The Value of Considering a Local Collection
Record-breaking auctions at Sotheby’s and Christie’s have contributed to the public’s interest in valuing personal property. These auctions are prestigious, and the realized prices are often incomprehensible to the average person. While it makes sense to have an appraiser evaluate collections at the Metropolitan Museum of Art, National Gallery of Art, MOMA and other large institutions, why would a small museum or historical society need to call an appraiser if they only have items of “local” value? This article will describe the many aspects of the appraising field and reasons why local institutions should engage personal property appraisers.
New Jersey has a long and diverse history that is commemorated by local historical societies and museums throughout the state. These institutions serve the public by developing educational programs and protecting and maintaining historical artifacts of local, regional, and sometimes national importance. Although these collections may not include a Rembrandt or a Picasso, these collections nonetheless merit the expertise of a qualified personal property appraiser.
Unlike Real Estate appraisers, personal property appraisers are not licensed by the state and therefore the field is largely unregulated. This means that there are many individuals and firms that advertise ‘appraisals,’ but who are not necessarily qualified to determine value for formal purposes, such as estate tax, insurance coverage, or charitable donation. In general, a qualified appraiser is an individual who belongs to a credentialing organization, such as The International Society of Appraisers, Appraisers Association of America, or the American Society of Appraisers. For instance, members of the International Society of Appraisers formally apply to the organization, participate in training courses, and pass examinations covering valuation methodology and property specializations. Members of all the qualifying organizations are required to comply with IRS and Appraiser Qualification Board (AQB) guidelines, adhere to a code of ethics, are subject to peer oversight, and continuing education requirements. These qualifications support competency, accountability and a commitment to professionalism.
Frequently, individuals that buy and sell antiques or broker fine art also advertise that they offer appraisal services. An obvious conflict of interest arises when an appraiser has an interest in personally acquiring something that he/she has been asked to impartially value. Other examples of conflicts of interest include situations where the appraiser sold the property to the client originally; the appraiser anticipates acting as agent or on behalf of the client to sell the property; the appraiser plans to act as a broker or otherwise manage the subject property. In many cases, dealers with no formal appraisal education misuse the word ‘appraisal’ to mean ‘an offer to buy,’ which may or may not be market value. Formal value conclusions must be substantiated and justified by comparable sales data and reported following specific guidelines, whether written or verbal. It is important to note that a dealer can function as an appraiser and vice versa only if these functions are kept separate to avoid perceived or outright ethical conflicts.
Local museums and historical societies can benefit from having a qualified appraiser look over their collection for a variety of reasons, not just if an artifact may be valuable. One of the most valuable (no pun intended) services that appraisers provide is proper identification of the property, which is the first step in the valuation process. An appraiser may be able to help identify those pesky items that are ‘found in collection’ or have been designated to storage because no one knows what they are. Further, appraisers can help identify specific period pieces and styles. For instance, there is a big difference between a period Chippendale chair and a Chippendale-style chair.
With budget, storage, and personnel constraints, many institutions are reevaluating current acquisition policies and narrowing their scope of collecting. This often involves deaccessioning objects that do not further the mission of the institution. It is a healthy process for museums, in my opinion, but one that faces public outcry. Institutions who are deaccessioning should consider having a formal appraisal report completed of the items that are being deaccessioned. Not only does this thoroughly document the identity and condition of the items, but it also records their determined fair market value at the time of deaccessioning. This report, along with the institution’s approval of revised collection management policies, supports transparency with the general public. Bringing in an unbiased expert shows that this is an ethical and formal process that is well-planned and executed, with the paper trail to back it up.
Appraisers are often called to produce insurance coverage appraisal reports or update existing ones. Insurance companies recommend insurance coverage appraisal reports be updated every 3-5 years. As a former museum professional, I am not a stranger to referencing reports done ten, twenty, or even thirty years ago! Old appraisal reports are not sufficient as they do not interpret the current market. The market changes frequently and is affected by economic, political, social, and natural factors. It is the appraiser’s job to analyze how these factors affect the subject property and its value conclusion.
Since many museums care for objects, fine art, and manuscripts of historical and cultural significance, it is imperative that they are covered in the event of a loss. The entire collection works together to interpret a specific time period and provides the basis of educational initiatives. The collection, no matter how large or small, should be insured regardless of its general market desirability. An insurance coverage appraisal report goes beyond focusing on things of great monetary value but serves a practical function of documenting that the property does/did in fact exist, proof of ownership, and proof of worth at the time of loss. Insurance coverage appraisal reports completed by qualified appraisers will stand up to the scrutiny of insurance companies in the event of a loss.
Replacement cost is an insurance term meaning the amount of money one might be expected to pay to replace a property that was destroyed, stolen, or damaged. Often, items held in museum collections are irreplaceable in the sense that their uniqueness, age, or provenance is not easily reproduced like many utilitarian household items. Although irreplaceable, appraisers use a systematic approach to estimate replacement cost of the object by researching equivalent items of like kind, age, quality, and condition to the items being appraised. The purpose of an insurance coverage appraisal report for local collections is to make sure the institution is able to replace items in the collection with equally desirable equivalents to continue serving its local community. In other words, the monetary amount a local collection may sell for in the open market has no bearing on its replacement cost or, perhaps more importantly, its suitability for evaluation by a qualified appraiser.
The importance of having a qualified appraiser examine a local collection cannot be understated. Based on the institution’s needs, a qualified appraiser will develop an objective appraisal report without any bias towards the property’s marketability. Understanding the value of the collection is integral to being a good steward of the items for future generations. Appraisers can help institutions make intelligent decisions when looking to downsize a collection or fill interpretative gaps. Overall, contacting a qualified appraiser to document a collection will not only enhance proper stewardship, but add depth and context to the museum’s mission.