Appraisal Journal

Just a quick update. I have recently had some author interest in contributions for the new digital Journal of Advanced Appraisal Studies. I have been involved in several other projects and assignments and have not been able to spend as much time developing the new concept as I would look. I have had a lot of interest, and also offers of assistance from many appraisers.

With that, today I had an interesting conversation about the potential for an interesting partnership on the Journal. The idea has not yet even gone into the concept state, it is more of a potential idea, but I think one with much merit.  I am thinking about the potential, and hope to know more about the possible partnership by the middle of July which would offer much credibility and promotional opportunities. If thinks work out (and even if the dont) my plan is to have a digital online version of the journal (right now without fees so we can reach as many appraisers and allied professionals as possible) by the fall.

I already have a list of potential and interest contributors, but could always use more for future issues. If interested, please reach out to me. I will post more on the direction of the new digital Journal as I learn more and planning/partnership discussions proceed.

Post Art Fair Sales

The Art Newspaper recently posted and interesting commentary article on the potential of art fairs publicizing sales data. That would be great news for appraisers and collectors alike, the reality is, in my opinion that it will never happen. The article does point out confidentiality issues, as well as competitive concerns (knowing what other dealers are selling) and administrative concerns.

The Art Newspaper reports
In a market increasingly reliant on price databases to support its claim that art is a measurable asset, fairs remain data deserts. Against a barrage of sales figures from auctions, step inside a fair and everyone becomes coy. Many galleries still “do not discuss prices”—in a trade fair.

In March, Art Basel published its second art-market report, written by the economist Clare McAndrew. As Marc Spiegler, Art Basel’s global director, writes in the introduction, “understanding the market’s dynamics is essential”. Yet, ironically, none of Art Basel’s fairs can contribute sales data to its own report. Aside from random “selected sales” reports, no comprehensive public sales record of deals done within Art Basel’s fairs—or any other fairs—exists.

The 2018 Art Basel and UBS Art Market Report found that in 2017, surveyed galleries made 46% of their sales at fairs, up 5% on 2016; McAndrew estimates that fair sales “reached close to $15.5bn in 2017”. By her calculations, sales at fairs account for around 24% of the estimated $63.7bn-worth of art sold in 2017, but we have no idea how or where that money was spent.

Could fairs do the unthinkable and insist that exhibitors provide full sales information? Spiegler says: “As we are not involved in the sales, it is difficult for us to stipulate anything, but I do think that pricing transparency is very helpful.” Patrick van Maris, the chairman of Maastricht’s Tefaf fair, admits that fairs are on the back foot in terms of data- harvesting. “It would be hugely useful to know exactly what people sold,” he says. “I don’t think it’s realistic at the moment to insist that exhibitors report all sales, but with this drive towards transparency, in future it might be.” The Dutch fair’s chairman, Nanne Dekking, advocates the use of blockchain-based technology as a means of increasing transparency by creating a digital sales ledger for works of art. But for blockchain to work, sales at fairs—and within galleries—would have to be recorded, accurately.

In its first three years, from 2003 to 2005, London’s Frieze fair attempted to report overall sales figures (recorded as £20m, £26m and £30m respectively), but then stopped on the basis that these were “misleading” and “inaccurate”. Today, Frieze co-founder Matthew Slotover says: “Only around 60% of exhibitors would respond, and it was mainly larger galleries who wanted sales to remain confidential, so we felt that the results were skewed.”

Spiegler acknowledges that the dominance of auction sales skews the perception of value. “There’s a real risk of misperception when an artist is successful but the only sales data is auction data. It’s a lot easier to sell paintings at auction than it is to sell conceptual work, and yet that’s the kind of work that often has the most to offer.”

So, how do we fix it? Arguments against price reporting at fairs include confidentiality, the administrative burden and the complexities of after-sales, not to mention the value of the data that galleries would hand to fair organisers (and their competitors).

Again, we hit the rock of opacity that is the comfortable foundation of the art market. For all the supposed desire for transparency, no one will make the first move because it is the far more difficult path. Dealers cannot claim to want transparency, nor complain that auction sales skew perceptions of value, unless they reveal more details of their dealings. And to enforce that would require a power greater than a humble fair organiser.
Source: The Art Newspaper 


Cindy Charleston Rosenberg, ISA CAPP Elected to the Appraisal Foundation Board of Trustees

I am please to formally announce that Cindy Charleston Rosenberg, ISA CAPP and a past president of the ISA Board of Directors has been elected to the Appraisal Foundation's Board of Trustees effective January 1, 2019. Cindy will serve a 3 year term.  As the Chair of the TAFAC Personal Property Issues Committee I welcome Cindy to the BOTs and I look forward to working with her on promoting qualified appraisers.

Cindy's bio on the AF website states

Cindy Charleston-Rosenberg, ISA CAPP, of Huntingdon Valley, Pennsylvania is President of the Art Appraisal Firm, a national advisory for important collections of American art. She is a past President and Certified Member of the International Society of Appraisers (ISA), the largest professional organization of AQB qualified personal property appraisers in North America. Cindy writes and presents widely on advanced appraisal methodology, and has won numerous awards for thought leadership and contributions to the appraisal profession.  She is an advocate for raising awareness of the critical importance of the AQB appraiser qualifications requirements, including uniting The Appraisal Foundation’s personal property sponsoring organizations behind this goal.

If you know Cindy, or even if you don't, reach out to her and send her congratulations. It is really a great accomplishment, and will benefit all personal property appraisers having another personal property appraiser on the AF BOTs.

The Appraisal Foundation reports
Washington, DC – The Appraisal Foundation (Foundation) is pleased to announce elections and appointments to its Board of Trustees, effective January 1, 2019. The Board of Trustees is the governing body of the Foundation and is responsible for securing funding and overseeing the work of the Foundation’s independent Boards.

The following individuals were elected as At-Large members of the Board of Trustees for three-year terms:

Cindy Charleston-Rosenberg of Huntingdon Valley, Pennsylvania

Michael H. Christensen of Salt Lake City, Utah

Jennifer S. Wagner of Morgantown, West Virginia

Emerson Sutton Jr. of St. Louis, Missouri (re-elected to a second term)

Additionally, the following individuals were recently elected or appointed to the Board of Trustees and have commenced their service:

Peter J. Fontana of Great Falls, Montana

Linda Trugman of Plantation, Florida

These individuals are dedicated business leaders who bring their expertise from various backgrounds and disciplines. Their leadership will be of great benefit to the Foundation and its Boards in ensuring public trust in the valuation profession.

About The Appraisal Foundation

The Appraisal Foundation is the nation’s foremost authority on the valuation profession. The organization sets the Congressionally-authorized standards and qualifications for real estate appraisers, and provides voluntary guidance on recognized valuation methods and techniques for all valuation professionals. This work advances the profession by ensuring appraisals are independent, consistent, and objective. More information on The Appraisal Foundation is available at www.appraisalfoundation.org.  


Millennials - Collecting vs Experiencing

The Art Newspaper has an interesting article on millennial collectors, or perhaps the lack thereof. The article states with millennial's, and this has been reported on in the past are more interested in life experiences rather than collecting. This does sound a bit dour, but there is a positive side, and that is within the sharing economy. Perhaps that will also lead to more millennial art investments as there interest and collection interests grow.

The Art Newspaper reprots
“No one wants to own anything any more. It’s all about experiencing, sharing and being in the moment. Since the digital revolution, information and algorithms are more valuable than the physical.” So said Ralph Nauta, the co-founder of the artist collective Studio Drift, at a recent event for Future\Pace, itself a collaborative effort to produce often-experiential art.

He has a point. Millennials don’t seem to have the same collecting gene as previous generations. In many ways, this is a wonderful thing that has contributed to upcycling, crowdsourcing and other on-trend benevolent behaviour—but it is not good news for the art market, which relies on a cult of possessing.

This shift from an ownership to a shared economy, in which companies such as Uber and Airbnb loom large, is very much on the mind of the market’s leading players. “Is the art of the future an object or an experience? I don’t think it should be overstated, but it should be taken into consideration,” says Marc Spiegler, the global director of Art Basel, who says this is a topic that he and the Los Angeles-based artist Doug Aitken often discuss.

There are some positive side-effects for art. The fetishisation of the unique may be on the wane, but editioned works, including photographs, prints and ceramics, are increasingly popular, helping to broaden the art market’s appeal. Some museums’ outreach programmes now explicitly encourage visitors to Instagram the works on their walls, which again democratises the potential audience for art.

Forms of private patronage are changing, too. Although collectors have historically supported artists by buying their works on the primary market, they now increasingly invest in production or, through platforms such as Patreon, even fund artists directly. “Sharing and supporting art is an implicit duty, rather than making another status-building acquisition or investment,” says the collector Alain Servais, who has shown his own support by becoming a member of Friends of Liste, a smart scheme that has reduced the exhibiting fee for ten of the galleries at the Liste art fair this year.

From the sidelines, it is interesting to observe how art’s intermediaries are experimenting with ways to monetise experiences. Von Bartha gallery’s stand at Art Basel this week includes Non Alcoholic Vodka (2006; priced at SFr55,000/$55,000), an installation by Superflex that comprises more than 100 bottles and, while still adventurous, is much more commercially palatable than the collective’s swings, which graced Tate Modern in London last summer. Pace gallery charged an entrance fee for its TeamLab exhibition in Palo Alto in 2016, which is not such a shocking idea; lest we forget, quite a lot of people are willing to pay up to SFr50 ($50) a day for the experience of watching dealers sell art in Basel this week.

Just how much this macro-economic shift will affect the art market remains to be seen. It is a relatively small field and needs only a handful of buyers to keep up appearances. Plus, as one observer notes, millennials may start out car-pooling, but once they grow up and have children for the back seat, ownership becomes a more attractive option. Still, galleries and artists “who can make buying and owning art an experience have the most natural future”, Spiegler concludes.
Source: The Art Newspaper 


Fine Art and Estate Planning

A Washington DC area local radio station and news site recently posted a good article on incorporating a fine art collection into an estate plan. The article, written by a wealth advisor touches on What is a Colletctible,  Why Valuations are Important, How Collectibles are Taxed, How to Prepare with 8 planning techniques.

What I find most interesting is the importance the wealth advisor gives to proper valuations.

The article states "In many families, members often have different opinions about fair market value for collectible assets left behind. These differences can lead to delays in the settlement of an estate which could be costly, fuel disagreement among heirs, or even lead to litigation."

It continues "One way to reduce the chance of this occurring is to obtain appraisals for all valuable collectibles while you are still living." While the article also recommends included a specialty dealer or auction house or two to assist in settling an estate. An appraiser should be included, and probably more important that a dealer or auction house. But, that just shows we have additional needs for promoting qualified appraisers, valuation services and art advisory. 

This is an excellent article for appraisers to review and be familiar with, and would also be an excellent resource when working from both an appraisal and art advisory position.

WTOP reports
WASHINGTON — An interesting situation arose recently with a colleague of mine.

Acting as the executor of a longtime client’s estate, she discovered an original statue of a famous 19th century artist in the recently deceased client’s closet. If no pre-emptive planning was done, this statue could pose several potential issues for the estate and their heirs.

While we may not find artwork of this caliber stashed in the closet of a relative, we or our family members may be collectors of art and other valuable items that we consider not just as personal property that reflects our passions, but also as a means of building our net worth.

In fact, in a 2017 report, Deloitte found more than 80 percent of collectors reported they thought of their art collections as a type of investment.

Why then do many high-net-worth collectors fail to adequately plan for the ultimate distribution of these potentially valuable assets?

If you own valuable artwork, antiques or other collectibles, then you may want to consider how to correctly distribute these assets upon your death.

To help you and your heirs plan for these treasures when you are gone, we have touched on a few important topics to consider.

What is a collectible?

According to the IRS, the definition of collectibles includes works of art, rugs, antiques, any metal or gem (with exceptions), any stamp or coin (with exceptions), valuable alcoholic beverages or “any other tangible personal property that the IRS determines is a “collectible” under IRC Section 408(m)”.

In general, there are two ways you can distribute collectible personal property — either leave the assets to your heirs or donate them to a charitable organization.

In either case, special tax and estate laws will apply and these laws differ from laws governing distribution of other types of assets in an estate. Ignoring these laws can result in unnecessarily high capital gains taxes to your heirs, income or estate tax penalties, or depreciation of the asset’s market value.

Equally troubling are issues that may arise from ownership disputes or difficulty in liquidating rare items, assets with limited market demand or collectibles where their worth is derived primarily from family sentimental value.

For now, we will address special considerations for distributing collectible personal property to your friends or family members.

Why is proper valuation important?

Many estate plans clearly articulate a plan for division of financial assets but fail to address distribution of more complicated assets that often have both financial and sentimental value. Jewelry, large coin or stamp collections and rare antiques are just a few examples of assets that can complicate an otherwise orderly distribution of someone’s estate.

In many families, members often have different opinions about fair market value for collectible assets left behind. These differences can lead to delays in the settlement of an estate which could be costly, fuel disagreement among heirs, or even lead to litigation.

One way to reduce the chance of this occurring is to obtain appraisals for all valuable collectibles while you are still living.

Some attorneys and CPAs also suggest in your estate planning documents you include the names of at least two dealers and one or two auction houses who specialize in your type of collectible. This information can be helpful to whoever settles your estate, especially if they are not an expert in things like wine or antique needlepoint.

Markets and the economy certainly influence a collection’s ultimate value. It’s best to get estimates from multiple sources with dates and valuation amounts to help your executor and heirs have a sense of a reasonable range of values for the collection should they decide to sell the assets.

By providing clear documentation of the potential value of your precious belongings in your estate documents, you reduce the chance that something having great value will be sold at a deep discount by a naive heir or donated away to charity by an unaware executor.

Proper valuation is also important to help establish how much should be included in the calculation of the overall value of your estate.

Delays can occur if someone must take extra time to find the right experts rather than simply contacting the experts you provided for your type of asset. Since there are no licensing requirements for appraisers of personal tangible assets, whoever selects the appraiser will need to carefully consider their credentials or level of expertise in a particular area.

Remember that even if your heirs choose to hold the assets rather than sell them, they will still need a value of all assets to establish the total value of your estate.

Tax laws also stipulate that if assets are not sold within a period of time of the owner’s death, or if values exceed a certain level, the estate must obtain an official appraisal for valuation purposes. Some estates try to avoid this requirement by donating assets directly to a charity, but this is technically not allowed unless the estate plan specifically authorizes such assets to be donated rather than passed on to estate beneficiaries. And failing to report some valuation for tangible personal property on the estate’s Schedule F (Form 706) is a leading audit trigger for the IRS.

Note that valuation for insurance purposes is not the same as valuation for estate planning and legacy purposes.

Insurance appraisals and valuations for determining coverage are meant to reflect replacement or retail value of collectible assets and typically result in the highest appraised value, which often differs substantially from fair market value.

If you think valuation for insurance purposes may cause confusion about the value of assets if you pass away, you’ll want to leave special instructions so that heirs don’t assume insurance schedules are accurate as to correct valuation.

Related, an absence of insurance could imply lack of total fair market value to an uneducated estate settlement team.

How are collectibles taxed?

Reliable valuation from expert appraisers is also necessary to satisfy income and estate tax laws.

An appraisal done as of the date of death provides an accurate tax basis that the beneficiary takes on as their own basis when the asset is passed to them. This is an important figure as it ultimately determines the taxable gain and amount of income tax inheritors will pay if they hold any of the assets for a period of time then sell them at a later date.

This special tax law, known as “stepped-up basis”, may provide some incentive for you to keep highly appreciated assets until you die as a way to reduce the overall capital gains tax that you or your heirs would have to pay.

On the other hand, you’ll need to consider whether keeping the asset would increase your estate valuation to a level that triggers unwanted estate tax liability.

Basis amounts also work in reverse, meaning there could actually be a reduction or “step down” in tax basis if the value of the asset at the time of inheritance is lower than the original price paid.

We’re finding devaluation is increasingly common as the millennial generation is not as interested in purchasing antique furnishings. A millennial generation with more frequent relocation, less time to maintain assets (think polishing silver) and smaller home sizes contributes to declining market values for collectibles being handed down today.

When collectible assets are held for at least one year by an investor (i.e., a beneficiary who is not acting as a dealer in that type of asset), then long-term capital gains tax rates apply.

One important fact is that federal long-term capital gains rates on collectibles are higher — a whopping 28 percent — no matter the level of your adjusted gross income (unless you also owe the 3.8 percent surtax). That compares to a top long-term capital gains tax rate of 20 percent (23.8 percent with surtax) on other types of assets.

Another disadvantage, especially for higher income beneficiaries, is that sale of collectibles held less than one year are taxed at personal income tax rates. If you inherit a collectible and later sell it at a loss (compared to the basis you receive), your ability to write off such loss will depend on whether there is any evidence of “personal use.”

For example, if you inherit a valuable piece of artwork, hang it in your home then sell it at a loss, the IRS may reduce or eliminate the amount of loss you can deduct on your income taxes. If a collectible is held strictly for investment purposes, then you can usually deduct the loss. A CPA or estate tax attorney can help you determine if inherited collectibles are likely to be treated as personal use or investment property.

Depending on the asset value and/or state laws, estate tax also may apply to collectible assets passed after death. In many cases, reporting requirements hinge on either asset value, total estate value, or both.

Attorneys are quick to point out that there is no statute of limitations for estate tax fraud, so regulators can hold someone liable for tax audits or penalties indefinitely. There are plenty of real world examples of heirs owing taxes or penalties and estates forcing an asset sale that ultimately erodes market value and reduces the total amount inherited by beneficiaries.

What should I do to prepare?

There’s no way to guarantee smooth disposition of your collectibles and personal property. Market value, demand, and family dynamics change over time.

There are numerous planning alternatives that can lessen the estate tax burden imposed on collectibles.

Here are eight planning techniques you can initiate while you’re alive to improve settlement of these assets upon your death:

  1. Obtain one or more appraisals from certified experts. You may also want to request a certificate of authenticity for high value and rare items.
  2. Keep records of purchase date, price, appraisals, damages, insurance coverages and cost of any improvements such as refurbishment or repairs. For collections, consider making a list of all the individual items in the collection and record the above information for each piece in the collection. You may also want to include selling dates for items of a collection and the names of past buyers and sellers as they may serve as a ready market for the collection.
  3. Talk to your heirs and ask which items are most important to them. That will give you an idea of potential disagreements about the inheritance of particular items. Make sure any promises to pass down certain items to a particular person are clearly written in your estate plan.
  4. Consider ways to equalize inheritance amounts and ways to respond to potential claims of fairness that may arise among your beneficiaries. It’s tempting to leave this difficult task to your chosen executor, but that person could have a conflict of interest, especially if they are your spouse or a benefiting adult child.
  5. Consider taking advantage of annual or lifetime gift exclusions by gifting personal property during your lifetime.
  6. Articulate in your estate documents who will bear the cost of storing or shipping items, especially if intended heirs reside out of state. With more inheritors living farther away, it’s increasingly common to include language stipulating that an estate will bear the cost of storage during estate settlement. Consider whether beneficiaries have the means to cover what could be expensive delivery of larger or fragile items they stand to inherit.
  7. Understand potential benefits of gifting to charity, keeping in mind regulations and confirming that the receiving charity can handle the management and sale of the donation. Donor Advised Funds may be a useful tool for gifting collectibles, depending on the fund sponsor. To learn more, read: Are donor advised funds right for your charitable giving?
  8. Notify your investment adviser, CPA and estate planning attorney of collectibles that may have value. You may also wish to have a discussion with your executor to make them aware of the special nature of this personal property and to alert them to arrangements you’ve made to preserve the asset value or to respond to potential family disputes.

Becoming aware of the unique laws that pertain to valuable artwork and other collectibles can help ensure an orderly distribution of your treasured collectibles.

Taking a few simple steps now can help maximize value to your beneficiaries by minimizing taxes, and perhaps most importantly, reducing family disputes.
Source: WTOP 


Fine Art "Financialization" and Blockchain

The NY Times has posted an interesting article on the fine art market and the integration of blockchain. Many believe that fine art is an asset class, yet for many there remains a reluctance to buy completely into fine art as an asset conversation. With blockchain, the article notes, there is a growing interest and understanding that could push fine art totally into a more fully accepted or universally respected asset class.

The NY Times reports
LONDON — In recent years, there has been plenty of talk of the “financialization” of art. As prices soar to new levels and digital technology opens new markets, that talk is getting louder.

Last month in London, DACS, Britain’s leading artists’ rights management organization, unveiled “The Art Market 2.0” to lawmakers in the House of Commons. A report by academics at the Alan Turing Institute in London and Oxford University, it envisioned how blockchain technology might “change the balance of economic power in the art market” and “integrate art into the financial sector.” A financialized Art Market 2.0 would lead to an “explosion of liquidity and value,” according to the report.

A day later at the London Business School’s 10th Art Investment Conference, held at Phillips auction house, there were, as usual, sessions discussing the performance of art as a financial asset class. This year, however, the event focused on whether “new technologies can make art a better investment.”

“It’s not Wall Street,” Alain Servais, a Belgian collector, former investment banker and one of the speakers at the conference, said in an interview. “I don’t think art can be considered as an asset class.” He pointed to the art market’s lack of liquidity and regulation and to the ability of trade insiders to control the prices of certain highly collectible names. “These are wealthy people’s toys,” he said.

But to what extent has the art market been “financialized,” in the way that a Wall Street investor would recognize?

A lack of liquidity and regulation, together with opacity, volatility, high transaction costs, cyclical trading patterns and a relatively small scale, have all long been reasons institutional investment houses have shied away from the art market.

But wealthy individuals from the world of finance are becoming increasingly enthusiastic about art as a way to increase their capital.

“Much of today’s most dynamic wealth creation comes from hedge funds, private equity and real estate,” said Evan Beard, a national art services executive at U.S. Trust, a wealth management unit of Bank of America. “None of our clients are buying art for investment. But they’re savvy with credit, and art is a capital asset.”

Mr. Beard said that Bank of America has about $6.5 billion of art-secured loans on its books and that clients have used much of this liquidity to capitalize their businesses.

Last year in the United States, the art-secured lending market grew 13.3 percent to an estimated $17 billion to $20 billion, according to the 2017 Deloitte Art & Finance Report. The market is dominated by the major investment banks, which charge lower interest rates for their loans than specialist lenders that securitize loans solely against art.

And then there is the money that savvy financier-collectors can make out of auction guarantees. Mr. Beard said that more than 10 of his wealthy clients routinely guarantee works at Sotheby’s, Christie’s and Phillips. They take the risk of being the only bidder and owning the artwork in return for a fee or a percentage of the “overage” if the bidding exceeds an agreed-upon price.

“They’ll guarantee three paintings in a season they’d like to buy and will be happy to own one of them if the overage on the others gives them a good discount,” Mr. Beard said.

At the latest biannual season of Impressionist, modern and contemporary art auctions in New York, Sotheby’s, Christie’s and Phillips took in about $2 billion, a 25 percent increase over the equivalent sales the previous May. Most of the more expensive lots had been certain to find buyers courtesy of these opaque arrangements with third-party guarantors, which blur the boundaries between private and public sales. Among the works sold were paintings by Amedeo Modigliani and Andy Warhol that fetched $157.2 million and $37 million, respectively.

Artnet News pointed out that Christie’s website published the price of Andy Warhol’s 1963 “Double Elvis [Ferus Type]” as $38 million with fees, rather than the $37 million that was announced to the media. That $1 million discrepancy reflected the fee earned by the undisclosed third party, who earned more from the transaction than the seller. That was the casino magnate Steve Wynn, who had bought the painting in 2012 for $37 million.

The rewards for saying “bid” into a telephone can be even more spectacular. Thomas Danziger, a New York attorney who represents clients active in the top end of the international art market, estimates that whoever guaranteed Leonardo’s $450.3 million “Salvator Mundi” could have earned between $80 million and $100 million. On the other hand, as Mr. Danziger points out, guarantors who end up buying a work are left wondering if the lot has been overvalued. The Modigliani nude that sold last month, for example, was knocked down to a single bid of $157.2 million from its guarantor.

“Guarantees used to be a gentlemen’s club, but now they’re greatly extended,” Mr. Danziger said. “Auctions have become a public forum for private transactions,” he added, referring to how it has become routine for at least of the third of lots at evening contemporary sales to have been “presold” to external guarantors.

With plentiful liquidity available from the major banks, and millions to be made from auction guarantees, wealthy collectors can make art a lucrative asset without having to go anywhere near the art finance industry.

Yet companies continue to come up with ideas to financialize art. Later this month, the Singapore-based Maecenas, which gave a presentation at the Art Investment Conference in London, will launch a “decentralized art gallery” (the works are scattered, but exhibited together online) that “democratizes” investment in art, according to its website.

One of several start-ups that have explored the idea of “fractionalizing” art, Maecenas will divide 49 percent of the value of an artwork into shares, which can then be bought and sold on the company’s blockchain trading platform. Shares will initially be priced at $10,000 each, according to Miguel Neumann, one of the company’s founding partners, who comes from an investment banking background.

The first artwork will be Andy Warhol’s 1980 silk-screen painting “14 Small Electric Chairs Reversal Series,” will be supplied by Dadiani Fine Art, based in the Mayfair district of London. The gallery, which offers a commercial mix of contemporary and older British, American and Russian art, gained notoriety when it became the first in the city to accept payments in Bitcoin and other cryptocurrencies. (The Warhol will be valued at 4.2 million pounds, or about $5.6 million.)

It remains to be seen how many investors will want to speculate in shares derived from works owned by galleries and collectors. The art market, after all, despite its shortcomings, is still democratic enough that people can buy and actually own works for less than $10,000 that turn out to be good investments.

But there are also people, such as Duncan MacDonald-Korth, one of the co-authors of the DACS “Art Market 2.0” report, who remain convinced that the technological integrity of blockchain will eventually transform the art market.

“The stakes are getting so high,” Mr. MacDonald-Korth said in a telephone interview, referring to the skyrocketing amounts being paid for trophy works of art. “The higher the values get, the more incentive there will be for the market to be properly financialized.” He envisages a large-scale trading platform on which investment banks and hedge funds will be able to trade fractions of art in digital currency. “We’re in a special moment in the economics of the art market.”

What this moment will mean for art itself is anyone’s guess.
Source: The NY Times 


ValueMyStuff Valuations and Appraisal Report

I just received an email on the ValueMyStuff, which states "The report is an expert’s guide to the complex and fragmented art and collectibles market, looking at both important valuation factors, risks, changes in taste and the impact on value on a broad section of art and collectibles. The report covers 49 collecting categories from Memorabilia and Scientific Instruments to Fine Art." To download the report, click HERE.

The group of experts who have contributed opinions and commentary to the report are just short market related capsules that are not at all related to the data and ValueMyStuff conclusions. In short they are discussing general markets and standards of art lending, insurance standards etc, but not using any of the ValueMyStuff data conclusions in their commentary.

I am still collecting comments on the ValueMyStuff report, but the more I delve into the report, the more concerns I have.  Most comments, so far, have not been positive, with many appraisers concerned about multiple report factors, including the exclusive use of ValueMyStuff data, no definition of  "fair market value" (keep in mind it is a UK platforms FMV could be different than what we use in the states. Additionally, the sample report on the website uses Insurance Value and Auction Value (yet in the notes it is called an auction estimate) and not fair market value.

Typically online valuations are used with restricted reports, where an owner might wish a quick valuation and identification before paying for a qualified appraisal by a qualified appraiser. ValueMyStuff states it can be used for insurance, so here we have third parties using the report and making financial decisions based upon the content and value conclusions through images.

Additionally, in each item category the report has condition as being highly important value characteristic, and rightfully so, but how is that justified against appraising from images without performing an inspection or getting an unbiased condition report.

Perhaps most concerning to me is the unusually low value of the data points used for compiling and analyzing market trends within the report. The report narrative notes the average FMV across all valuations is $4,398. And,  nearly 84% of all FMVs were below $1,000. So in effect, we are looking at a report giving market trends and quantitative data on decorative accessories and household content. Not to say the report is not useful, but it many cases it may only apply to the lower market levels of the various listed categories.

Many professional appraisers are skeptical about online appraisers and how they can be credibility performed with property due diligence, authentication and accurate valuations for $20 per item. An appraisal is not an auction estimate, it is a researched and developed valuation based upon scope of work and the intended use.

Given ValueMyStuff is chagrining $20 per item, how does the appraiser make any income and perhaps more importantly, produce a credible appraisal report and value conclusion. The website sates, "Expert Appraisals in 48 Hours, from $10". Another comment pointed out by a comment, what about liability if this is being used by third parties such as an insurance company.

Please keep the comments coming, it is interesting to see what appraisers think of this platform and report.

ValueMyStuff states in the report
Data Source & Limitations (bold emphasis added)
The valuation information used for this report is exclusively based on data provided by ValueMyStuff. The findings provide valuable insights into the market for valuations of art and collectibles but are not neccesarily indicative of the overall market trends.

The Average Fair Market Value across all valuations made by ValueMyStuff between 2012-2017 came in at $4,398. At the top end of the 10 sectors covered in this report we find the Fine Art sector (see graph below), which also accounts for 61.7% of all valuations with a Fair Market Value above $100,000. However, 83.9% of valuations in the period did have a Fair Market Value below $1,000.