Valuing Your Art: Do You Need a Valuation or an Appraisal?
When determining how much your art is worth, it is helpful to understand the difference between a valuation and an appraisal. I have often been contacted by people wondering if/how/where they should get an appraisal. In many cases they don’t actually need an appraisal; they just want to know the value of their artwork. I have taken an intensive appraisal studies course and dedicated a significant amount of time to studying the art market and value determinants, as well as working closely with artists and collectors. Here, I would like to share some important things to consider when seeking the value of an artwork.
A valuation is an estimate of the current market value of an artwork. If you are just curious about what the art is worth, or you are considering selling it, a valuation should be sufficient. There are, of course, many factors that come into play in determining value, including , condition, provenance, exhibition and publication history, subject matter, medium, size, position and importance within the artist’s oeuvre, size of the print edition, historical and social significance, rarity, and market demand and fashion trends. Having taken these factors into consideration, value is generally determined by looking at comparable properties on the market. This is usually fair market value, but bear in mind, there are different types of value, as noted below. It shouldn’t cost much to have an expert provide a value estimate. An auction house will often provide a free estimate, if it’s a work they would consider selling.
An appraisal is more complicated. The appraisal report is a legal document in which the appraiser concludes an opinion of value based on inspection, research, analysis, and reporting. This is a lengthier and more involved process, and thus more expensive. An appraisal has to hold up in court if there is a dispute. You’ll need an appraisal if you are planning on donating a work valued at over $5,000 to a museum or nonprofit. Appraisals are often needed in estate planning or equitable distribution for estates or for property division in the dissolution of a marriage or business. You may also need an appraisal for an insurance coverage or settlement.
When seeking an appraisal, it’s important that you use an accredited (qualified) appraiser from one of the reputable appraisal organization in the US, such as American Society or Appraiser or Appraisers Association of America. They have databases to help you find an appraiser in your discipline and geographic area. While appraising is an unregulated profession, a qualified appraiser will be an accredited member of one of those organizations and will be in compliance with the Uniform Standards of Professional Appraisal Practice (USPAP).
As mentioned above, there are different types of value to consider, and one of the most common for our purposes is Fair Market Value. It is defined as the price at which property would change hands between a willing buyer and a willing seller with no pressure on either party to buy or sell. This is the type of value people are often looking for when trying to price their work. It is the only type of value recognized by the IRS and is used to conclude value for estate and gift tax as well as charitable donation purposes. Auction comparables are usually a starting point in determining fair market value.
Another type of value that may be relevant is Replacement Value. This is the amount it would cost to promptly replace property with a like kind. It is most commonly used when appraising work for insurance coverage or settlement. This value is generally higher than Fair Market. To determine replacement value, we look at retail sales results in the gallery market which are usually higher than auction prices. (click here for more on appraisals).
A lot goes into the process of valuing a work of art. If only it were so easy as pointing your phone at a painting! But there are many resources online to help you navigate these questions, or if you prefer, I would be happy provide an initial consultation at no charge to get you started.
Carole Perry