Ask an Instructor: Office Hours and Appraising Experience

ISA members are invited to send in their questions on all things appraising and education to ISA's instructors. One of ISA's instructors will share answers on the ISA Now Blog. Please send questions to directorofeducation@isa-appraisers.org.


Question: When is the next Office Hours webinar?

Answer: The next Office Hours with the Director of Education will be held on December 5th at 2pm CST. It’s a free webinar open to all ISA members for a lively question and answer session on the topics of your choice. Mark your calendar now!

Question: I’m having a little bit of trouble obtaining my 700 USPAP-compliant hours to reach the ISA Accredited Member (AM) level. Any suggestions for ways to gain more appraisal-specific experience hours?

Answer: Yes! I can certainly help. There are lots of ways for you to gain qualified hours. Remember that the hours must be towards the development and report of a USPAP-compliant appraisal. Thus, the hours can be your actual time spent performing the appraisal, both billable hours and non-billable (gratis) hours. Contact me today at directorofeducation@isa-appraisers.org to discuss a plan of action that would work best for you

- Meredith Meuwly, ISA CAPP
Director of Education

Ask an Instructor: Updated USPAP Standards and Webinars

ISA members are invited to send in their questions on all things appraising and education to ISA's instructors. One of ISA's instructors will share answers on the ISA Now Blog. Please send questions to directorofeducation@isa-appraisers.org.


Question: To which USPAP standards do I write if I start an assignment in the Fall of 2017, but my final report is completed in January 2018?

Answer: Thanks for asking a great question. This is a very common question we instructors receive every fall/winter when the USPAP standards change. Even if your assignment starts in 2017, even if your effective date is in 2017, and even if your inspection date is in 2017, if the issue date of your report is in 2018, then you must write to the 2018-2019 USPAP standards. You are responsible for knowing and abiding by all of the 2018-2019 standards as of January 1, 2018, regardless if you have taken the USPAP update course or not and regardless if you have in hand the current manual or not. But don’t panic yet! Your ISA Education team will make sure you are aware of the changes coming so that you will be prepared.

Question: What are the webinars being scheduled for 2018? Have you thought about having one about (fill in the blank)?

Answer: We have six webinars being scheduled for 2018 that can be on a variety of topics. Have a specific topic or speaker in mind? Let me know! Want to present a webinar for the organization and earn more Professional Development Credits (PDCs)? Let me know too! Our best presentations have been recommendations from the membership, so let me hear from you.

- Meredith Meuwly, ISA CAPP
Director of Education

ASK AN INSTRUCTOR: Is ISA still using the term critical assumptions?

ISA members are invited to send in their questions on all things appraising and education to ISA's instructors. One of ISA's instructors will share answers on the ISA Now Blog. Please send questions to directorofeducation@isa-appraisers.org.

Question: Is ISA still using the term critical assumptions? I thought I read it in one of the education updates or blog posts that it has been substituted with different terminology.

Answer: We have switched to using the term extraordinary assumptions, since that’s the USPAP term, but the term critical assumptions is still acceptable. (I usually use both terms and put one in parenthesis.)

Question: Could you clarify about identifying the client? For example, if a lawyer calls me about an estate appraisal, is he my client or the heir that meets me at the house?

Answer: According to USPAP, the client is the party or parties who engage the client, by employment or contract, an appraiser in a specific assignment. The attorney may be acting as an agent only. The client is the one who signs the agreement. If the lawyer signs the contract, then they are the client.

ASK AN INSTRUCTOR: I have a client who wants ‘estate sale or liquidation value’ of furniture and not a full appraisal report. I believe I know the answer, which is a full appraisal report needs to be completed under USPAP, but I wanted to clarify this with you.

ISA members are invited to send in their questions on all things appraising and education to ISA's instructors. One of ISA's instructors will share answers on the ISA Now Blog. Please send questions to directorofeducation@isa-appraisers.org.

Question: I have a client who wants ‘estate sale or liquidation value’ of furniture and not a full appraisal report. I believe I know the answer, which is a full appraisal report needs to be completed under USPAP, but I wanted to clarify this with you.

Answer: The answer is slightly different than you thought. It hinges on the use of the word “full”. What one considers full may not be the same as another’s point of view. A “full” report is what one does every time they complete an assignment; you can’t do half of a report. I’m assuming the question really deals with the extent of the report. There are choices.

You could provide your client with a restricted appraisal report, one that simply states facts and does not summarize or expand upon them. This usually means the report is a little “leaner,” or not as exhaustive. It covers all the elements of the ISA report writing standard and the Standards of USPAP 7 and 8, but it is somewhat simpler, depending on the scope of work and what the client desires. However, a restricted report must not have a third party, so it could not be used for the IRS or an insurance claim or coverage (USPAP Advisory Opinion #11 provides an excellent chart of the differences between a Restricted Appraisal Report and an Appraisal Report).

Any opinion of value is considered an appraisal, but if you are an estate sale liquidator, you do have another option. You can put on your other hat (world’s greatest liquidator) and treat it as an estate sale situation providing your client with pre-sale estimates, just like auction pre-sale estimates. This would not be an appraisal report and is probably what your client wants or needs. However, you can only do that if you are indeed an estate sale liquidator or auctioneer. You must be very clear on which hat you are wearing and that your client does not perceive you as an appraiser. USPAP Advisory Opinion 21 covers this in detail. Valuation services done in other roles, not as an appraiser, are acceptable. Your obligation is not to misrepresent your role. This can be done through disclosure, notification, or careful distinction when speaking to the client. So perhaps the client is asking for something simpler which you might be able to accomplish.

ASK AN INSTRUCTOR: How do you respond to an inquiry that assumes that appraisers don’t charge for their work and that we can easily answer questions about their treasures without having to do any work?

ISA members are invited to send in their questions on all things appraising and education to ISA's instructors. One of ISA's instructors will share answers on the ISA Now Blog. Please send questions to directorofeducation@isa-appraisers.org.

The ISA website is a very good source of potential work, although many of the inquiries I receive still assume that appraisers don’t charge for their work and that we can easily answer questions about their treasures without having to do any work. This is a typical letter I received just a week ago about appraising a clock or, as the note said, they would “like to know how much it is worth.” Note my answer, which is probably a version of what you say as well. If not, I would suggest making a template to answer these types of inquiries in order to save time and to spare any possible embarrassment or inability to ask for a reasonable fee to compensate you for an answer you have already provided.

Question: I found you on the ISA web page and wanted to ask you for some orientation. I have an LFS huge Grandfather Clock I would like to know how much it is worth. On its back it is marked 81 A together with the LFS logo. Do you think you could give me some hint on how to know its value?

(This is a version of almost every forward I get from the website.)

Answer: Thank you for your inquiry. I am more than happy to assist you in the valuation of your item, however as an ISA qualified appraiser I first need to determine the scope of work necessary to answer your question meaningfully. To give you an appropriate appraisal, I will need a little more information from you. First, can you tell me the intended use of the appraisal? Is it for insurance coverage, to decide whether to give to a family member, part of a divorce settlement, to sell, or just out of curiosity?

The reason this is important is because items may have different values or costs depending on the markets selected for your intended use. I would also need some good quality photos, measurements, and any provenance (history) you have. Once I have this information, I can begin to determine the appropriate value or cost of the item, as well an estimate of the fee to provide your appraisal. My reporting back to you can be in a formally written document, phone call, or email, so long as it adheres to ISA standards. On certain occasions, my reporting may require a full documented appraisal report, such as if there is a third party involved.

I would be extremely wary of someone calling themselves a professional appraiser if they don’t ask for the same information. We must conform to our own ISA standards and the Uniform Standards of Professional Appraisal Practice (USPAP). I would like the answer to your question to be accurate, clear, and worthy of trust.

Feel free to visit my website at XXXXXXXXX for contact information, as well as some examples of my previous work. I look forward to hearing back from you.

ASK AN INSTRUCTOR: Can I legally group items by using the sales comparison approach based on experience without researching? And my client desires two values side by side. Is it okay to list the values of each item listing FMV first, followed by liquidation value?

ISA members are invited to send in their questions on all things appraising and education to ISA's instructors. One of ISA's instructors will share answers on the ISA Now Blog. Please send questions to directorofeducation@isa-appraisers.org.

Questions: I'm appraising an estate now that's in probate. The problem is MANY things in the will were itemized that shouldn't have been, such as many basic household items. I want to group them because of little individual value, but using the sales comparison approach, can I do this legally based on experience without researching so many individual items? In other words, not having comparables and photos of each item?

and

My client desires two values side by side: Fair market value and wholesale value (or dealer value). Once the items are released back to her, she will probably sell them to a dealer. Is it okay to list the values of each item (or group of items) side by side, listing FMV first, followed by liquidation value?

Answer: Sure. Let me attempt both answers for you.

1. When things are itemized in a will, even though the values are minimal, you should value them separately. It provides information to the estate executor and/or heirs, even though it may not affect or have any tax consequences. You may have a very short description (I usually use what’s listed in the will) and then provide the valuation. It does not need elaborate description, photographs, or comparables. Just state in your cover letter that many values, particularly those of minimal value, were based on your own personal expertise in the market.

2. I would not use a probate or estate appraisal combined with a re-sale appraisal, especially wholesale. Instead, provide a separate appraisal with different numbers. It shouldn’t be too much of a problem. You are basically duplicating the other one but have a different intended use, objective, value definition, etc. The other option is to tell the client that wholesale values are probably 50% of those on the appraisal (or the appropriate percentage).

ASK AN INSTRUCTOR: What is a reasonable formula to help create an inventory in the estate of a noted historian?

ISA members are invited to send in their questions on all things appraising and education to ISA's instructors. One of ISA's instructors will share answers on the ISA Now Blog. Please send questions to directorofeducation@isa-appraisers.org.

Question: I am working on an inventory in the estate of a noted historian. He’s well known in certain circles, but not a household name. What is a reasonable formula to assist in this area?

Answer: You ask a difficult and repeated question from many members, i.e. regarding what role ownership plays in determining value. The notoriety or celebrity status of ownership does play an important role in determining value since it is a value characteristic of an item. Unfortunately, there is no formula or set method I can suggest that would provide a quick and easy answer. However, I do have some guidelines that might be useful.

1. Ownership must be viewed in both a short term and long term perspective. Short-term perspective is based on current fads and pop culture. It may affect the value significantly, but is apt to drop rapidly depending on the fortunes and tastes of the fickle public. If Michael Jackson owned a sofa, the value at the time of his death might be considerably more than it is right now. A sofa owned by Elvis might not have peaked. In the long term, one looks for a traditional historical or cultural significance of the owner, i.e. if George Washington owned or sat on it. These examples are much easier to substantiate and document with parallel comparables.
2. The object’s value is proportional to the relationship it might have to the owner’s notoriety or reputation. For example, a cigar humidor owned by George Burns, the well-known cigar smoking comedian, would be worth more than a humidor owned by another celebrity since it doesn’t have that symbiotic relationship. A chair owned by Joan Rivers that sat in her guest room will not have the same value as one she used constantly while hawking her jewelry on QVC. It could be the same chair, but the emotional ties are not present.
3. Notoriety may be select and difficult to market, unless there is an attempt to promote and eulogize to the public. Al Capone’s cocktail shaker sold by Leslie Hindman years ago brought in more than ten times any other shaker would have brought, partially, if not completely, based on the fact that she made a fanciful and very successful effort to publicize the sale, even having all the auction staff wear “gangster” clothing to the preview. Since as appraisers we do not often know if there will even be an attempt to promote and “embroider” the objects, we must be more objective and value them in light of what is currently known and recorded.
4. One of the tests an appraiser must consider is the “highest and best use” of the goods. Although I am not suggesting every single item has another employment that might result in a higher value, it often is worth the time and effort to consider it. USPAP states in Standard 8-2-a-ix that “value can be a function of the current and alternate use of the subject property, the choice of the appropriate market or market level for the type of item, the type and definition of value, and intended use of the report.” What if you had to appraise the Jackie Onassis estate? What would you have done with the strand of costume pearls? I doubt you would have appraised them at over $75,000, unless you were aware that they might be considered a “prop” in an advertising campaign to sell reproductions of the strand.
5. The public can be both more savvy or less discriminating at any given moment. Short-term fads have a way of become even shorter. I would be very cautious of using overnight recognition to base serious value conclusions. On the other hand, narrow areas of knowledge have blossomed in the past few years, and science (scientists) and history (historians) are two of those areas. Part of that comes from the amazing sale results of Nobel prizes and related archives and material owned by prominent and respected world leaders in their respective fields. You are right in considering the fact that a well-known historian’s objects may have added value.

I once appraised the household goods of a “famous” couple who were part of the “housewives of …” television series. They were declaring bankruptcy and the court ordered a bankruptcy appraisal to learn the forced sale value of their assets. The items were appraised based on similar sales of contemporary household goods and accessories in bankruptcy situations. The appraisal was sent in and an auctioneer was chosen to hold the auction. Since even bankruptcy auctioneers have discovered the potency of the Internet, they listed the upcoming sale on their website. In the first 24 hours, they had over a million hits! The trustee called and questioned whether this might be a bigger event with higher prices than anyone had imagined. We decided to write a letter to the court suggesting that the marketing and publicity of the case might alter the outcome and raise the potential proceeds much more than the original values given in the appraisal. To make a long story short, the sale never occurred.

If I could only provide a handy formula, I would probably become the toast of the town (the appraisal town), plus I might get a shot at a few late night talk shows. It certainly would make a good book! (Not a bad idea.) Too bad it just doesn’t work that way.

ASK AN INSTRUCTOR: Is my expert witness report of an appraisal USPAP compliant?

ISA members are invited to send in their questions on all things appraising and education to Leon Castner, ISA CAPP. Leon, or one of ISA's other instructors, will share answers on the ISA Now Blog. Please send questions to leoncastner@comcast.net.

Question: I'm being considered for an expert witness assignment. My expert report in this case would not be an appraisal. A small part of the project would be to confirm the data and approach contained in an existing appraisal report on the subject.

Since my report will not be an appraisal, I do not want to perform a formal USPAP appraisal review of the existing report. I would like to speak to the data contained in the report and the approach. I feel the approach was solid. I reviewed the data and found it credible.

Would I be violating USPAP by referencing the report without performing a formal USPAP compliant review? My intention would be to disclose that referencing the data contained in the report is not, and should not be considered to be a review.

Answer: If you are reviewing someone else’s appraisal report, it is an appraisal review and must conform to USPAP. This could include a review of partial parts of the report, the methodology, the principles, the “approach,” and/or the valuation itself. It doesn’t have to include the entire report and may not even cover the valuation section, but it is still an appraisal review. According to FAQ #294 (page 353), an appraisal review is:

The act or process of developing and communicating an opinion about the quality of another appraiser’s work that was performed as part of an appraisal or appraisal assignment. 

The keys to understanding whether this is an appraisal review rather than a consultation or something else is:

• Was the work under review an appraisal? 
• Was the work performed as an appraisal or appraisal review? 

If you were asked to review a market data summary or any document that did not include any opinion(s) of value, it would not be called an appraisal review. You could do that without conforming to USPAP 3, 7, or 8, but you would still be under certain portions of USPAP, i.e. Definitions, Preamble, Ethics, Competency, and Jurisdictional Exception rules.