Frequently Asked Questions

Appraisals

 

 

Q: Why should one consider an appraiser?

A: Whenever there's a question about the value of your personal property, there's also a risk involved. It may be the risk of selling too low, or of paying too much; the risk of being under or over insured; the risk of not getting your fair share in a division of the property; the risk of incurring tax penalties or being audited when claiming a deduction for charitable contribution or when calculating estate taxes.

A professional appraiser helps you manage these and other such risks by providing a written opinion of value upon which you can base your financial decisions. Rather than being just an "educated guess," the professional appraiser's value conclusions are based on prescribed methods or evaluation, research, and report writing. Bankers, financiers, investors, insurers, adjusters, estate managers, trustees, executors, attorneys, judges, federal and state tax agencies—all are dependent upon the knowledge and expertise of the appraiser, and so are you.

Too often and too late, people find out that the appraisals they have are inaccurate or misleading, resulting not only in greater risk to themselves but also in an annual waste of millions of consumer dollars. A competent appraiser helps you manage financial risk.

Q:  What should I expect from an appraiser’s report?

A: A competent appraisal report has:

• A cover document explaining in detail what type of value is being sought ("purpose") and how the appraisal is to be used ("function" or "assigned use").

• The methodology and resources relied upon, including market analysis and market(s) selected.

• A complete and accurate description of the property written in such a manner that it can be identified without photos.

• The date(s) and location of inspection, and the effective date of value.

• A statement by the appraiser that he or she has no financial interest in the property or that such interest is disclosed in the report.

• The appraiser's qualifications and signature.

Q: Do you ever not accept an appraiser’s report?

A: Yes. Do not accept an appraisal if:

• It is handwritten or unsigned.

• The fee is based on a contingency or upon the value of the property.

• The appropriate "purpose" and "assigned use" are not stated.

• The item is beyond the appraiser's expertise.

• The appraiser is not willing and able to defend it in court (subject to the appraiser's availability, and separate fee arrangement).

Q: What qualifications should I look for in an appraiser?

A: A qualified appraiser has formal education in appraisal theory, principles, procedures, ethics, and law. The appraiser should be up to date on the latest appraisal standards. Continuing education and testing are the only ways to ensure this competence.

The appraiser you hire should be familiar with the type of property you want appraised and know how to value it correctly.

Expertise on a particular type of property is not enough if the "expert" does not know how to evaluate an item for its appropriate worth. Without appraisal training, these "experts" have no way of understanding the complicated variety of marketplace definitions that are used to determine appropriate values for appropriate uses.

For example, a museum curator may be able to authenticate a work of art, or a jeweler may be able to determine the identity of a gemstone, but neither may be able to value those items correctly unless they follow appropriate appraisal principles and procedures.

Q: Do all appraisers have similar qualifications?

A: No! There are many self-acclaimed personal property appraisers who have not completed any professional education.

It is important to ask the prospective appraiser what type of formal appraisal education training he or she has received. Obtaining a copy of the appraiser's professional profile or resume can help you evaluate the appraiser's credentials; the burden is on the consumer to evaluate an appraiser's qualifications.

Q: Are all appraisers tested for being an appraiser?

A: There are many appraisal organizations, but only a few require members to take courses and pass tests before being admitted as full members. International Society of Appraisers (ISA) is such an organization.

Membership in a professional association is important because it shows that the appraiser is involved with the profession, has peer recognition, has access to updated information, and is subject to a code of ethics and conduct.

Q: If an appraiser belongs to an organization that offers testing and education, is that enough?

A: If the appraiser claims membership in a group that trains and tests its members, be sure to ask if this appraiser has personally gone through the training and testing.

Some organizations have grandfathered members into high member status without testing them. "Grandfathering" means allowing members to retain their titles and status if they joined before new rules or testing standards were required. ISA has an absolute non-grandfathering policy.

Continuing education is also important for appraisers. Procedures and regulations are always changing. Because of this, ISA constantly updates, expands, and rewrites its courses to ensure that its members will perform the work you need with knowledge of all the latest professional standards.

Q: How does an appraiser handle items outside of their specialty?

A: No appraiser should claim expertise in everything. ISA recognizes over 230 areas of specialty knowledge. A good appraiser knows his or her limits, and is expected to consult with other experts when necessary.

Q: Does an appraiser charge a percentage of the appraised value or a contingency fee?

A: Do not hire an appraiser who charges a percentage of the appraised value, or charges a "contingency" fee. These practices are clearly conflicts of interests, and may result in biased values. The IRS will not accept an appraisal done with such fee arrangements.

ISA appraisers are prohibited by their Code of Ethics from charging a fee based on a percentage of the value of the property appraised. Hourly fees, flat rates, or per item charges are acceptable.

Q: What will the appraisal report be like?

A: You should receive a formal, typewritten report that gives you the information you need in a complete and organized way.

Some appraisal societies only teach appraisal theory, with no "real life" examples. ISA is the only major appraisal society in the United States that specifically trains its members in how to write standardized, comprehensive appraisal reports. Each accredited member has been tested on these standards.

Q: Will the way an appraisal will be used affect the value of the item?

A: Yes. The same item may have many different appraised values depending on how you intend to use the appraisal.

For instance, a value for insurance may be very different than a value for estate tax, consumer resale, or charitable contribution. Other assigned uses include investment, liquidation, price confirmation, equitable distribution, loan collateral, casualty loss, and many more.

Qualified, educated appraisers understand the many different types of values, assigned uses, and market levels. He or she works with you to choose the proper type of value so that you can use the appraisal correctly and effectively.
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