Choose Your Path: One Artwork, Many Values
The setting: You inherited an old landscape painting from your grandparents. You grew up hearing the story: they bought it on a trip to Italy in the 1960s, and supposedly the artist was famous. It looks old, it has a signature, and it has always hung in the family home.
Now it belongs to you, and you need to determine what is it worth. But this is not an easy answer. Choose your own adventure.
You have options.
- Keep it. You love the painting, and hang it in your home
- Donate it. You want to donate the painting to a museum or nonprofit.
3 Insure it. You want to cover the painting on an insurance policy. - Sell it. You want to sell the painting; you have no room for it.
With each of the above options, the painting may have a different value.
The value of an artwork is not a single, fixed number. It depends on what path you choose. Once you decide, you may find that you need an appraisal, and the purpose of that appraisal will determine which type of value is appropriate.
This is where your narrator, the appraiser comes in. Their role isn’t simply to tell you what your painting is worth, but to help you understand and determine the appropriate type of value for your chosen path.
Choose Option 1: Your adventure ends here, at least for now. You probably don’t need an appraisal.
Choose Option 2: Turn to Fair Market Value.
If you chose Path 2, your adventure leads to Fair Market Value (FMV). Donations require FMV; it considers the market that currently exists, analyzing recent historical market data and trends, usually beginning with auction records. The appraiser considers the artist’s overall market and then compares the appraised work to relevant sales based on medium, size, date, subject, quality, and condition.
The date of a sale also matters. If the strongest comparable sold several years ago, it may need to be adjusted for current market conditions. In other cases, auction data may not yet exist because an artist is actively working and is only found in galleries. The appraiser is interpreting the market rather than simply reporting prices.
Choose Option 3: Turn to Retail Replacement Value.
If your goal is to insure the painting, your path leads to Retail Replacement Value (RRV). This approach is different from FMV, and timing becomes particularly important. Research may still begin with auction records, but retail galleries and dealers become important sources of market data.
Imagine that the inherited painting is destroyed in a house fire. Comparable works have sold at auction for around $20,000, but they appear only occasionally. As the owner, you cannot necessarily be expected to wait two or three years for the right replacement to come to auction. A dealer, however, may have a suitable work available now for $35,000.
Why is retail so much higher? A dealer has acquisition costs, research, conservation, framing, transportation, insurance, storage, staffing, rent, marketing, and the financial risk of holding inventory. The dealer also provides something extremely important in a replacement scenario: immediate availability.
Insurance values may also need to consider more than a total loss. Artwork is often damaged rather than destroyed. Depending on the property and circumstances, adequate coverage may need to account for conservation, specialized packing and transportation, framing or mounting, and installation.
Choose Option 4: Turn to Marketable
Cash Value.
This adventure has additional considerations, so we will save it for the next issue.
So, Which Path Will You Choose?
An appraised value is developed for a particular purpose, at a particular point in time, within a particular market. As an appraiser, I can help you determine which value you need and choose the right path. •
