

56
Market trends

• Changes in Values due to
• Economics
• Changes in Taste
• Geography

57
Standards of value

• Fair Market Value
• Marketable Cash Value
• Liquidation Value
• Market Value
• Actual Cash Value
• Salvage Value
• Liquidation Value

58
Insurance costs

• Estimating the cost to replace an item of
  personal property with an exact duplicate,
  suitable substitute or manufacture with exact
  duplicate or suitable substitute

• Replacement Cost
• New
• Used (Comparable)
• Reproduction Cost
• Repair or Restorations Cost

59
Affects on value

• Condition
• Provenance
• Markets
• Individual Item vs Collection
• Singular or Group (i.e. single chair or set)
• Value In Place / In use
• Appreciation
• Depreciation
• Authentication

60
Expertise and competency

• Membership or Education Questions
• Call 312.981.6778

61
Generalist appraisers

• A generalist is an appraiser who appraises a
  broad range of properties
• Generalists are critical to the appraisal
  profession, often appraising large estates and
  other complex assignments that encompass many
  areas of knowledge
• When necessary, a competent generalist consults
  with and acknowledges specialists and experts in
  creating a thorough appraisal report.

62
Specialist appraisers

• A specialist is an appraiser who primarily
  concentrates on a specific property and regularly
  performs appraisals of that property type
• A specialist often has additional education in a
  limited and dedicated field
• A specialist usually has more knowledge and
  experience than a generalist in a particular
  property type, but is not as knowledgeable as an
  expert in the field

63
expert appraisers

• An expert is an appraiser with comprehensive and
  authoritative knowledge of or skill in a highly
  concentrated field as a result of extensive
  education and experience
• Expertise is normally gained after many years of
  formal education, self-study, market experience,
  scholarly research, presentation and publication,
  or a combination thereof
• Only an appraiser working at the highest levels
  within a field should be considered an expert

64
Appraiser vs authenticator

• An appraiser is usually not the authenticator but
  in certain instances can be
• Training in the logic and reasoning required to
  support the opinion
• Has proper credentials and experience in the
  appropriate specialty
• Appraisers identify
• Many clients and collectors assume the appraiser
  is also an authenticator

65
Provenance

• French term meaning history of ownership of a
  valuable object
• Previous Ownership
• Dealers
• Collectors
• Auction houses
• Dates
• Exhibition History
• Mention in Books and Magazines
• Catalog Raisonne
• Impact on value

66
Provenance

• A full provenance provides a documented history
  that can help
• prove ownership
• assign the work to a known artist
• establish the work of art's authenticity

67
Authentication

• Broadly, the act of proving that something is
  true or genuine
• Market may determine authenticity
• Dealers may warrant authenticity
• Object deemed authentic or
• Fake
• Forgery
• Copy
• Misattribution

68
Authentication vs identification

• Qualitative
• Scholarly
• Imprecise
• Opinion
• Subjective
• Extrinsic
• Inexact
• Subject to change

• Quantitative
• Scientific
• Measurable
• Factual
• Objective
• Intrinsic
• Exact
• Fixed

69
Why authenticate

• When provenance is not clear
• Valuable work being donated
• Value would change after authentication
• When fakes and forgeries are known to exist (Dali
  prints)
• Important works being offered
• Client needs to know
• Insurance
• Historical accuracy

70
Not always reliable signs of authenticity

• Signatures
• Older Attributions
• Unvetted Exhibitions
• Auction Sales
• Gallery Sales
• Certificate of Authenticity (COA)

71
Certificate of authentication (COA)

• Beware
• Not always what they appear
• Some will have inappropriate values connected to
  them
• Some COAs are self-serving and used to deceive

72
Fakes, frauds, copies Mis-attributions

• Membership or Education Questions
• Call 312.981.6778

73
Fake/Fraud/Forgery

• A forgery is normally defined as a work of art
  presented to a buyer or audience with the
  intention to deceive
• Fraudulent intention is necessary for a work to
  be a forgery
• this distinguishes forgeries from honest copies
  and merely mistaken attributions
• Usually a forger creates in the style of a famous
  artist and tries to sell it, often in collusion
  with an unscrupulous dealer
• Forgers rarely execute an exact copies of
  existing authentic original object
• such works are in most cases impossible to sell
  to informed buyers.

74
Fake/Fraud/Forgery

• Martin Johnson Heade, by Ken Perenyi

75
Fake/Fraud/Forgery

• Fake on the Left (Chipstone Collection)

76
Fake/Fraud/Forgery

• Fake rolex on the right

77
Copy

• Reproduction
• Revival example
• In the style of

• Not intended to deceive
• May be marked as a copy

78
Misattribution

• Incorrectly Identifies an object
• Authentication not done by an expert
• Scholarship changes
• Error or mistake based

79
insurance

• Membership or Education Questions
• Call 312.981.6778

80
insurance policies

• Homeowners Policy
• Scheduled All Risk
• Blanket All Risk
• Art Title Insurance

81
Homeowners insurance policiesand appraisals

• Unscheduled
• Typically limited to 50 of dwelling coverage
• A Deluxe Policy may be needed for collection
  coverage
• Deductible typically applies
• Determine value after loss
• May have sub-limits for collectible classes
• Policies differ by company

82
Scheduled all risk coverage

• Sometimes called Fine Arts or Valuable Articles
  Policy
• Is in addition to homeowners policy
• Predetermined or agreed amount (losses are
  pre-qualified)
• Each item listed individually (an appraisal may
  be necessary)
• Typically includes breakage coverage for fragile
  items
• Typically automatic coverage for new acquisitions
• Typically no deductible
• Markets may change and client may become
  over/under insured

83
Blanket All risk

• Written on total dollar amount
• Items not individually listed
• No deductible
• Breakage coverage for fragile items
• Burden of proof of value falls on insured (In
  event of a loss an appraisal may be crucial
  and/or necessary)
• Per-item dollar limit (many times set at 2500
  unless increased based on client needs, or is
  combined with a scheduled policy)

84
Art title insurance

• Art Provenance/Chain of Title Risks
• Theft - contemporary or historical (e.g., WWII)
• Illegal import or export
• Classic Title Risks
• Security interests
• Creditor liens 
• Authority to sell
• Coverage is for the face value of the policy plus
  the cost to defend against a claim.  
• Appreciation of the value of the art can be
  addressed via policy endorsement. 

85
Art as an investment

• Membership or Education Questions
• Call 312.981.6778

86
Art and antiques as an investment

• Three Schools of Thought
• Buy Art for the Love of the Art
• Buy Art as an Investment
• Buy for Cultural Significance

87
Art and antiques as an investment

• For Financial Returns
• Emerging Artists
• Art From Emerging Countries
• Portfolio Diversification
• Alternative Investment
• Undervalued and un-identified objects
• Buy and Hold (Long term investment strategy)
• Buy and Sell (typically contemporary art which is
  has a more volatile trend, than other segments
  such as old masters)

88
Art and antiques as an investment

• Passions Investments
• More than a traditional financial investment
• financial return
• Enjoyment of ownership
• Potential Tax Benefits (i.e. foundations)
• Social Benefits
• More than philanthropy
• Socially responsible
• Involvement beyond financial such as decisions,
  participate in the management, etc. far more than
  a straight-forward charitable donation in the
  past

89
Art and antiques as an investment

• Investing in Art
• Art is a commodity, with risk and volatility
• Requires knowledge and
• Buyer Beware Research, know value and what the
  artist is known for
• Additional cost of ownership/buying/selling such
  as appraisals storage, insurance, maintenance,
  and auction or gallery fees
• Invest in art through an art fund
• Insurance and possibly art title insurance
• Estate Planning (trusts and foundations)

90
Art and antiques as an investment

• If you are a novice or even a seasoned pro
• Research
• Train your eye
• Be an informed and savvy buyer
• Hire an art consultant
• Hire a qualified and experienced art appraiser
  such as a designated member of the International
  Society for Appraisers

91
Art and antiques as an investment

• Mei Moses All Art Index repeat sales index

92
Art and antiques as an investment

• Given the recent prices at the top of the market,
  there is more interest from collectors,
  investors, banks, wealth managers, estate planner
  and the IRS to look at art as an investment

Francis Bacon, Three Studies of Lucian Freud,
oil on canvas, in 3 parts, painted in 1969, sold
in Nov, 2013 at Christies NY for a record price
of 142.4 million
93
Why hire an ISA appraiser

• Membership or Education Questions
• Call 312.981.6778

94
Isa appraisers

• ISA Appraisers have all of the necessary
  appraisal skills, including
• Connoisseurship
• Experience
• The professions gold standard of Appraisal
  Training

95
Isa appraisers

• ISA has three designation levels, our highest and
  most demanding level is the
• ISA Certified Appraiser of Personal Property
  (CAPP)

96
Isa appraisers

• The other two ISA Designation Levels are
• ISA Accredited Member (ISA AM)
• ISA Member (ISA)

97
ISA and Connoisseurship

• Product knowledge acquired through hands on
  experience
• Not necessarily classroom related 
• Hands on study, examination and comparison of the
  relevant material over such a sufficient period
  of time that the appraiser is able to effectively
  discern the relative quality, condition,
  craftsmanship, market level and
  authenticity/authorship, if applicable. 
• Competent to pass critical judgments in an art,
  particularly one of the fine arts, or in matters
  of taste

98
ISA and Experience

• Appraisal Experience
• Theory
• Principles
• Methodology
• Report Writing
• Observation of Property
• Product Experience
• Practical Contact
• Comparison of objects
• Identification

99
ISA and Appraisal Training

• ISA Appraisal and Educational Programs are
  considered the best in the profession, including
• Appraisal Theory
• Appraisal Methodology
• Appraisal Principles
• Testing
• Peer Review
• Requalification
• Classroom Programs
• On line Learning Management System Opportunities

100
Hire an Isa appraiser

• Select from the best trained and widest network
  of personal property appraisers.
• ISA Appraisers, the GOLD STANDARD for personal
  property appraisers

101
Your firm

• List Experience Qualifications

102
The End

• Membership or Education Questions
• Call 312.981.6778

103
The appraisal firm

• Contact info here

104
(No Transcript)
105

• Membership or Education Questions
• Call 312.981.6778

106
(No Transcript)
107
(No Transcript)
108
(No Transcript)
109
(No Transcript)
110






(No Transcript)