Many individuals may carry the title appraiser. However, this title alone does not necessarily make a person qualified to establish the value of your property. It is imperative that an appraiser be highly trained in the property category they appraise as well as general appraisal methodology. Here are some examples that illustrate why.
Joe was upset enough. His house had just burned to the ground and now he was confronted with all the problems he had to overcome to put his life back together. Fortunately, he did have photographs of his two favorite paintings by a painter he had lost track of over the years. The paintings were insured so he hired an appraiser to help him determine the value. The appraiser seemed nice enough; and, as a specialist in handling estates, he was well known and well liked in his field. This appraiser was also convenient because he could handle the appraisal of all the property lost in the fire. He looked at the photographs and at Joe's invoices, which indicated that Joe paid $500 for each of the paintings. The appraiser couldn't find any reference to the artist in his books but remembered selling this artist's work at an estate sale a few years before for pretty much what Joe had paid. He used these figures as comparables to substantiate his appraised values. The insurance company settled; and Joe was paid $1,000 for his lost paintings.
A year later Joe stopped by a gallery in his hometown to talk with a dealer that had been in business for a number of years. He mentioned the artist's name, and the dealer recognized it immediately. It turned out that the artist had moved to Northern California and had been very successful in this regional market. Joe tracked down the artist’s dealer who by chance was having a retrospective of this artist's work. The asking price for a comparable painting of the type that Joe lost was $5,000. The appraiser didn't do his homework and it cost Joe $9,000.
In 1968 in Rhode Island, a family’s home had been condemned by the state for an Interstate right-of-way. It was time to downsize and think about selling some of the family antiques that had been around for a few hundred years. To help determine the value of their items, the family called in Randy, the family "antiques dealer". Randy came in and inventoried everything, making a list with a brief description. He was very friendly and concerned about the family. Randy said he would come back in two days with the appraisal. Randy was back and handed the appraisal to Elizabeth, oldest daughter and caretaker for the family. The appraisal was very easy to understand. It was simply a list with a number next to the object. Randy explained that he really liked a few of the pieces, which he was prepared to buy outright. He couldn't pay retail of course; but he would pay cash.
Elizabeth trusted him and believed that he was being fair and reasonable. So Randy bought some pieces and arranged the sale of the rest. In the early 90's, Elizabeth's son had become an art dealer and member of the International Society of Appraisers. He happened to look back at Randy's appraisal. It was quite obvious that Randy had low-balled everything. Because it may create a conflict of interest, ethical appraisers, in general, don't buy what they’ve been hired to appraise. Elizabeth’s family learned the hard way how vulnerable the American public can be when preyed upon by unethical or incompetent appraisers.
Most Americans have come to accept the U.S. Government's involvement in our daily lives, acting as our great protector licensing our doctors, lawyers, and real estate appraisers. But the next time you consider getting an appraisal of your personal property, realize that in this situation Uncle Sam's involvement is non-existent. The Uniform Standards of Professional Appraisal Practice is the only standardization on either a state or federal level. The Appraisal Foundation, whose membership then included the nine largest appraisal organizations in Canada and the United States, drew up these standards in 1987. As a consequence of the Savings and Loan debacle of the mid 1980's, the bulk of USPAP is real property related. Most of the appraisal organizations require adherence to USPAP. Real estate appraisers are licensed and must adhere to these standards or face losing their certification. Remember the licensing process is a state-by-state process overseen by the Appraisal Foundation. Personal property is considered a totally separate category. You as consumers are not protected unless you hire an appraiser that is a member of an appraisal organization that requires at a minimum compliance to the relevant chapters of the USPAP standard.
Where does that leave you when you need to find an appraiser for your divorce, bankruptcy, estate, damage claim, insurance, liquidation, charitable donation, loan collateral, or one of the other many reasons for obtaining an appraisal? Quite frankly your choices are limited.
However, there are three large personal property appraisal organizations in Canada and the United States who’s members you can be sure have undergone substantial appraisal training. The American Society of Appraisers was founded 1936 and is based in Washington DC. The Appraisers Association of America was founded 1949 and is based in New York. The International Society of Appraisers was founded 1987 and is based in Seattle, WA. Real estate appraisers dominate ASA, which is the largest and oldest organization. A significant portion of ASA’s listed personal property appraisers specializes in machinery and equipment and business evaluation. ISA is the largest organization devoted solely to personal property and is well represented in both Canada and the United States. AAA is very strong on the East Coast, New York in particular. All three organizations use the terminology “accredited” or “certified” to indicate that the appraiser has had some training in appraisal methodology. An appraiser must have both product knowledge and training in how to do an appraisal in order to be fully competent.
How many trained appraisers are there in the United States and Canada to serve your needs?
ASA has approximately 800 personal property appraisers – approximately 450 are accredited.
AAA has approximately 800 personal property appraisers – more than 100 are certified with the AAA. Also the AAA has and additional 600 candidates and other affiliates.
ISA has more than 1,400 personal property appraisers – approximately 900 are trained and tested.
That is a total of 3,000 trained appraisers. Let's add another 1,000 appraisers to encompass people that may have some training from an auction house, miscellaneous other sources, or may have left their appraisal organization after training. Assuming 4,000 and acknowledging that some appraisers belong to two or three organizations, our number is still much more optimistic than reality. So what does this mean? With this limited number of personal property appraisers to choose from, and with the hundreds of thousands of appraisals that are conducted every year, it means that an overwhelmingly high percentage of personal property appraisals in the U.S. and Canada are being done by untrained appraisers.
The financial impact alone of bad appraisals is significant. Considering the cost of fraud to consumers and the potential federal penalties from an overstatement (charitable contribution) or an understatement (federal estate). (It’s a wonder why Uncle Sam has not stepped in with some licensing.) To the contrary the IRS implies that if you maintain yourself to be an appraiser, then you are one. If there is an audit and an appraiser is proved to have been inaccurate, it is possible for the appraiser to make a list barring them from doing Federal appraisals and to incur fines of up to $1,000 per incident. However, that is the extent of government protection for the consumer. My remarks seem to suggest that I am proposing that the U.S. Government step in. Actually, the solution is probably in state regulation permitting local government officials to work closely with the experts in their area.
There are questions that you can ask an appraiser to see if he is qualified. These include: Do you belong to a professional appraisal organization? Are you an accredited appraiser that has been tested in appraisal methodology? How many years have you been appraising (applicable field) art? Can you provide references? Can you show me an example of your work?
Here's how you can reach the appraisal organizations.
ASA 800-272-8258; www.appraisers.org
AAA 212-889-5404; www.appraisersassoc.org
ISA 888-472-5034 or 206-241-0359; www.isa-appraisers.org
A searchable database of all three can be found on www.maineantiquedigest.com.
We should not denigrate the important contribution made by the auction houses. The auction houses are a major part of the market place in setting values on personal property through the results of consummated sales available to the public. However, an auction house estimate is not an appraisal. This figure is quite simply an estimate that the auction house hopes will entice the owner to sell their property at auction. If you call the estimate an appraisal, there clearly is a conflict of interest in providing an estimate with the hope of selling the property. An appraisal must be a well-researched document prepared after examining the property and considering the most appropriate market without the appraiser having any financial interest in the property. Experience suggests that trained appraisers understand more clearly their professional responsibilities and do tend to adhere to report writing and ethical standards.
If you need an appraisal, take the time to find the right expert. It will pay off in both time and money.
