Fine Art and Antique Appraisals

The value of valuation.

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“I inherited a painting from my grandfather and I would like to know how much it’s worth.” This e-mail regularly appears in the inboxes of art and antique appraisers. Although the inquiry seems clear enough, it in fact prompts further questions. For what reason does the client want or require an appraisal? For insurance coverage or a damage claim? To donate the item to a charity? For the probate of a decedent’s estate? Or simply to decide how much to sell it for? There are several different kinds of appraisals, and the concept that an item can have different values depending on the reason for the valuation can be a bit of a brain teaser.

As an appraiser, I recently evaluated a 19th-century oil painting depicting a panoramic vista of the American West. Shortly thereafter, I received an inquiry from the client wondering why there was such a discrepancy between the value I determined and the auction estimate provided by a leading international auction house. Because the client had initially requested an appraisal for insurance coverage purposes, the value I determined included the buyer’s premium, shipping, customs brokerage, provincial/federal taxes and framing charges—all the fees that one would have to pay in order to obtain that work of art in the first place. The auction estimate provided by the auction house was just that: an estimate of what the market would bear for the painting in an advertised and orderly auction. The two values were unrelated and the intentions very different; a value requested for insurance coverage is not the same as a value for resale purposes.

In another situation, I appraised an 18th-century kabuto (Japanese samurai helmet) rendered in leather, gold-painted lacquer and iron that had languished in a flooded basement. The insurance company was looking for a third-party appraisal value to determine how much to pay out the client. In this particular case, the insured had suggested the item was worth what the insurance company felt was a considerable, and questionably high, sum.

This type of appraisal—specifically for damage claims—is often requested by insurance companies as they require proof of value for damaged artwork and antiques in order to honour the policy and pay out the insured. However, because of the damage sustained, it was difficult to determine the true condition, and therefore the true value, of the artwork at the time it was acquired. As this example illustrates, it is advisable to have the appraisal of one’s valuables take place at the inception of the policy and not after the damage, theft or loss has occurred.

Appraisals for charitable donations and cultural property donations are also common requests. Donors gifting an artwork or art object to a registered charity (for a fundraiser or otherwise) are entitled to a tax receipt for the value of that item. More specifically, in order to provide tax receipts to donors, registered charities require written appraisals determining the fair market value for art and antiques worth over $1,000. Cultural property donations, on the other hand, are slightly different beasts. These are donations of heritage items deemed to be of “outstanding significance and national importance” to Canadian institutions. An appraisal to determine the fair market value of these items necessitates extra documentation to meet the requirements of the Canadian Cultural Property Export Review Board, who vet the donations. The tax receipts issued for these donations result in significant income tax benefits for the donors, in addition to augmenting our national collections of cultural heritage.

Executors and law offices frequently require probate appraisals for tax purposes or appraisals for estate division, such as in the case of a divorce or distribution of property within a decedent’s family. A few years ago, I was jointly retained by warring siblings who each suspected the other of undervaluing the paintings belonging to their deceased father’s estate. Presumably, both intended to dupe the other by inheriting objects of “little worth” which, upon research, would turn out to be objects of significant worth. Whether household items or art and antiques, it is advisable to hire an objective third party when conducting an appraisal of the assets belonging to an estate. As it happens, the siblings’ suspicions were indeed founded.

In light of the many types of appraisals and the different corresponding values that exist, a collector should be very clear about the intended use of the appraisal. It could mean the difference between a few dollars, or a few thousand.

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December 6, 2010