Art like any asset, requires the same attention as that accorded to your other personal assets: your car, your home, or your CD collection.
Obtaining a professional appraisal of your artwork(s) operates in much the same way as seeking a value for other assets. Credentials should be assessed; market sector and specialty experience should be examined together with the level of tertiary qualifications and membership with an industry association.
Most importantly, seeking the services of an independent, objective and impartial professional will result in a more accurate, credible valuation, and without the potential bias of a vested interest in the artwork and therefore its value.
Valuation: the importance of methodology & purpose
There are different types of art valuations, and various methodologies are utilised in assessing the artwork(s) specific to its/their purpose. Typically, art valuations are used for:
Insurance
Superannuation;
Financial reporting;
Asset Validation;
Liquidation reports;
Estate planning and division; and
Family Law property negotiations.
For the valuation of an artwork for insurance purposes for example, the methodology will incorporate an assessment of the current retail value and market for the artist and artwork, which will provide a ‘replacement’ value.
When it comes to a valuation for Family Law property negotiations, the methodology for establishing a ‘fair market value’ will be employed. A fair market value is defined as
the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts
Put simply, ‘fair market value’ means what the artwork(s) could sell for at any given auction in the immediate or near future. In determining this type of value, the appraiser will undertake market research derivative of both the primary (commercial galleries) and secondary (auctions, re-sales) market sectors.
The valuation process for Family Law property settlements
Fundamental to Family Law property settlements is the division of assets, with the primary asset invariably being the family home. Artworks are viewed as assets, and in a similar manner to jointly electing a property valuer to assess the value of the matrimonial property, so too with the appointment of a specialist art valuer for the parties’ art collection. The steps entailed are generally, as follows:
Once the appointment of a valuer has been confirmed, the elected valuer will receive a joint letter of inspection from one of the solicitors to the negotiations. This letter should clearly detail exactly the requirements for the valuation including for example, if the artworks need to be realised within a certain time frame; or if the attributable value should be stated as a nett value, or as a value less sale costs.
The valuer will respond to the letter of inspection and confirm instructions, in addition to providing a fee proposal to the solicitor, which will confirm the hourly rate and estimated total time required to undertake the valuation.
Included in the letter of inspection will be a list of artworks/items to be valued, agreed upon by both parties. This is an especially important step; it is crucial the solicitor has received accurate instructions as to the artworks/items which need to be valued so as to provide a definitive list to the valuer, otherwise disputes can potentially arise.
If your art collection has been well documented over the years, this step will be relatively simple; in the alternative it will be important to collate all relevant documentation regarding the artworks (purchase invoices, artwork commission contracts, receipts) to assist with drafting this list.
The valuer will then seek pre-payment for the audit and valuation. This is common practice and is based on the duration of property negotiations to reaching final settlement. This payment will be referred to as a disbursement in your solicitor’s invoice(s).
The valuer attends the premises where the artworks/items are located and carefully inspects each piece and proceeds to document the artworks noting artist, title, medium, dimensions, signature and/or other inscriptions or distinguishing marks, and condition;and photographs the artworks for reference. These details will form an inventory (schedule) of artworks and will be included in the final report.
One of the parties to the negotiations or the person who resides at the premises, will be in attendance during the valuation to direct the valuer to each artwork. To assist with this process, it is preferable the artworks are accessible (i.e. not wrapped for example) and are available all in one location.
For the purposes of documenting the artworks and drafting the final report, the valuer will consider the following attributes:
Authenticity - discernment of a signature, title or date, original sale documentation;
Quality - consideration of the artist’s period in which the work was executed; composition, palette and technical prowess;
Rarity - how many works by this artist are available on the open market;
Limited Edition Prints (if applicable) – the breadth of the edition for the work; available prints in the edition;
Condition – the archival stability of the work and framing quality, i.e. is the artwork in its original frame?;
Provenance – probably one of the most crucial factors in the overall valuation process, “provenance” equates with the artwork’s ‘history’, i.e. from artist’s studio to gallery exhibition to auction house sale; and includes discerning any notable non-commercial exhibitions in which the artwork was included, for example, a ‘survey’ exhibition at a regional gallery, in addition to any publications in which the artwork was illustrated or discussed;
Market – does the artist have an auction record? Sales rates for the artist in either the primary or secondary markets.
Documentation
The final report, i.e. the valuation, constitutes a ‘legal’ document and will become supporting material to the property negotiations. The parties will be provided a copy each via their respective solicitors.
The quality of the appraisal documentation is important and should include:
a statement of compliance (i.e. no vested interest from the valuer);
purpose of valuation;
asset class, location and inspection(s) dates;
definitions, provisions & disclaimers;
demonstrate a solid, up to date appreciation of the market for the subject artist/artwork;
present well-reasoned research;
provide documentary proof and/or reference to recent auction results and other market indices (ones which are verifiable); and finally,
clearly and concisely outline the methodology used for the appraisal.
A professional audit and valuation of your artwork(s) which adheres to industry set standards and is provided by an experienced specialist will provide a level of assurance as you proceed through the Family Law property negotiation process.
©Catherine Asquith 2020