Appraisal Writing Guidelines

An appraisal report may be utilized in a wide variety of contexts, depending on its purpose: an insurance schedule; the settlement of a damage/loss claim; a determination of tax liability for the IRS in an estate situation; a determination of tax relief for the IRS in a non-cash charitable contribution; the basis for an equitable distribution; or the basis for disposition decisions, to illustrate just a few of the possibilities.

The appraisal report should allow the reader to follow the appraiser in the valuation process, in a reasonable and logical manner. The document should present, in articulate and precise language: (1) the purpose, terms and marketplace context in which the value is determined; (2) the data and sources examined, and the analysis which was applied; (3) a full description of the object, appropriate to its value, importance and the purpose, applying the evaluative experience of the appraiser; and (4) the value conclusion. The narrative must be cogently and intelligently written with no loopholes.

Each valuation process is unique. The appraiser should be satisfied that the report anticipates and answers any questions that may be raised.

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I.

Elements Required for a Correctly Prepared Appraisal

1. Name and Address of Client

2. Name, Contact Information and Qualifications of the Appraiser
Statement of professional qualifications - curriculum vitae
Statement of personal physical on-site inspection by the appraiser (or disclosure of other methods/circumstances)
Statement that appraisal is prepared in accordance with USPAP including date of USPAP followed
Statement of disinterest on the part of the appraiser (no financial interest)
Statement of fee structure (basis for charge; that it is not contingent upon the value of the objects appraised)
Clear division of appraisal when one or more than one appraiser is involved, who did what and inclusion of all CV's

3. Purpose of the Appraisal
Insurance
Donation
Estate
Equitable Distribution
Inventory
Damage/Loss
Other

4. Valuation Method Used and Defined
Market Data Comparison Approach
Cost Approach
Income Approach

5. Type of Valuation Used and Defined
Replacement Value
Fair Market Value
Market Value
Marketable Cash Value

6. Marketplace in Which Valuation is Applied

7. Relevant Dates
Date of on-site inspection
Effective date of the appraisal
Date appraisal report issued

8. Descriptioon of Appraised Objects
Item
Country/region of origin
Medium
Date(s)/period of creation
Markings (e.g. signatures, maker’s marks, manufacturer’s marks, inscriptions)
Full detailed description (including all observable physical characteristics)
Dimensions (measurements)
Condition (A representation as to condition must always be included, whether in a per object, per group or general statement.)
Firm statement of value - no estimates (exception may occur in Professional Opinion of Value statements)

9. General Format and Statements
Statement in belief of authenticity (only that the objects appraised correspond to the descriptions provided in the appraisal)
Statement of assumptions and limiting conditions
Statement of the number of pages in the appraisal
Pagination indicated on each page (e.g., ‘1/50' or ‘page 1 of 50')
Statement of the number of photographs. (Generally the numbers correspond to the item numbers; if under separate cover, reference the page the photo is located on in your description (e.g. ‘Photo page 1/50').

10. For Appraisals Relating to IRS Usage Estate (E) or Donation (D)
Statement that appraiser has not been disqualified by the IRS (E and D)
Appraiser’s Tax ID# (E and D)
Statement of the appraiser’s qualifications specific to the item(s) appraised (D)
Statement of how the objects were acquired (D)
Completion of IRS form 8283 (D - separate from report)

11. Additional Description (if applicable)
Name of artist/craftsperson
Name of historical style/school of work
Title of work
Provenance
Catalogue raisonné number or other reference
Frame information
Exhibition history
Publication history
Dimensions (weights, e.g. troy oz.)

12. Support for Valuation Conclusions (if applicable)
Comparables (fully presented and annotated as appropriate)
Biography of the artist/craftsperson/school
Related analysis and discussion of the object/artist/school, etc.
State of the market discussion/market analysis
Material provided by consultants (identified)

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II.
Additional Review Information

The structure of the report should be as “user friendly” as possible, logical and sequential in the presentation of your valuation conclusions and precise in your value statements. The items should be numbered, keyed to the photographs (if included) and organized by both location and/or category, as appropriate.

Create a format of headers and footers for your reports, so that EACH PAGE INCLUDES ALL RELEVANT INFORMATION: your name and contact information, the client’s name, purpose of the appraisal, valuation system used, effective date of valuation and pagination.

Check that all the Elements of a Correctly Prepared Appraisal have been incorporated within your report and that your credentials are included with every report.

According to the 2005 USPAP, the work file for each appraisal must contain the name of the client and the identity, by name or type, of any other intended users; true copies of any written reports, documented on any type of media; summaries of any oral reports or testimonies; and all other data, information and documentation necessary to support the appraiser’s opinions and conclusions, and to show compliance with the Standards. The appraiser must retain the entire work file for at least five (5) years after preparation or at least two (2) years after final disposition of any judicial proceeding in which the appraiser provided testimony related to the assignment, whichever period expires last.

As quoted from USPAP 2005, the content of a self-contained appraisal report must be consistent with the intended use of the appraisal and, at a minimum, describe information sufficient to identify the property involved in the appraisal including the physical and economic property characteristics relevant to the assignment and describe sufficient information to disclose to the client and any intended users the scope of work used to develop the appraisal. The appraiser has the burden of proof to support the scope of work decision and the level of information included in a report.

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III.
Comparables: Purpose and Structure

It is NECESSARY to include comparables in the following reports, both of which must follow IRS guidelines:
1. Appraisals for estate purposes, for any object valued at $5,000. or more or one for which such documentation would be useful.
2. Appraisals for non-cash charitable contributions (donation purposes.)

It may be USEFUL to include comparables in the following situations:
1. For any appraisal purpose, if, in the appraiser’s judgment, the value of the object requires annotation and support. Providing additional data may be determined by provenance, condition, regionalism, academic interest, or even the expectations of the client.
2. For any appraisal purpose, if the value cited is substantially different from what a knowledgeable person would anticipate, and thus requires explanation.

Comparables based on auction sales must include:
1. An indication as to whether the buyer’s premium has been included; or the price given is the hammer price. N.B. The IRS considers the buyer’s premium to be an integral part of the fair market value.
2. All relevant information (as appropriate) including date, auction house and location, sale number, sale name if a single owner or important collection, lot number, description of item [medium, size, signature, etc.], condition if noted, estimates, and sale result [price realized, bought in, withdrawn, or sold subsequent to the auction by private treaty.]

Comparables based on private sales must include:
1. The name and location of the dealer, gallery, show; some annotation as to the dealer’s role in the marketplace; and, if possible, the buyer [private collector, museum, etc.; however it would be highly improper for a dealer to disclose the name of a private buyer.]
2. The dollar amount of a sale actually realized.
3. If the only values obtainable are those at which similar/same pieces were offered, they may be indicated, if so described. It must then be mentioned that the marketplace was, apparently, resistant at those prices.

All comparables cited should be as recent as possible, and as close to the subject piece in time, form, style, medium, quality, condition as possible. All appropriate sales should be cited and then annotated to explain differences and your reasoning to support your valuation conclusions. The process by which the appraiser gathered data, what data was available and considered for the appraiser’s analysis, and what factors were relevant to the evaluation should all be readily apparent to the reader.

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IV.
Review of the Basic Appraisal Report Format

The appraisal report should be a formal, organized, document. The appraiser must remember that although each assignment is unique, there are essential components that must always be included, as per the “Elements of a Correctly Prepared Appraisal.” In addition, there are other structural and informative sections that should/must be included for specific types of appraisals.

Elements that must be in every report are in bold.

Cover Page
Table of Contents
Valuation Summary
Certification Page
Inventory/Narrative Section
Definitions/Methodology Page
Disclaimers & Limiting Conditions PageSources of Data
Appraiser’s Credentials

Comparables
Discussions of the Marketplace
Artist/Craftsperson biography
Discussions of a specific object/artist, etc.
Selected Bibliography
Index of Artists
Consultants’ Credentials
Photographs/Photocopies

The technical and aesthetic presentation of your report should be as attractive and professional-looking as you can provide, in a form that will withstand mailing and handling. Develop your own templates and narrative style and try to stay away from using forms or mass-produced boilerplates. The appraiser’s authority is evidenced by the language, cogent organization, and sequential development of the report.

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V.
Basic Information – Every Page

EVERY PAGE should have the appraiser’s name and business contact information, the client’s name, the purpose of the appraisal, the value system used, the effective date, and pagination.

EVERY PAGE, even if separated from the document, will thus contain all the relevant information.

“EVERY PAGE” is a literal instruction and includes even the more boilerplate disclaimers-type pages, sources of data, selected bibliographies, and photo images - everything is integral to the appraisal report and should be so identified.

This information should be easily presented in headers and footers, customized for each report.

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Please feel free to contact AAA with any questions or comments.
212.889.5404, x11.