There are four major reasons that people seek an art appraisal. The most common reason is to investigate whether they have sufficient and proper insurance coverage for their collection. Secondly, estate and divorce settlements will usually require an appraisal. Thirdly, owners are considering a possible sale of their art, and wish to know its value. Fourthly, they are considering a charitable donation of their art, and the IRS may require an appraisal. Then there are those who are simply curious about the value of a piece or pieces of art. The reason for the appraisal should determine the type of appraisal and the choice of the appraiser.
     For insurance purposes, a replacement value appraisal is usually provided, for the other purposes, a fair market value appraisal is usually required. An appraisal that doesn’t specify its type is certainly questionable!
     There can be confusion between the terms "appraisal" and "authentication." An appraisal assumes that the piece being appraised is authentic while an authentication is a formal and professional opinion that the work is genuine and created by the claimed artist.

Types of Appraisal

Fair market value (FMV) is the price that the art would sell for on the open market between a willing buyer and a willing seller, with neither being required to act and both have reasonable knowledge of the relevant facts. If there is a restriction on donated art, the FMV will reflect this restriction. This is the appraisal value that usually applied to charitable donations and estate values.

Replacement Value: Replacement value (RV) is the amount it would cost to replace an item with one of similar and like quality purchased in the most appropriate marketplace within a limited amount of time. This is the highest of the appraised values and is applied primarily to insurance coverage.

Market Value: Market value (MV) is the value realized, net of expenses, but a willing seller disposing of property in a competitive and open market to a willing buyer, both being reasonably knowledgeable of all relevant facts, and neither being under any constraint to buy or sell.

Liquidation Value: Liquidation value (LV) is the
value realized in a sale situation under forced on limiting conditions and some time constraints.

Selecting An Appraiser
     Selecting a appraiser depends on many factors. Since the work should be visually inspected by the appraiser, it is best to find an appraiser near you. Since you are seeking the most accurate appraisal possible, it is important to find the most qualified appraiser for your kind of art. An appraiser specializing in art with a specialty in the particular type of art is your best choice. Since the appraisal fee depends on both the rate and the hours expended, and expert may be able to complete an appraisal in a few hours whereas it may take a general appraiser a week to complete the appraisal.
     Choosing an appraiser for charitable donation purposes deserves special attention since the Internal Revenue guidelines outline appraiser requirements, especially if the value of the donation is over $5000. The IRS requires what they call a "qualified" appraisal, and the appraiser must be qualified. Although many requirements and restrictions are outlined, the most significant is that the appraiser must be certified by a recognized appraisal organization. The IRS also requires the appraiser to certify the authenticity of the work. Thus, if an appraisals expected to exceed $5000, not only must the appraiser be certified but s/ he must also be qualified to certify the authenticity of the piece.

Appraisal Fees  
      The cost of an appraisal ranges from as low as $25 an hour to over $300 an hour. So selecting the right appraiser is not only a matter of the accuracy of the appraisal, but also the cost of the appraisal. It makes no sense to spend $600 appraising a $500 painting. In fact, in many cases, gallery appraisers will offer price evaluations at a rate less than a formal appraisal. Price evaluations may be sufficient for insurance purposes, whereas estate settlements and charitable donations always require a formal appraisal. Also, since the cost of an appraisal depends on the time required, it is always wise to find an appraiser that specializes in the particular art to be appraised. An expert in antique Chinese brush painting may be able to perform an appraisal in an hour, whereas a general appraiser may require days.
     Before an appraisal is initiated the appraiser should provide you with their hourly rate, plus some estimate of the time required. If the appraiser cannot furnish you with such an estimate, it suggests the appraiser does not have experience in this particular area of art. Some appraisers require a deposit with signed approval to pursue the appraisal, whereas for others the process may be more informal.

Related topics:

Finding An AppraiserAuthenticating Your Art  
Restoring Your ArtInsuring Your Art
Appraising Your Own Art Selling Your Art  
Donating Your Art