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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

Author: NoŽl Burndahl 

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 covered.

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?

Author: NoŽlBurndahl

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 market level.

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

APPRAISAL

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 before.

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 are right.

Items to be Valued:

Regina Music Box $2,500.00
Player Piano $1,500.00
Phonograph $250.00
Monkey Organ $500.00
Total Value of Collection $4,750.00

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.

Sincerely,

Appraisal Services

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 impressive.

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 Appraisal Document.

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 equipment.

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

 

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