Appraisal and valuation.
- Thomas P. McNulty
Terms that both refer to the assignment of monetary value to works of fine or decorative artworks; they are often used interchangeably but, in fact, are only partially related in meaning. “Appraisal” represents the field whose practitioners assign values to properties for specific—often official or legal—purposes (e.g. tax deductions for museum donations, equitable distribution of property in the event of a divorce or dissolution of a gallery co-ownership, etc.). The documents that convey these substantiated values are also referred to as “appraisals.”
“Valuation,” by contrast, is an activity that is carried out by any number of art world participants. For example, artists are often the first to value their creative output inasmuch as they must approve the prices they will accept for their artworks; they are pricing, but not appraising, their own work. Similarly, when dealers create price lists for an artist’s works, they are not appraising those works, they are pricing them. The real difference between the two is that appraisers’ values are opinions that are supported by analysis and data (often in the form of prices paid for similar works, referred to as “comparables”), whereas values assigned by other art world practitioners are simply price targets that may or may not ever be attained. In the auction world, prices actually paid are referred to as “prices realized.” In other words, appraisals are opinions, and prices realized are the facts upon which those opinions are based. This article will elaborate upon these concepts, while tracing the development and current state of the appraisal profession, with particular reference to the USA and UK.
1. History of professional appraisal services.
The appraiser’s profession originally evolved from the occupations of 18th-century art dealers and auction experts, who had experience in drafting after-death inventories. A first turning point in the professionalization of these services was reached in the aftermath of the French Revolution, when Jean-Baptiste-Pierre Le Brun was hired as the first “commissaire-expert,” or independent appraiser of the Musée du Louvre. He had previously rendered similar services to the tax authorities of Robespierre’s regime, assessing the value of the confiscated art collections that were left behind by emigrated aristocrats. While institutional and individual practitioners have provided appraisal services in the USA, France, the UK, and other countries for many years, it was not until the 1960s that appraisal became a bona fide profession. This process involved the establishment of specialized organizations which serve their members—and, by extension, their clientele—by establishing codes of ethics, providing continuing education opportunities, and promulgating professional standards of practice. In the USA, the Appraisal Foundation—a non-profit educational organization authorized by Congress as the source of appraisal standards and appraiser qualifications—is charged with establishing qualifications required by practitioners. Three independent Boards operate under the auspices of the Appraisal Foundation: the Appraisal Practices Board (APB), the Appraisal Qualifications Board (AQB), and the Appraisal Standards Board (ASB). Established by the Foundation and adopted by Congress in 1989, the Uniform Standards of Professional Appraisal Practice (USPAP) codifies the ethical and performance standards required by professional appraisers in the USA; USPAP compliance is mandatory for certain types of appraisal activities—particularly, those undertaken by state-licensed and state-certified appraisers involved in federally related real estate transactions. Professional fine and decorative arts appraisers are urged to comply, but compliance remains voluntary, as the field is largely unregulated by federal, state, or local laws.
2. Reasons for professional appraisal services.
Professional appraisal services are required for many reasons. Collectors might engage the services of an appraiser for purely informational purposes. In the process of estate planning, for example, collectors often require an independent opinion of the works in their collection to ensure equitable distribution of those works among heirs upon their passing. Other, legally mandated purposes vary from country to country, based upon the individual country’s laws. In the USA, for example, collectors may deduct the value of artworks donated to museums and other government-sanctioned non-profit institutions. For this purpose, a well-documented appraisal is required. (Note that in the USA, living artists who donate their own works may only deduct the value of the materials used in the works’ production, not their actual market value). Another primary reason to employ an appraiser involves insurance. In the case of damage, theft, or other loss, owners are reimbursed only for the work’s documented value as of the date of the event that caused damage or total loss. For this purpose, collectors engage an appraiser’s service to ensure that their collection is not under-or over-insured.
3. Value factors.
Any work of art can have numerous monetary values. These values can be determined by the market in which the work was sold or is intended to be offered for sale. The primary market is the venue in which works are offered for sale for the first time. Galleries—and, increasingly, art fairs and auctions—are all considered to be primary marketplaces. Markets labeled “secondary” are those in which works are resold; galleries, auctions, fairs, and other venues can all be secondary marketplaces (see Primary and secondary markets). It is the sales history (or lack thereof) of their offerings that dictates the nature of a marketplace.
The vast majority of appraisals are based upon data derived from sales of comparable items, usually referred to simply as “comparables.” Because markets fluctuate over time, those sales that occur closest in date to the subject appraisal are preferred. Sometimes, no such sales are available, and appraisers must use older than preferred sales data from which they extrapolate the current value of their subject piece.
In selecting comparables, appraisers consider: popularity of the style, school, or country of origin; popularity of the artist; critical reception of the work as evidenced by exhibition and publication; subject matter; dimensions; date of creation, provenance, and condition; among others. The relative importance of these factors varies from artist to artist, and from artwork to artwork. In the case of a badly restored canvas by a prolific artist, for example, condition becomes the most consequential driver of value; in this case, the impact is clearly negative. The negative impact of the work’s poor condition is exacerbated by the fact that because the artist is known to be prolific, so numerous works in better condition are likely to be readily available.
The degree to which two artworks can be considered comparable is rarely absolute. The most straightforward example is the modern or contemporary editioned print or other multiple. While there might be an incremental premium added for print numbered 1/250, no such argument could be made for a variation in the value assigned to an edition’s individual prints numbered 200/250 and 201/250. Unless there is a condition issue, illustrious provenance, or other extraneous factor, these works are essentially the same.
Of the value drivers enumerated above, the general desirability of the style or period has the greatest impact on any artwork’s marketability, which will be reflected in its valuation level. In the 19th and early 20th centuries, wealthy collectors favored works by the Old Masters. Later, Impressionism and early modernist works were most sought after. Since the last quarter of the 20th century, it is safe to say that works created after World War II have taken center stage, with taste trending toward the contemporary across the globe. The elevation to prominence of a particular style is a result of a wide array of forces; the most significant of these are critical reception as reflected in exhibition and scholarship (including academic publication and teaching).
Within any school, style, or other broad category, there is a hierarchy of artists. Among all the Italian Old Masters, for example, Leonardo da Vinci would likely be identified by even the least knowledgeable person as a “top-tier” example. Once the subject artist’s “level” has been decided, the appraiser must place the subject work within the continuum of the artist’s entire oeuvre. For some artists, date of creation is of paramount importance in the construction of value. Among those artists who are closely associated with the beginning of a dominant trend, for example, the precise date of a work might result in its value rising many times over his or her works created a decade earlier or later.
The impact of provenance on value cannot be overstated. A well-documented, unbroken chain of ownership is an assurance that the work is likely not a forgery (although provenance documentation itself has been known to be forged). The collectors—whether individual or institutional—who, together, constitute the provenance often add another type of associative value to artworks. While difficult if not impossible to predict with any degree of accuracy, the premium garnered through prior ownership by a celebrity can be an enormous factor in an artwork’s value.
The monetary impact of specific physical attributes of the work must be assessed in order to arrive at an appropriate value for any work of art. Consider a physical attribute like scale, for example. Usually, one expects large items to be more valuable than their smaller counterparts, all other factors being equal. With some (particularly very famous) artists, the value of comparable works rises as their scale increases. With many artists, including the relatively unknown or anonymous, the reverse is often the case. Very, very large works can be among the least valuable of an artist’s oeuvre, as their lackluster career underscores the fact that few would devote significant physical space to their works.
The appraiser charged with assigning value to any artist’s work should have a deep understanding of the artist’s entire oeuvre, in order to assess the relative impact of various factors both physical (e.g. palette, subject matter, condition) and associative (e.g. provenance and historical importance) on the work’s monetary value. The variability of these value factors makes each work a unique challenge for even the most experienced appraiser.
- The Appraisal of Personal Property: Principles, Theories, and Practice Methods for the Professional Appraiser. Washington, DC: American Society of Appraisers, 1994.
- Skates Art Investment Handbook: The Comprehensive Guide to Investing in the Global Art and Art Services Market. New York: McGraw-Hill, 2010.
- Appraising Art: The Definitive Guide to Appraising the Fine and Decorative Arts. New York: Appraisers Association of America, 2013.
- McNulty, Tom. Art Market Research: A Guide to Methods and Sources. Jefferson, NC: McFarland & Company, 2014.
- Rozell, Mary. The Art Collector’s Handbook: A Guide to Collection Management and Care. Handbooks in International Art Business series. Burlington: Lund Humphries Publishers, 2014.
- Spieth, Darius A. Revolutionary Paris and the Market for Netherlandish Art. Leiden: Brill, 2018, chapter 2.