Only the Freshest Comps

I was talking with fellow appraiser Francine Proulx of Art/Antiques Resource LLC (excellent newsletters on education, shows, antique and appraisal related websites, click HERE, or on the banner to visit and navigate to the professional services page) and she mentioned an interesting article which appeared in Saturday's Washington Post. Francine pointed out an article on real estate appraising and how only very current or "fresh" comparable values were now being used and sought by mortgage lenders. Although the article is real estate specific, Francine thought it was very pertinent to personal property appraising in this current environment of the fine and decorative arts markets as well, and I certainly must agree.

Washington Post Real Estate reporter Kenneth Harney makes a strong case that due to the current market trends there is a need for appraisers (and in some circumstances a requirement) to use only the most recent and freshest of comps. This approach certainly translates well to the current market situation with the fine and decorative arts as well.

Harney states Rather than accepting sales of similar properties that closed as much as six to 12 months ago, lenders and mortgage investors are demanding that appraisers include only the freshest comps, ideally those closed within the previous 90 days, to support their valuations.

They're also pushing for more extensive data on local listings, pending sales and listing-price-to-selling-price ratios before they agree to fund a mortgage.

The article also states that some appraisers are having hard times finding enough "fresh" comps to satisfy lenders. In these cases, many appraisers are taking current market trends and making valuation adjustments for the differences in time based upon the metrics existing real estate valuation trending model.

Now personal property appraising does not, as of yet have many of these more sophisticated real estate metric and valuation trending programs and models, but there are some price models and documentation which could be used. As personal property appraising becomes more standardized and scientific I hope to see more valuation models which will be developed to assist and guide the appraiser. One major hurdle to overcome of course is the timeliness of any index, and most guides and indices are reveal a substantial time lag.

Just the other day I posted on the AW Blog that perhaps some of the previous weeks modern, impressionist and contemporary sales were not as bad as anticipated based upon high/low estimates since the catalogs and catalog estimates were produced months ago. Just a few months ago the mind set for purchasing find and decorative arts was rather different than it is today. As appraisers in uncertain times we need to think through our assignments and ensure that our research is relevant to current market trends.

In this market place it does not make sense to use comparapbles from a year or two ago, unless adjustments are to made. As those adjustments are made, be prepared to justify and defend any value conclusions. Also, if a review of the report becomes necessary 6-12 months later, make sure the workfile is well documented on the market trends at the time of valuation. Just some food for thought in these times when market trends are so varied and mixed.

To read the Washington Post Real Estate article click HERE.