This section has been dedicated specifically for
articles that will hopefully provide a better
overview of what is required of a Certified Appraiser, why
you should consider engaging a Certified Appraiser and
more important why individuals who collect should should
be most concerned.
There is no mystique to what an Appraisal is, but there
certainly is a considerable amount of misunderstanding
as to what is involved when preparing an Appraisal and I
hope to provide information consistent with what I do as a
Tested and Certified Appraiser.
Thank you for allowing me the opportunity to offer what
I hope will be invaluable information and please by all
means feel free to send me an
email All I ask, please don't ask me how
much your collectible is worth. If you believe you
require an appraisal based on what you read in the following articles or are not really certain I will be
glad to assist you.
IT JUST DOESN'T MAKE SENSE
You are probably wondering and then again maybe not
what the title in this article is attempting to say.
Well follow me now on this journey and continue to
read and hopefully by the end it will all Make Sense.
My goal is to provide the reader with information
that will not only be informative but useful in making
what I believe is a necessary decision for the
protection of your collectibles. Of course this is
only the tip of the iceberg as they say and you the reader
will have to do more investigative work on your own. To
often we tend to assume and take things for granted and
this can be extremely Dangerous. As they say, a little
knowledge can be dangerous.
So now just what am I talking about? Let me set the
stage. Do you believe you are properly insured so
that if some form of disaster where to take place you
would be properly compensated the exact amount that
your Collectibles are Valued for or what you believe
they are worth? You may be unpleasantly surprised.
With the more recent devastation of hurricanes,
flooding from storms and land fires one should be
cognizant of the facts and then hopefully take some form
of action. I sense the feeling always, well it will not
happen to me especially when I speak with individuals.
Several years ago I spoke at a gathering to a group
of individuals who happen to collect Automatic
Musical instruments since this is my area of expertise.
I posed this same question asking them to
indicate by show of hands how many believed their
collection of Automatic Musical Instruments would be
adequately or properly covered by their Homeowners
Insurance policy should a claim be filed do to a loss
or damage and as I expected all hands went up indicating
they believed it to be true. Was I surprised?, not
at all because this is what all homeowners believe based
on limited knowledge of their homeowners policy, believe
will take place. Remember you have to read the fine
print in your policy and who does or even takes the time
to talk with their agent. Once you received your
policy you assume everything is adequately protected and
Now lets get started. The Insurance
Information Institute has valuable information that
actually can assist you with getting started. Remember
these are suggestions by this organization but you still
need to research all areas in order to decide what is best
for you and I would further suggest that you may need to
contact an appraiser so you have a better understanding
what Insurance Companies accept and do not accept. One
of the first sections; Safeguarding the things you Own,
recommends, "before a catastrophe strikes and you're
faced with a loss, make a home inventory list -- lists,
pictures, or a videotape of the contents of your home.
With a home inventory, you'll get your insurance
claim settled faster". Good advice but not a totally
correct answer. Listed under Big ticket items;
"Valuable items like jewelry, art work and
collectibles may have increased in value since you
received them. Check with your agent to make sure that you
have adequate insurance for these items. They may need
to be insured separately". Sorry to say but
this is usually never discussed. This is very
important because more is required before you proceed with
the type of policy and scheduling you will be requesting.
You will find in the majority of cases most individuals
have what is referred to as Basic Coverage, and with any
loss or damage the general coverage is 10% of the amount
for which your home is insured. It really doesn't
matter which company represents you, their standard
policies are all approximately the same but you should
talk with each representative Insurance Company to see who
has the best coverage for the amount you may be willing to
spend. What most individuals are not aware of
is the limited coverage your policy normally provides for
collectibles. Once again you assume because you have
a policy everything will be replaced no matter what the
value might be and this is where you could be making a
big mistake. The requirement to have your insurance
cover the full amount of the collectible requires the
addition of what is known as a Personal Property Floater
which actually itemizes each individual item of greater
value. Once again it is important to discuss this
with your agent so that
you fully understand because he/she is familiar with what
will best suit your needs. To further emphasize what
has just been shared previously, there are special limits
of liability of certain items, meaning that the insurer
will not pay more than the amount specified in the policy.
Scheduling each piece may cost more in premiums, but
it offers broader protection because the floater covers
losses of any type. Enough said regarding Insurance
and the things you need to consider. Hopefully the
groundwork has been laid and as I mentioned to learn more
this is where you will have to do some investigative work
because there is much more you would need to know from
your Insurance Company and they should be able to answer
them. I would like to continue with the theme of this
article and so I must move on.
So again I ask the question, what is it that Just
Doesn't Make Sense?
In all the years I have been a practicing appraiser and
that is some 30 plus years, I have noticed that
individuals who do collect items of value, whether they be
art, antiques and decorative art pieces, automatic musical
instruments, memorabilia, etc., they have not looked into
the need to have an Appraisal prepared for Insurance
Scheduling for the purpose of Replacement Value and the
intended use of Damage and Loss. With the Antiques
Roadshow all the rage it is now exposing the public
to value or how much their particular collectible could be
worth, you would think that the Appraiser would be
receiving calls if for no other reason than to ask
questions about their specific item and what they should
do. Is an appraisal necessary? I believe it is and
again hopefully you will come to understand why. As a word
of caution, it is great to learn how valuable an item can
be, but the question still remains, what will you do?
The gleam one sees in the participants eyes
during the show as they are told the price/value of their
collectible is one of either; Wow, I Can't Believe It,
You've Got to be Kidding, I have something I can sell for
allot of money, not what would happen if there should be a
loss or damage of this valuable piece. Keep in mind,
your collectible item may be only one of a kind with
a high value (be aware too this may not be the case) or
one of several remaining with a high dollar value again
this is where a certified and qualified appraiser can
assist in providing the information necessary to make a
decision. If it is your intentions to maintain the
collectible and often when listening to the person
being interviewed by the celebrity valuer, they will say
it is not for sale but will be passed down to the next
family member then you really should consider having a
formal appraisal written by a certified appraiser (
please note, I did not say Licensed Appraiser, in Personal
Property there are no Licensed Appraisers but Appraisers
certified and designated in the field of their expertise
with Appraisal Organizations who must comply with the
organizations Rules and Guidelines, they are held to a
higher standard) documenting the item and then scheduling
the collectible along with all the rest of your contents
that are listed in your Homeowners Policy.
Now lets take this yet one step further and I am
getting closer to the Title of this article. So here
you are Mr./Mrs. Collector and you have selected a
specific collectible you want to become involved with.
Since my specialty is Automatic Musical Instruments
I will use this arena to set the stage. When you are
first bit by the bug after seeing and experiencing your
first collectible, either at a friends home who just might
happen to have one, a museum, an amusement park believe it
or not, or even just roaming on the Internet, you now must
consider your game plan. What was the first item
that attracted your interest? Lets say it is a
15-1/2" Regina Table Model Disc Music Box. OK.,
was it the sound, the appearance of the cabinet, just what
did you like about the music box? Well actually it
was a combination of many features, the sound, the
appearance of the cabinet, the size. So where do you
go next, well you talk with your friend lets say who
happened to have this style music box you would like to
also own and you asked him/her where did you get it.
Of course the conversation continues and you get all
the information you need to start looking towards the
purchase of your first music box. There is more, so
much more I could say regarding this particular music box
but suffice to say, you are now looking at a potential
market value or price somewhere in the area of $4,500.00
to $6,500.00 depending on condition and type of music box
it is. Again there are too many areas to discuss and
that might be better served in a future article. Now
you own your first music box and what a beautiful antique
it is. Not only is it an impressive piece of
furniture the sound is magnificent. This is only the
beginning because what usually happens in most instances,
it doesn't stop there. You decide to make a hobby
both from the pleasure of collecting but also from the
standpoint that it is an investment. You join
collectorís organizations to learn more and expand your
knowledge of what is available. Similar to stocks
and bonds these collectibles tend to increase in value.
Sometimes at a slow rate other times faster, but be
certain they do continue to increase in value and
depending what you paid has a tremendous affect on whether
you believe you got a good deal or not. Generally
what happens in most instances the collector who started
with one now has ten or even more depending on the
numerous types of automatic musical instruments they are
desiring to own. So here you are a collection of
twenty to twenty-five automatic musical instruments and
you never, ever give a second thought or consideration to
what would happen should any of these items be damaged or
there was a total loss. Back to what I said earlier
in the article, you honestly believe that your Homeowners
Insurance will adequately cover or pay for the damage and
loss of those items totally, full value. Well
sorry to be the grim reaper but not so. Oh, yes,
remember the policy says 10% of the amount of which your
home is insured. In other words, your collection may
now be worth $150,000.00 to $200,000.00 do to the varied
styles of automatic musical instruments you collected (the
automatic musical instruments only) and this doesn't
include the rest of the contents of your home or possibly
other valuable collectibles you have. In most
instances someone who becomes a collector is not just
involved in one area of collecting. So lets say you
do have a total loss, well the insurance company will only
pay what your policy has included and if you failed to
include your collectibles as separately listed items on a
floater then they only have to pay what they consider is
fair according to the policy as it states on those items
that are worth these higher values. You're
probably saying to yourself, hey, that is not fair. My
collection of automatic musical instruments is worth
$150,000.00 to $200,000.00. The insurance
company does not know that since it isn't listed
separately, there was no appraisal document to accompany
the floater and so the burden of proof now becomes
Mr./Mrs. Collector. Here is yet another very
important factor. Depending on what you have
collected over the years, may no longer be available or
very difficult to obtain do to a number of issues and that
again is another subject to discuss separately.
So having shared this information here comes the
response to the article title It Just Doesn't Make Sense.
Here you are, the collector of valuable pieces that
have been with you over the years, in some cases as many
as twenty-five or thirty, with the newer collector less.
You now know enough as a collector that the cost to
purchase these incredible collectibles is not inexpensive.
You also know that as an avid collector you have had
to budget not only the amount based on the item you are
seeking to purchase but when you actually can afford to
make that purchase did you have to spend a little more
than you expected. You are also most likely more
aware than anyone, because this particular area of
collecting is a higher dollar value, it isn't something
you just go and purchase. It really has to be carefully
planned. Your love for them has grown and best of
all you love sharing them with friends. Most
important the value of your collection has grown
considerably based on when you first started. It is
obvious that if you were to start today as each collector
says when he or she first started, I could never afford this
I wished I would have started earlier. Also chances
are better than average that many of the collectors are
middle class wage earners and to be in a position to
arbitrarily purchase everything you currently own in your
collection would be impossible unless you were a Bill
Gates. Most important, if you are in your later
years of collecting, now you are having to think about
what would happen should I pass away, what is going to
happen to my collection? The majority of the time, a
collection usually is maintained in a household until one
or the other passes away.
It Just Doesn't Make Sense that a collector is willing
to jeopardize the total loss of their collection
by failing to properly have their collection
appraised yet are willing pay for that loss out of
their own pocket because that is what is actually
being stated when one doesn't consider the consequences of
that loss. As I mentioned earlier, I have been
involved as an appraiser for 30 plus years and it boggles
my mind to think an individual would be willing to pay
incredible prices for their collectibles and yet doesn't
think enough of the collection to protect them
properly by having an appraisal properly prepared that
would document all details and provide an
Estimated Value based on the current market information so
that should a loss occur you would be properly compensated
by the Insurance carrier for that total amount, no
questions asked. I can assure you the value of the
collection far exceeds the cost to prepare an appropriate
appraisal document but more important to have the peace of
mind that should something happen your collection would be
adequately and properly covered. Over the years I
have been involved where tragedy struck and the individual
believed their homeowners policy covered the full value of
the items that were seriously or completely lost do to the
damage. The burden of proof was the owners not the
Insurance Company. Think about this, it could be the
best decision you can make.
It is the sincere
desire of the author that the information provided in this
article has been helpful. If you have any comments
or questions please feel free to contact the author via
email. You can access my email address by clicking
on the authors name under the title. Thank you for
this opportunity to have presented this information.
I especially request that you give thought about
what has been shared and consider the information useful.
To learn more about the Author click on the name and read the section titled Appraisers Background.
So, Just What Is An Appraisal?
Black's Law Dictionary defines a appraisal as
"a salutation or an estimation of value of property
by disinterested persons of suitable qualifications"
and "the process of ascertaining a value of an asset
or liability that involves expert opinion rather than
explicit market transactions."
My job once I am engaged as your appraiser, it is
important to understand the meaning of value terms and
definitions. In other words, it is not just
providing a set values/amounts for an item based on the
fact that I say it is so. To often when viewing
other appraisals which does transpire from time to time,
an appraiser who generally is not certified and tested
through a recognized organization such as The
American Society of Appraiser
is not aware or in that matter even concerned
whether or not there are Ethics, Rules and Guidelines
included that the appraiser must follow and comply with.
Let me be fair, it is not their fault, they just
have not been taught the correct way to prepare an
appraisal. I want to understand the purpose and
reason for someone desiring to have an appraisal in the
first place. So this is what I must do in order to
decide the direction to take next in expressing what you
need to do.
So this means as a certified and tested appraiser, I
need to be aware and must understand the meaning of
value terms and their definitions, but even more important
be aware of contractual terms that reflect the type of
value that may be required in the preparation (key
ingredient) of an appraisal. There are seventeen meanings
of value that I can use depending on the assignment and
what the Intended Use of the appraisal is for. For
instance, examples; the insurance industry uses (these are
usually the most requested types of appraisals for
collectibles) are Replacement Value and Actual Cash Value.
The latter is defined as "current replacement
cost, less depreciation." This type value is
normally established by an insurance adjuster based on
insurance industry depreciation guides. Another example
also used based on the Intended Use of the appraisal is
Fair Market Value. It's definition is the price at
which the property would change hands between a wiling
buyer and willing seller, neither being under and
compulsion to buy or sell and both having reasonable
knowledge of relevant facts. This is quoted from
Treasury Regulation Sec. 20.2031-1[b]. The
components of this concept include: 1. Price at which
property would change hands, 2. Between a willing
buyer and willing seller, 3. Neither party under
compulsion to buy or sell, 4. Both parties having
reasonable knowledge of all relevant facts as of the
valuation date (very critical and important), and 5. The
sale is made to the ultimate consumer in the appropriate
Please understand I am only talking about one element
here of what goes into the preparation of providing an
Appraisal for a client. There will be more articles
to follow discussing the many aspects of the appraisal
document which then should help your better understanding
of why an appraisal is important, what is involved,
whether or not you require an appraisal, and probably most
important why you should always consider contacting a
certified and tested appraiser. Unfortunately the program
everyone watches The Antiques Roadshow makes appraising
appear to be a simple process that provides a Value.
Remember it is a show to entertain and enlighten. Don't
misunderstand, I have nothing against the show, it is
informative and has helped the public become more aware so
please know I am not discrediting the show. It is a fact that
there is more to appraising than what they have time to demonstrate and in my honest opinion a statement should be made either at the beginning of the show or the end indicating that a written document is the proper procedure when considering an Appraisal of a Valuable Collectible.
Hopefully this will become clear.
Before I close this article I would like to provide an
example of what most appraisals that are being written
today by a non-certified and tested appraiser appears when you receive it and
then let you decide if you believe it is complete or not.
The example is of Automatic Musical Instruments, which is
my area of expertise, although it could be other
collectibles as well. This is mainly to demonstrate the
types of appraisals I come across that are prepared by
someone who holds themselves out to be an appraiser.
I will have some closing comments.
APPRAISAL DOCUMENT EXAMPLE
January 1, 2006
Mr. & Mrs. Joe Collector
300 Collectors Lane
Have Collection, Anywhere 00220
Dear Mr. & Mrs. Collector,
Listed are the following items you
have in your collection with values. This appraisal
is for you to file with your insurance company.
My background as an appraiser: I
appraise all types of collectibles and am qualified to
provide prices based on my having appraised collectibles
Qualifications as an appraiser:
I have prepared numerous appraisals or all different types
having both small values and large values. I have
been appraising for 10 years and consider myself extremely
knowledgeable when it comes to knowing everything there is
about appraising. I am also qualified because I say I am
qualified have prepared as many appraisals as I have and
you can trust my expertise as an appraiser that the values
Items to be Valued:
|Regina Music Box
|Total Value of Collection
All values stated and listed above
are based on my knowledge of prices. This is what
these items would sell for and should be what you can
obtain if you do.
Signed: Fantastic Appraiser
As you can see from this example it is basically one
sheet of paper with the information listed about the
items, the values, and the Appraisers information. These
are the types of appraisal documents still being prepared
that I see from time to time and although it may seem as
though I may be making it up, I am not. Some have
been very close to appearing almost identical to the
example I have provided. The missing
ingredient, it is on very decorative paper so it appears
Unfortunately this very type of appraisal document is
still being accepted by all of the professional services
that require individuals to have an appraisal prepared and
presented for whatever reason. Sadly in our industry
as certified and tested appraisers, we refer to this very
document as a Laundry List. I hope that you can
clearly see there is something drastically wrong with this
document and if not that is what future articles will help
to make clearer.
In closing you now know what an appraisal is. I
can assure you that as a tested and certified appraiser
there is more than just what appears in the example.
I am required by the organization that I am tested
and certified with The American Society of Appraiser to abide by its Principles of Appraisal
Practice and Code of Ethics, also since The American Society of Appraisers is a member of The Appraisal Foundation, I must also meet their Standards and Requirements. Future articles will
assist in demonstrating there is much more to the end
product and there are definite guidelines that must be
followed and adhered to in order to properly complete an
To learn more about the Author click on the name and read the section titled Appraisers Background.
Who Is a Qualified Appraiser, and Why Should We Care
Author: Margaret Olson, ASA: Margaret Olson, ASA, holds designations in Personal Property-Sports Collectibles and Memorabilia and Numismatics. She maintains her practice at Westminster Coin and Jewelry and Sports Appraisals in Wetiminster, Colorado, and is a frequent instructor with ASA's University Partners.
The IRS has changed the rules.
It is imperative that all appraisers, donors, CPA's accountants, tax attorneys, estate lawyers and anyone involved with charitable contributions and estate tax become aware of the changes and all the implications of the new IRS regulations.
If a donor chooses unwisely, and an appraiser is found to be unqualified, the appraisal that was submitted by the unqualified appraiser also becomes an unqualified appraisal. The donor could lose his or her entire charitable contribution deduction. Any questions regarding the qualifications of the appraiser may be raised on audit (after the tax report due date). Therefore, there is no second chance for the donor. Reg 1.170 A-13(c)(3)(i)(A).
The Pension Protection Act of 2006, signed on August 17, 2006, increased the requirements of a "Qualified Appraiser" in charitable contributions. The new requirements are set forth in IRS Publication 561, April 2007. The IRS significantly expanded its definition of a "Qualified Appraiser" for returns filed after February 16, 2007. Now, a "Qualified Appraiser" is an individual ho meets all of the following requirements.
1. The appraiser must have: Earned an appraisal designation from a recognized professional appraiser organization for demonstrated competency in valuing the type of property being appraised, or,
Met certain minimum education and experience requirements.
a. For personal property, this includes: a. Successful completion of college, or or professional-level course work that is relevant to the property being valued, and
b. Must have at lest two years of experience in the trade or business of buying, selling or valuing the type of property being valued, and
c. Must fully describe in the appraisal his or her qualifying education and experience.
2. The appraiser must regularly perform appraisals for which the appraiser receives compensation, and
3. The Appraiser must demonstrate verifiable education and experience in valuing the type of property being appraiser.
To do this, the appraiser can make a declaration in the appraisal that, because of his or her background, experience, education and membership in professional association, he or she is qualified to make appraisals of the type of property being valued.
4. The individual has not been prohibited from practicing before the IRS under section 330(c) of Title 31 of the United States Code at any time during the past three-year period ending on the date of the appraisal.
5. The individual is not an excluded individual.
When the donor has a wide variety of objects, more than one qualified appraiser may be required to submit an appraisal report. More than one appraiser may appraise the property, provided that each appraiser complies with the requirements, including signing of the qualified appraisal report and Form 8283, Section B. Part III.
There is now an additional requirement to the Appraiser Declaration. Each "Qualified Appraiser" is required to provide an appraiser's declaration contained in the appraisal, which must now include a statement that the appraiser understands that a Substantial and Gross Overtatement of Valuation resulting from and appraisal that the appraiser knows is for tax purposes may be subject to a penalty.
I hope that you find this information of value and remember, what is most important, be sure to obtain a certified and qualified appraiser. Don't be afraid to donate if you feel that is what you desire to do but keep in mind that when selecting a "Qualified Appraiser" you will have nothing to be concerned with because that individual has the ability to satisfy the requirements need to prepare a document for your donation. When do you
need an appraisal, well the designated dollar amount is $5,000.00 and more. So if you are thinking of donating and you are not sure whether the item you are considering will require an appraisal because its value might exceed the requirement, then by all means contact a certified appraiser.
Here is the name of an organization that you can click on that will provide the correct appraiser for your appraisal needs in your community. TheAmerican Society of Appraisers
First Shoe Drops in IRS Implementation of Pension Protection Act's Appraisal Provisions
Last week the Internal Revenue Service (IRS) issued its first set of proposed regulations for implementing the important appraisal provisions of the Pension Protection Act of 2006. Entitled, "Substantiation and Reporting Requirements for Cash and Noncash Charitable Contribution Deduction", the rule proposes the establishment
of new definitions for the terms "Qualified Appraiser" and "Qualified Appraisal." When finalized, the rules will govern all tax-related valuations of noncash charitable contributions. In a typical tax year, several million taxpayers make noncash contributions totaling $30 billion. Approximately 80,000 taxpayers each year make noncash donations with claimed values of more than $20,000 each. Donations include real estate, closely held stock, art, antiques and machinery and
The proposed regulations include a number of important changes in IRS appraisal policies that ASA has advocated for several years. If they become final in their proposed form, the new regulations(1) redefine the term "Qualified Appraisal" in a way which requires that all valuations of noncash charitable donations comply
with "the substance and principles of USPAP", (2) redefine the term "Qualified Appraiser" in a manner which requires either a "recognized appraisal designation" from "a recognized professional organization"-such as ASA-" on the basis of demonstrated competency", or, from an individual who can demonstrate that he or she has "verifiable education and experience in valuing the type of property for which the appraisal is performed. "including "two or
more years" of such experience, and, (3) allow appraisers who now must sign their names and use their personal social security numbers on their tax-related appraisal reports, to obtain an employer identification number even if they have no employees or, if they work for a valuation firm, use only the firms tax ID number.
Interested parties have 90 days in which to submit their comments on the proposed rule. ASA is generally supportive of the proposal, but does have some specific concerns which will address in its comments. Within the next several months, the IRS is expected to propose two additional sets of regulations implementing the Pension-Protection
Act dealing with valuation misstatements and penalties for such misstatements including fines and a possible suspension of an appraiser's right to practice before IRS (i.e., perform appraisals whose conclusions of value will be incorporated into federal tax returns).
Stand By, More To Come