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Jonathan Rubin

APPRAISALS AND CERTIFICATES: DO YOU KNOW THE DIFFERENCE?

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I thought some might find this interesting - This is written by Robert Cauer

 

 

APPRAISALS AND CERTIFICATES: DO YOU KNOW THE DIFFERENCE?

Even some inexperienced dealers don't know it.

In the violin world, the terms "Appraisal" and "Certificate" are used often interchangeably but there is a big difference.

A Certificate is a document used to declare the Authenticity of an instrument. A Certificate often (but not always) has accompanying pictures and is as credible as the person who wrote it. There is no price stated on a certificate and it will accompany the violin whenever it changes ownership. Certificates are considerably more expensive than an appraisal. They usually cost 5% plus of the instrument's value if they are written by a known and respected connoisseur. 

An Appraisal is a document used mainly for insurance purposes to state the replacement value of the instrument. As opposed to a certificate it has to be renewed every few years to state the current value. A dealer without much knowledge about the originality of instruments can still make an insurance appraisal for an expensive violin, even a Stradivari, if he has access to the original certificates by known and trusted connoisseurs. This appraisal is usually a bit under $200.00 for very expensive instruments.

Unless the dealer writes an actual certificate, his appraisal it is not an individual confirmation of the authenticity of the violin. It is merely an opinion about the value of the instrument while relying on the existent certificates. The owner with a fine instrument, which is well certified does not need yet another certificate to get an evaluation for his insurance. Sometimes the statement in an appraisal contains the sentence: "Made in our opinion by..." if the instrument has already strong certificates, which state that it is genuine. This is sometimes done to elevate the status of the dealer who writes the appraisal. This sentence rarely appears on appraisals if there are no strong certificates for instruments with "expensive" labels. Of course there are some experienced dealers, who know and recognize the maker of the instrument. However they would never make the mistake of calling an appraisal "certificate" as we have seen several times lately.

Insurance appraisals usually state the value higher to include the sales tax. Therefore they should not be taken for coin value by a buyer who buys an instrument from a private party.

In some instances appraisals are made to state the wholesale value at which a dealer might buy it, or for a price the instrument may fetch in an auction.

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In the violin world, the terms "Appraisal" and "Certificate" are used often interchangeably but there is a big difference.

A Certificate is a document used to declare the Authenticity of an instrument. A Certificate often (but not always) has accompanying pictures and is as credible as the person who wrote it.

An Appraisal is a document used mainly for insurance purposes to state the replacement value of the instrument. As opposed to a certificate it has to be renewed every few years to state the current value.

Always worth discussing. Was this in relation to the recent CNBC program on identifyng a Strad?

It is useful to have definitions and glossaries (e.e. the terms 'atributed to' & 'ascribed to')

 

I am wondering if these days a lot of respected certificates from the past might also need to be reviewed occasionally in the light of a lot of scientific research and technology such as dendrocronological analysis?

 

Auction houses also use terms such as "Description" referring often to certificates, and even venture their own 'opinion' on the identity of an instrument.

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Parts of this I agree with (depending on who the appraiser is, and what format and guidelines they follow).  Some I do not.  Happy to bang out the differences with Robert next time we have dinner.

 

What often is done isn't always what is correct... and what Robert writes about is what's often done..  but I believe in the future, we'll see a few more insurers demand a little more detail and accountability from appraisers.  The courts and the IRS already do.  The following assumes that "proper", or professionally accepted procedures and guidelines are followed (one should note that a good many don't follow these guidelines, and in fact may not qualify for membership in appraisers organizations that are USPAP compliant).

 

An appraisal is a document that contains a value for a specific purpose (Intended use; ie. insurance/replacement, charitable donation, estate, fair market, specific market, etc.).  In the US, there are specific definitions for each type of valuation.  Scope of work should be described (examination environment, procedures, limiting factors, work or reports from others pertaining to critical factors on which the appraiser is relying).  Many of us include a glossary to help define some of the terminology used within the appraisal.  Similar guidelines and definitions exist in other counties as well, as Jacob has mentioned in the past (referring to the guidelines in Austria).

 

While not the sole purpose of an appraisal, using USPAP guidelines (for us yanks), the appraiser should state their opinion of authenticity (or lack thereof) within the document, so contrary to Robert's statement, there is and should be an opinion being presented (even if that opinion is that the violin is certified as a specific maker, and the appraiser believes it is, or may not be, or is not by that specific maker).  This really cannot be an empty claim.  The US gov't and most courts have the ability question the appraiser's experience, and can nullify an appraisal if the appraiser has no past experience appraising the type of instrument or bow being valued (if you're going to appraise a classic Cremonese instrument, you need to have past experience doing so)... an important detail for someone making a charitable donation or valuing an estate for tax or distribution purposes.  Once an appraisal has been rejected from the IRS, that appraiser will have difficulty performing charitable donation appraisals in the future (the IRS will tend to bump them).  The cost of appraisals should not be "tied" to an instruments value,but rather to an hourly fee or set fee.

 

I disagree with the cost.  While a number of insurance appraisals do fall within the $200 mentioned, one that required careful documentation of restorations or continued research will not.  A simple, but proper, insurance evaluation (summary report) can run a good three or four pages (unless one selects an unreadably small font).   An estate or fair market value appraisal, properly done, is a good number of pages long and usually does include photos, as well as the list of comparable sales and other important market related information being used to support value...  and cost a good deal more to produce.

 

A Certificate of Origin is a document that simply states an experts opinion of origin, authenticity and provenance.  While photos are standard these days, this was not always the case.  As long as the author carries "weight" in the industry, it's a valuable document to have.  There is most usually much less information contained within this sort of document than within a proper appraisal, however.  The opinion rendered is the purpose of the document, and the reputation of the person offering the opinion that is paramount.  Costs are often charged by % of total value, though some experts have a flat or sliding fee.  

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I love the distinctions being discussed here. In my (limited) experience, an appraisal worth the ink and paper runs around $800. Jeffrey, does the percentage of value come into play once the instrument is worth a certain amount? 2% after, say, a quarter million?

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I love the distinctions being discussed here. In my (limited) experience, an appraisal worth the ink and paper runs around $800. Jeffrey, does the percentage of value come into play once the instrument is worth a certain amount? 2% after, say, a quarter million?

 

If we're talking "appraisals", no.  In order to avoid conflict of interest, an appraisal (valuation) should never be charged by %, but rather by an hourly fee or set fee, and should include a statement clarifying that the compensation of the appraiser is not contingent upon the reporting of a predetermined value.  The catch 22 here is that if one is appraising a 6 or 7 figure instrument, the detail required becomes more and more critical,  the data more difficult to confirm, and the time required/involved may be increased accordingly.

 

Yes, while it would be unusual for an insurance evaluation (summary report) to reach that level, a good and complete fair market appraisal for tax, estate, or resale purposes can run into, and on occasion beyond, the $800 range... and includes specific market data to support the value assigned, specifics concerning condition, etc.  A reasonable correlation would be costs associated with valuation of a house, artwork, or a business.  If an appraiser considers that the item presented for appraisal isn't "worth" all the fuss, they are free to decline the assignment (and I often do).

 

I realize that these costs may shock some who are used to the old days, where an insurance appraisal basically says "violin labeled _____ should be insured for $____"... and little else.  While this still occurs (and may be just fine in the case of commercially produced student instruments where data is easily available on the internet or in catalogues, or inexpensive instruments where the risk is low), there are risks associated with this sort of document... and a number of appraisers in this industry take the time to participate in continuing education, collect and share market data, and try to ensure that they are giving their clients a document will protect them, and ourselves, in the future.  A testament to this is that while I'm probably the most "expensive" appraiser in my area, the number of requests I receive for appraisal work hasn't diminished, but rather the opposite.

 

For owners of instruments and bows who update their appraisals regularly, once the initial costs of creating a work file, photography, and market data is paid, the updating isn't as expensive.  It usually simply involves an inspection and updating of more recent sales data, and setting a current replacement value.  I already have the background data.

 

% is commonly used for certificates, and yes, most experts have a minimum charge and the % kicks in above a certain level.  Costs vary, but for those who make a business of certification, it's not unusual to see a charge of 4 or 5%.

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For those of you that don't want to pay $800 to have your Schoenbach box appraised, I offer free verbal opinions, of course if I think there's any chance your instruments really valuable, I will refer you to experts that charge rates like those above.......

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