More than 16 years ago, I took my first Uniform Standards of Professional Appraisal Practice (USPAP) course on my way to becoming an accredited personal property appraiser. What separates a USPAP-compliant appraiser from an auction specialist or gallery owner are the procedures, guidelines and ethical standards for appraisal detailed in the USPAP manual. USPAP is an enforceable set of rules regulating the appraisal profession that apply to all appraisal disciplines including personal property, real estate, and business valuation. Professional appraisal associations like the International Society of Appraisers, American Society of Appraisers and the Appraisers Association of America have the legal authority to enforce USPAP compliance by their members.
I recently completed my 7 hour USPAP update course for 2024-2025. The major update to 2024 USPAP concerns the ethics rule; that appraisers must be aware of and comply with with non-discrimination laws such as the Fair Housing Act, the Equal Credit Opportunity Act and the Civil Rights Act of 1866.
An independent appraiser compliant with the ethics and standards of USPAP approaches any appraisal project from an objective standpoint. USPAP compliant appraisers must include a signed certification in their appraisals attesting that they have no interest in the property being appraised. They also must state that their fee is set at an hourly or per project rate rather as a percentage of the appraised value.
So what does an arm’s length appraisal look like versus an auction estimate? Let’s say you have a California landscape painting from the 1930s and you want to know what it might bring at auction. You find out that Bonhams has annual auctions in San Francisco for early California painting so you go to the website and submit a digital photograph of your painting, its dimensions, where you acquired the piece etc… After a couple of weeks you hear back from them that they are interested in consigning the painting for an upcoming auction. They provide you with an estimate of $5,000-$7,000 as well as terms for sale such as the sales commission. While the auction specialist has undoubtedly researched what comparable paintings have sold for at auction, it’s important to understand that these estimates are also set with a view to drawing in prospective buyers to bid on the property. So typically the estimate range will be set low to encourage competitive bidding, to hopefully drive the hammer price to the high end of, or even above the estimate range.
An independent appraiser compliant with the ethics and standards of USPAP approaches the project from an objective standpoint, and marketing considerations have no bearing on our analysis. Rather the value conclusion of the painting is derived from a comprehensive gathering of relevant data including realized sales of similar properties at a variety of auction houses and overall market conditions. Moreover, the appraiser analyzes the nuances of various sales and their venues to determine why one painting may have sold for significantly more or less than other comparable paintings, which sales may be outliers on the low or high end, whether the sale venue is a place where collectors of early California paintings typically go to acquire works etc… All of these considerations and more go into the analysis of the value conclusion. Beyond requiring neutrality, USPAP details protocols for developing and reporting a valuation. Above all, as stated in the preamble of the USPAP manual, a USPAP-compliant appraiser is obligated to act in a manner that promotes public trust and confidence in appraisal services.
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