A Time to Vent

I dont usually editorialize on the AW Blog, I see the site more as being a resource for personal property appraisers to follow markets and trends, and for news related to the appraisal profession. This approach has worked well and the site has grown in credibility, subscribers and viewers from its inception in 2008. I never thought of this site as something for my personal expression, but for passing along useful content and information for appraisers. I hope you have benefitted from the site and the posts.

But every once in a while something does come up that really bothers me.  Sometimes I suppress the urge to vent, other times I will post in a diplomatic manner, but I think readers and followers of the AW blog will agree these are rare occasions.

Over the past two months, I have had the unfortunate opportunity to view two "unqualified" appraisal reports. One was an estate appraisal and the other was for a charitable donation.  Both were completed by appraisers who have experience and should know better, but were not associated with any of the three major appraisal orgs, the International Society of Appraisers (ISA), the Appraisers Association of America (AAA) and the American Society of Appraisers (ASA). For full disclosure, and most readers know I am a member of ISA, and I am the immediate past president of that organization. So I do have a bias toward ISA and appraisers belonging to these recognized organizations.

I would like to state that all independent appraisers are not bad appraisers, and that not all ISA, AAA and ASA credentialed appraisers are good appraisers. In addition to ISA, AAA and ASA appraisers, there are many quality independent appraisers providing professional services to users of appraisals. That being said, there are also many unqualified appraisers lacking in experience and methodology posing as professional and qualified appraisers.

I dont wish to go into many details and will stay rather generic, but the estate appraisal was done by a recognized regional auction house (outside of the DC metropolitan area where I am active), with an appraiser who stated experience in appraising personal property for nearly 30 years.  The value being sought for the estate appraisal was noted in the report as "Fair Market Replacement Value". Perhaps that was a cut and paste typo, yet it was bolded and underlined.  This particular appraisal had several individual items valued at over several hundred thousand dollars each, and was no more than a laundry list with a half page narrative. This estate appraisal report was also written within the past 5 years, so it was not a vintage 1980s appraisal report where standards were just being developed for personal property appraisals. The half page report narrative contained no intended user, no definition of value or market analysis, or date of death. The item description section included works valued at over $200,000 along with a very simple description with measurements and a value column (plus many of the measurements were incorrect). There was no difference in the amount of detail listed or due diligence for a $1,000 piece than the $200,000+ piece. There was no discussion of condition, where the most valuable painting had a fair amount of restoration. If you attended the ISA conference in Philadelphia in March, there was an excellent presentation from IRS appraiser Joe Ruzicka on the importance of including detailed condition reports within the appraisal report when submitting estate and donation appraisals. I could go on with additional problems and issues, but I think you see the issues.

The second report was for a charitable donation. The discussion on comparable property was well thought out and explained, yet I noted there was one major flaw. The comparable property selected had very little to do with the subject property. Additionally, the subject property itself was not described properly, and was therefore misleading the intended user and any reader of the report. Now, this is my opinion and it is based on a quick initial investigation, but I would have placed a far, far lower value on the property than what was included in the initial report. In my opinion, if this report were to be reviewed and the return audited, there could be section 6695A penalties for the appraiser and fines, penalties and back taxes for the client.

I will say, that by appraising at this level of sophisticated appraisal assignments it appears an appraiser should known better in documenting, developing and in selecting comparable property for an appraisal report.  I am not inferring that belonging to one of the three major appraisal organizations would have changed the reports, but they very well could have. These three major appraisal organizations all have annual conferences where appraisal theory and methodology, as well as product knowledge and current market scholarship are discussed. ISA has requalification programs every 5 years, as well as requirements for continuing education. We need to see more collaboration in the personal property profession between all appraisal organizations including those beyond ISA, AAA and ASA, we need to have more input into the appraisal foundation, continue contact with the IRS and we need a way to make sure appraisers are properly qualified for the various levels of valuation and appraisal assignments they undertake. Given the wide and diverse nature of the profession, this is certainly a tall task, but a task where we need to at least start a dialog among the various stakeholders.

Just earlier this week ISA, AAA and ASA sent out a press release championing properly credentialed appraisers and qualified appraisal reports.  The press release, of course, noted that members of these three organizations currently meet the new Appraisal Foundation qualification criteria. New criteria from the Appraisal foundation and the Appraisal Qualifications Board will take effect on January 1, 2018. Again, this does not guarantee qualified appraisal reports, but, in my opinion it does help. The collaboration between the three organizations is certainly a good step in promoting professionalism and credentialed appraisers.

If I were to give advice, I would recommend to most personal property appraisers to join one of these three organizations, stay current with changes and trends.  And, dont just say, "I have been appraising for 30 years and I know how to write an appraisal report". If you are an independent appraiser and feel strongly about staying independent from ISA, AAA and ASA, make sure you are USPAP tested, and requalify every two years, and that you follow standardized practices for both developing and writing appraisal reports. Also, network with fellow appraisers and stay current with changes within the profession.

OK, soapbox mode off.

Just to toss out some market news, Sotheby's reports its Board of Directors has declared a quarterly dividend of $0.10 for the second quarter of 2015. The second quarter dividend is payable on 15 June 2015 to shareholders of record as of 1 June 2015.