Art has no extrinsic value, it can’t be used, and as most work of art are unique, we don’t know how much they are worth. When we buy the works we only know how much we pay when we bought them, but how does the price change a few months, years, or even decades later? Or what if you inherited a work that has been in your family for ages, and no one possesses any relevant documentation? It is easy to find out the daily rates of a troy ounce of gold as one gold bar is the same as another gold bar, but it is not as easy with art. Unlike commodities, there are no regulated global exchange markets for art. Furthermore, every work of art is different from another and many contextual factors such as its condition, provenance, subject matter, colours, etc. determine an object’s value. So how does one determine the financial value of a work of art?
First, it is important to acknowledge that there are many reasons why someone might want to know the value of a collection or individual work. Getting a work of art appraised, i.e, valued, does not necessarily mean someone is looking to sell it. Keeping the value of your collection up-to-date should be an ongoing element of collection care.
The most important reasons for valuing a collection are:
1. Establishing accurate insurance valuations, so that you can be sure that if the works get damaged, you have adequate.
2. You might need to know how large your assets fixed in art are- and if you are able to use them as collateral for a loan.
3. Your family assets might need to be split due to a divorce, death, or disaster (bankruptcy, for example) and you need to know – often quickly – what you have. The famous three Ds still make up the reason why most works of art come up at auction.
4. You might want to lend a work to an exhibition and need to be sure that the institution you’re loaning it to insures it for the right value.
5. You might need to pay taxes if you inherit a collection. These should be based on accurate financial values.
While this might sound straightforward and easy, valuations and appraisals can be a nightmare. As with many other elements of the art market, valuation services are not always regulated, and the laws governing different countries vary widely. For this reason, a collector needs to conduct thorough research and work with trusted people, to feel confident regarding the services provided.
What are the different ways to go about getting valuations and appraisals?
Getting your collection appraised
1. It is important to understand the difference between the term valuation and appraisal. A valuation is not as thorough as an appraisal. A buyer could go back to the gallery or auction house they bought their work from and inquire about the current market value of a similar piece by the same artist. They might give you a ballpark figure, probably without putting it in writing. This might give the owner a good idea but nothing more. A valuation is usually not legally binding and often based on opinions. However, an appraisal, is a clearly defined process in which an expert appraises works of art independently and without interest and is paid for their services. According to the American “Uniform Standards of Professional Appraisal Practice” (USPAP), an appraiser is someone who “is expected to perform valuation services competently and in a manner that is independent, impartial, and objective.” A professional appraisal should come with an extensive written report which includes cataloguing details, provenance notes, condition, and the appropriate value of the object.
2. There are three types of values associated with appraisals: Fair market value gives an opinion on what the work would sell for at a given moment between fully informed parties. Retail replacement values can be higher and are used mainly for insurance purposes – what would it cost to replace such an artwork? Marketable cash value is the Fair market value minus any expenses such as selling fees. This value should be used when assets need to be divided up as transaction costs can be high.
3. Unless someone wishes to sell a work at auction and therefore is interested in getting competitive valuations from different auction houses, it is advisable to work with an independent appraiser rather than having auction houses value the works. An auction house’s interest is always in consigning and selling works, and while most of them offer valuation services, there might also be an interested party. And of course, their valuations are based on ranges of estimates and don’t offer more assured valuations. Usually, countrywide appraiser associations have their own lists of independent appraisers, so it is advisable to go with someone who is registered with a trusted industry body.
4. Art values can remain fairly stable, but they can also change quickly overnight. It depends of course on market activity as much as on other circumstances, for example if an artist is showing in a major retrospective, has been taken up by a major gallery, has died, and so on. These events might drive prices up, but others of course can also cause prices to go down, and even collapse. So, ensure you keep your valuations updated regularly, for instance every 1 to 3 years, depending on the type of the collection and your personal need to know.
5. If you want to go out on your own, there are price databases you can subscribe to (against a fee), such as Artprice (https://www.artprice.com/) and Artnet (https://www.artnet.com/price-database/). If you have an editioned work which is fairly known or a very typical work by a well-known artist, then you might be able to find current values (based on auction prices) yourself. However, this doesn’t give you a precise valuation of your work as other factors such as condition, location, edition number, provenance etc. play a major role in accurately determining the value of a work, as mentioned above.
Valuations are not only an important part of estate planning, but are also helpful in protecting your art investments. They give you confidence in your buying activities and monitoring your collection’s value should be a regular part of your overall financial planning, even if you do not plan on selling. As in many areas of the art market, trust is key when asking someone to determine the value of your collection. Whichever route you take, make sure you feel assured the outcome does benefit you and not the valuer. Being kept informed about the developments in the art market regularly is probably a good way to get an overall feeling about the ups and downs of value in general, and about your collection in particular.
Mary Rozell: The Art Collector’s Handbook. The definitive Guide to Acquiring and Owning Art. Lund Humphries London 2020
A recent, very extensive guide with lots of resources for all elements around collecting, including legal and financial elements, and an extensive chapter on appraisals.
Garrett Wendell D and Appraisers Association of America. 2013. Appraising Art: The Definitive Guide to Appraising the Fine and Decorative Arts. New York NY: Appraisers Association of America.
A very detailed guide to appraisals with focus on the US American market.
This article gives a good overview of the range of expertise needed to value different types of art objects.
Experienced Art Advisor Elizabeth von Habsburg on appraisals and investment