A Look at the DIA Appraisals

Fellow appraiser Xillary Twil sent me an article from the Detroit Free Pres written by appraiser Scheriber Jacoby as a guest contributor to the DFP. We have posted on this topic before, given the vast difference in valuations, which Beverly smartly points out is partly due to how each appraiser looked at the collection, and if the collection was salable items or cultural property. She also notes that each appraisal is written for a specific time frame, assignment and market conditions, with reports being developed for a specific, and in this case different intended users.

It worth taking a few minutes to not only read the article, but also consider the various implications.

Beverly reports in the Detroit Free Press.

Why is there such a huge disparity among the Detroit Institute of Art appraisals? The collection is worth $8 billion, according to one appraiser, but the grand bargain organized by an alliance of foundations and the state claim a value of just over $800 million. Others use sums in between. The Free Press has reported the crisis in admirable detail, but the controversy is an opportunity to consider conflicting assumptions bred into the bone of both museum and appraisal professionals.

Detroit residents should understand and question the process and the perspective of "experts" as they weigh the value of art, as salable property and as a cultural treasure. Still, Detroit's bankruptcy has raised issues about a field where experience, good methodology, analytics and professional judgment are essential, yet — and I mean no irony — undervalued.

This emergency may represent a missed opportunity. A valuation — always based upon a time frame, specific assignment and market conditions — is a hypothetical and written on behalf of the intended user. Results highlight the difficulty of providing credible professional opinions of value worthy of public trust. On the other side, longstanding museum policies and procedures strenuously discourage talk of financial value. More clarity on both fronts may have helped the court and the public to avoid assuming that the values would be more uniform and the opinions less contentious.

City ownership makes the DIA's governance structure different from almost all other major American museums, organized as nonprofit private entities. Art museums in the U.S. are not required to account for their permanent collections for financial reporting purposes. Most American museums do not routinely prepare baseline financial statements of the total value of the permanent collection, nor do they wish to be forced by regulators to do so. The DIA may or may not have possessed its own updated, accurate assessment of the collection's value. If it did, it was not required to share them, and here begins the predicament.

The art world is consistently described as mysterious and opaque. Recent technologies have spread distribution of commercial price record databases, increasing price awareness. But access to private sales is erratic, highly dependent upon personal contacts, difficult to verify and, most compelling, time was of the essence, meaning that experts had exceptionally limited research time. That means numbers supporting appraised values in the various DIA appraisals were culled primarily from public sales, which are less than half of the market.

The culture of art museums fosters the idea that once an object exits the private sector and is accessioned into a museum's permanent collection, a powerful professional taboo descends. Objects that were bought, sold and priced before they joined the permanent collection are ever after imbued with reverence and pricelessness. Held in the public trust, virtually all museum mission statements commit to upholding this solemn pledge. Objects represent the material expression of our common cultural and aesthetic heritage; they are conserved, exhibited, studied and seldom sold. Museum policies explicitly prohibit curators or staff from offering opinions or answering questions relating to value. Prospective donors are strictly on their own when seeking appraiser recommendations, much less asking for estimates of how much an item is worth.

Thus, the structure of the museum industry and traditional institutional governance prohibit gathering of valuation information, except for specific purposes, such as purchase research, loan agreements, transit purposes, temporary exhibitions, etc.

These functions belong to the domain of a museum's registrar or collections management department, highly trained technicians entrusted with the physical care of the collections. On a single item basis, the process is often last minute. The DIA was the one institution that was best qualified, at least theoretically, to provide valuation leadership. That the DIA had to hire its own outside experts to ascertain its own position on the value of the collection calls into question whether the museum's internal valuation data may not have been sufficient, authoritative or comprehensive. A situation not necessarily by design, but possibly a result of value being a low priority and a distasteful one.

As a result and as a practical matter, the third-party valuation process was compromised. There has also been a lack of consensus on fundamental concepts that ought to have been agreed upon in advance rather than fought over in the courtroom. There is no question were the collection put up for sale, said sale would represent a bankruptcy liquidation and not "the sale of the century," as one appraisal report heralded.

Genuine collectors and most of the DIA's colleagues at other American museums, excluding the Chinese, Russian and other speculators mentioned, have expressed a measure of solidarity with the DIA's situation. It would be surprising if any would easily swallow their aversion to take advantage of a fellow museum's distress sale. We suggested that the DIA lead a campaign to marshal peer-based institutional support against purchasing Detroit's art be organized, on the grounds of proclaiming how limited the optimum market for the works would likely be. It would have been useful to dispel belief in what I called the "rosy scenario" of the global art market welcoming a sale with glee. In the end, it is imperative to understand that the ones who want the money are not the ones who want the art and their interests are absolutely not aligned.

One potential side benefit of the DIA matter is that it highlights the perils routinely faced by anyone who finds himself in a situation where valuable works of art need to be valued. Apart from the size, scope and scale of the DIA valuation task, it is not unlike what valuation specialists routinely face-conflicting agendas, financial requirements, decisions dependent upon the numbers.

Even when an assignment entails zero tension, one's professional opinions of value may later be challenged for accuracy, impartiality and independence.

Detroit's drama is being played out in the public square, and for that reason, it may be positive to air these issues — an appraisal is always subjective and hypothetical. But it can be a thoughtful, well-researched and reliable piece of work.

There is so much money rolling through the art world that one might be inclined to forget that art is more than a luxury good. But, the cloistered ideals represented by museum culture have a price of their own.

Beverly Scheriber Jacoby is president of BSJ Fine Art, a strategic fine art consulting firm based in New York.

Source: The Detroit Free Press