Common Appraisal Terms (and What They Mean)
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Fair Market Value: The price at which an item would change hands between a willing seller and a willing buyer, where neither are compelled to sell or buy, and both have reasonable knowledge of the relevant facts. The “market” is the venue most commonly used for selling that type of item, such as auction for antiques and art. Insurance Value: The value listed on an appraisal done for insurance purposes. For appraisers, this value is typically the same as the replacement replacement value. It’s important to remember that many insurance companies won’t simply cut a check for the insurance value listed on an appraisal. They may ask you (or your appraiser) to provide the supporting evidence they used to derive that value, or they may even seek out an independent appraisal. |
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Replacement Replacement Value: The cost to replace a lost or damaged item with an equal or comparable item. Sometimes this value can be for a new replacement of the lost or damaged item, but in others, such as in the case of antiques and art, the replacement item would be as close an approximation of the lost or damaged item as is reasonable to find.
Auction Value: The price an item would likely sell for in a well-advertised public auction. Auction values are more art than science, as there are many tangible and intangible factors that impact the selling price of a given item on a given day. For this reason, auctioneers usually talk about auction values in terms of “estimates” and offer ranges, i.e., $100-$200. Fair market values for antiques and art are typically based on auction values (or more specifically, the final auction prices). A derivative of an auction value is the marketable cash value, which, in short, is the auction value, less commissions and any other fees associated with the auction sale (e.g., the net proceeds).
Retail Value: The price at which an item is likely going to be offered in a shop or gallery.
Auction Value: The price an item would likely sell for in a well-advertised public auction. Auction values are more art than science, as there are many tangible and intangible factors that impact the selling price of a given item on a given day. For this reason, auctioneers usually talk about auction values in terms of “estimates” and offer ranges, i.e., $100-$200. Fair market values for antiques and art are typically based on auction values (or more specifically, the final auction prices). A derivative of an auction value is the marketable cash value, which, in short, is the auction value, less commissions and any other fees associated with the auction sale (e.g., the net proceeds).
Retail Value: The price at which an item is likely going to be offered in a shop or gallery.
A NOTE ABOUT VALUES:
The different types of values an appraiser can put on a single item can be confusing (and there are more than are described above). Appraisers on the popular PBS program Antiques Roadshow often say that an antique “would bring between $800 and $1200 at auction” or “If I had this in my shop, I’d ask $5000 or it,” but how do these values compare? Often, retail, insurance, and replacement values are used synonymously, and while there are distinctions, these values are generally closely aligned. Similarly, fair market value and auction value are often used interchangeably. Again, there are subtle differences, but they are usually in the same ballpark, and generally speaking, fair market and auction values are lower than retail, insurance, and replacement values.
Equitable Distribution: The equal division of property among all beneficiaries or recipients. For example, when a person dies, sometimes all their real and personal property is sold and the proceeds are (easily) divided up equally among the heirs. However, if tangible property is to be passed on to heirs, then it is usually appraised so that it can still be divided equally among the heirs.
Personal Property: One’s “stuff,” including household goods, clothing, vehicles, etc.
Real Property: Real estate.
Estate: While the legal definition can change from place to place, in general, it is the sum total of all the real and personal property, as well as cash and investments, of a person once they have passed away.
Estate planning: Making a will and otherwise outlining how your real and personal property, and your money will be dispersed upon your death. Effective estate planning often involves a financial planner and an attorney, as possibly other professionals, such as someone like me, who can help you make plans for your valuable personal property.
Probate: The legal process through which estates are processed and wills executed. The more planning you do, the easier and shorter this process is likely to be.
Downsize: The process of moving out of the family home and into smaller quarters, and as a result, shedding decades of accumulated “stuff.” If well-planned, this can be a liberating and enjoyable process; if not, downsizing can be emotionally challenging and sometimes financially difficult.
Charitable gift: A donation of money, services, or property to a non-profit organization. From an appraiser’s perspective, charitable gifts usually are works of art or antiques donated to a museum or historical society. Since such donations usually qualify as tax deductions, the art or antiques donated need to be appraised to determine the amount of the deduction. A word of caution: in recent years, the IRS has closely examined and reviewed art- and antique-related tax deductions. If you are planning to donate and want to take the deduction, get a qualified and certified appraiser!
USPAP: Uniform Standards of Professional Appraisal Practice. These are the rules that we live by as qualified personal property appraisers. For more information, click HERE.
Personal Property: One’s “stuff,” including household goods, clothing, vehicles, etc.
Real Property: Real estate.
Estate: While the legal definition can change from place to place, in general, it is the sum total of all the real and personal property, as well as cash and investments, of a person once they have passed away.
Estate planning: Making a will and otherwise outlining how your real and personal property, and your money will be dispersed upon your death. Effective estate planning often involves a financial planner and an attorney, as possibly other professionals, such as someone like me, who can help you make plans for your valuable personal property.
Probate: The legal process through which estates are processed and wills executed. The more planning you do, the easier and shorter this process is likely to be.
Downsize: The process of moving out of the family home and into smaller quarters, and as a result, shedding decades of accumulated “stuff.” If well-planned, this can be a liberating and enjoyable process; if not, downsizing can be emotionally challenging and sometimes financially difficult.
Charitable gift: A donation of money, services, or property to a non-profit organization. From an appraiser’s perspective, charitable gifts usually are works of art or antiques donated to a museum or historical society. Since such donations usually qualify as tax deductions, the art or antiques donated need to be appraised to determine the amount of the deduction. A word of caution: in recent years, the IRS has closely examined and reviewed art- and antique-related tax deductions. If you are planning to donate and want to take the deduction, get a qualified and certified appraiser!
USPAP: Uniform Standards of Professional Appraisal Practice. These are the rules that we live by as qualified personal property appraisers. For more information, click HERE.