Some of the material things we tend to value most in life – our fine art, antiques, collectible guns – account for an average of 17% of high net worth individuals’ assets.
Yet death, divorce and debt tend to be the only times people have their collections appraised.
That’s no way to protect your assets, especially when the market for art is soaring. Did you see the news about the Jeff Koons sculpture that sold for a record $91.1 million in May?
Collectible guns also are booming: A well-curated gun collection can return as much as 5-6% a year, as much as a conservatively managed 401(k).
The argument for annual appraisals isn’t hard to make.
Take, for example, an appraisal we heard about recently in Colorado made on a pair of hand-engraved J. Purdey & Sons 12-gauge shotguns.
The replacement value was appraised at $448,000. The previous appraiser – apparently not so many years ago – had guessed $27,000.
Had the weapons been stolen or lost in a fire before the latest appraisal, their owner would have seen $419,000 of their net worth evaporate.
So, in hiring an appraiser, here’s what you’ll want to consider:
- Start by getting a recommendation. You can turn to a museum professional, a reputable dealer, or another collector to find an appraiser. Or you can try one of these appraisal organizations: Appraisers Association of America (AAA), American Society of Appraisers (ASA) or the International Society of Appraisers (ISA). Another good option: call your insurance agent.
- Don’t rely on a weapons appraiser to give you an appraisal on your great-grandmother’s fine china or silver. Appraisers specialize, so someone with expertise in art likely won’t know much about firearms.
- Review the appraiser’s curriculum vitae. This will give you a better idea of how well they’ve met “The Four Es”: experience, expertise, examinations and ethics.
- Ask for a sample appraisal. This will give you a clear idea of how thorough an analysis you can expect on any items you decide you want appraised.
- Ask the appraiser to explain their fee structure. Fees should be based on an hourly, daily or set rate, excluding the cost and time to travel. The fee should never be commission-based. In other words, it should have nothing to do with the value of the appraised items.
Finally, steer clear of free appraisals.
Auction house offers free appraisals to attract merchandise to their sales. They know you’re trying to take advantage of them and, as a result, move you in and out as quickly as possible with minimal effort on their part. They won’t bother performing in-depth research or fine-tune the accuracy of their initial figures unless you consign the art.
The other problem with free appraisals is that often the staff people who conduct them tend to be younger, less experienced, and not necessarily able to accurately assess dollar values. Actual auction results may differ drastically from what you are told.
And finally, keep in mind that auction houses try to keep estimates on the low side because that means they stand a better chance of selling the art.
Mike Rosser leads the Private Client practice at CCIG. Reach him at Mike.Rosser@thinkccig.com or 720-212-2068.
CCIG is a Denver-area insurance brokerage with personal and business insurance clients nationwide. We do more than make sure you have the right policy. We also help you lower your long-term cost of insurance with our risk and claims management expertise and a commitment to service excellence.