Office Hours Information from March 2025

Friday, March 14, 2025 in Ask an Instructor, Education, For Appraisers

Here's a recap of the Q and A from the March 11, 2025 Office Hours with the Director of Education

Q: I recently received my ISA Member Designation. How do I get my 700 hours to become an Accredited Member?

As partners of the Appraisal Foundation, we adhere to Personal Property Appraiser Qualification Criteria. Qualifying appraisal experience consists of tasks associated with the accomplishment of personal property assignments which result in a USPAP compliant report. Below are some ideas for getting your 700 hours. Please note that these hours do not have to be billable.

• Preparing and writing your Core Course appraisal report
• Preparing and writing your AF+DA, Fine Art, or SAS appraisal report
• Prepare a restricted appraisal report for your client/friend/neighbor so they know the current market value of their collection
• Prepare an insurance appraisal for your client/friend/neighbor
• If you work at an auction house, help your Appraisal Services department prepare appraisals
• Aid another appraiser on one of their appraisal assignments
• Offer appraisals for people in your church/synagogue/civic organization/community
• USPAP compliant oral appraisals count
  • Host a gathering and invite friends and colleagues to bring items for an appraisal event (make sure you have signed USPAP certification statements in your workfile)

Q: Is it still 2024 USPAP even though we are in 2025?

Yes, the 2024 edition is the most current version of USPAP. We will be using the 2024 Edition until a new edition comes out. You do not write it as “2024-2025 USPAP” – it’s just 2024 Edition.

Remember, we are USPAP Compliant (not certified). Further, appraisal reports must follow the latest version even if the appraiser has NOT taken the latest course.

 Q: In a damage claim, what's the most common marketplace for determining the fair market value of diamond jewelry? Is it the orderly liquidation market, retail market, retail replacement market?

In a damage claim, it is important to ask your client if there is a specific definition of fair market value you should use. The definition may vary slightly from federal government definitions used to determine tax liabilities.

 The process for determining fair market value for a damage claim would be the same for any other intended use. You need to analyze comparable sales data in the most common market where transactions to the public most frequently occur. You must determine the most common market where the property is sold to the public (i.e., the market in which sales to the public most frequently occur). As appraisers, we are market researchers. It is our responsibility to be familiar with various market levels and marketplaces.

 There are different marketplaces depending on many factors, including: urgency to sell, quantity, condition of the property, and the quality of the items. The marketplace will depend on the type of property being appraised.

 Answering these questions will help you determine the market level and appropriate marketplace for the subject property. You can replace “diamond jewelry” with other types of property and ask yourself similar questions.

 For example:

• Where does pre-owned diamond jewelry sell to the public?
• What is the quantity of diamond jewelry?
• What is the quality of diamond jewelry?
• Who is buying this diamond jewelry?
• Where are these transactions occurring most frequently?

 In general, pre-owned diamond jewelry is most commonly sold to the public on the orderly liquidation market; however, the marketplace is going to depend on the specific property. For instance, Elizabeth Taylor’s jewelry (i.e., high end, branded, celebrity provenance) is going to sell at a high-end international auction house like Christie’s. A collection of unbranded jewelry that has no celebrity provenance may sell at a local or regional auction house.

 Q: What's difference between retail replacement market vs retail market?

First, ISA identifies four types of markets: Retail; Wholesale; Orderly liquidation; Distress liquidation. ISA does not provide a specific definition for the retail replacement market, as it is not a widely used term in personal property appraisals.

The retail market refers to common venues where property is sold directly to the public at retail, i.e. to the end consumer.

Examples include galleries, department stores, antique shops, and discount outlets.

For insurance replacement purposes, appraisers should consider where the client typically shops, which, in most cases, falls under the retail market.

Q: Is it true that "there must be a reasonable relationship between replacement value & fair market value. But often, replacement value exceeds fair market value."? If so, why? (CC Manual, 12-5)

First, we need to address the context of this quotation.

On page 12-5, the Core Course manual states “there must be a reasonable relationship between the replacement value and the fair market value. This quote is in the context of IRS Publication 561, which provides guidance for determining fair market value for charitable donations; therefore, this quote must be understood within that specific context and intended use. Publication 561 includes four ways to determine FMV: cost of the donated property; selling price of the donated property; sales of comparable properties; replacement value. You do not choose one of the four options. These are presented in descending order. Consider the purchase prices and comparable sales first. If they both fail, then maybe consider replacement value; however, you must explain in detail how the replacement value relates to the fair market value of your donated item.

In general, there does not have to be a reasonable relationship between replacement value and fair market value and there often isn’t. In the context of Publication 561, if you choose to use replacement value (i.e., the amount it would cost to replace the donated item as of the effective date), you must prove that there is a reasonable relationship between the replacement value and the fair market value. In other words, you must prove that the replacement value of the donated property is the best indication of the fair market value of the donated property. This is because replacement value is seldom used to determine fair market value. Please note that this is used infrequently. The cost or selling price and comparable sales are the best ways to determine fair market value.

Now I will address the second part of the question. Replacement value and fair market value are rarely the same number. Generally, replacement value exceeds fair market value. This is because we use different approaches for determining fair market value and replacement value. When determining fair market value, we use the sales comparison approach to analyze comparable sales data (i.e., sold prices). On the other hand, when determining replacement value, we use the cost approach to analyze comparable cost data (i.e., current asking prices). Replacement value also takes into consideration relevant costs associated with replacement. Further, these objectives and approaches generally require research in different markets and marketplaces, thus resulting in different value conclusions.

Q: For diamonds, would we use replacement cost new or replacement cost comparable? Technically, you can always find another diamond with the same approximate specs in the 4Cs. But because no diamond is exactly the same, with variation in clarity especially, would it be more appropriate to use replacement cost comparable or new?

Let’s assume our objective is to determine replacement value for a damage loss claim. Replacement cost new and replacement cost comparable are components of determining replacement value. Which one you use is going to depend on what kind of replacement will make your client whole after a loss. What is the property? Where does your client shop?

 Let’s look at the definitions. Replacement cost new is defined as the cost necessary to replace an item of personal property with a new item of like kind, utility, and having similar qualities within a reasonable amount of time in the relevant marketplace. If your subject property is a contemporary Cartier ring, you would likely replace it by going to Cartier and purchasing a new ring. The diamond may have the same color and clarity grade, or it’s gemological specifications may be close. It has similar qualities. You end up with a new ring.

 Replacement cost comparable is the cost necessary to replace an item of personal property with an equivalent item having similar appearance, quality, condition, age, authorship, and utility within a reasonable amount of time in the relevant marketplace. Note that the definition of replacement cost comparable mentions age. If the Cartier ring mentioned above dated to 1925, then age is a significant value characteristic. The insured needs to be made whole by replacing the 1925 Cartier ring with a comparable ring of similar qualities. It would not be appropriate to replace a 1925 Cartier ring with a new one purchased directly from Cartier. Instead, you would have to look at high end antique jewelry dealers and stores to replace this ring with one of similar kind, age, and quality. The insured ends up with a comparable, used property and not a new property. Replacement cost comparable is generally used for antiques, collectibles, fine art, period jewelry, among other types of property.

 Q: A potential client is looking for an appraisal of artwork that has been damaged due to flooding. They would like a value of the artwork before the damage and after the damage. The client is a publishing firm not an individual collector.

The type of value before and after the loss will be dictated by the client and is based on how the insurance policy is written or the particular situation at hand. Remember to talk to your client and ask questions! This goes for any intended use, but especially for damage loss claims where each situation is different. Since the client is a publishing firm, their insurance policy is likely different from general homeowners.

 For example, the client may want to know the replacement value of the artwork prior to damage and the salvage value of the artwork in its current condition. Talk to your client to identify the scope of work. In damage loss claims these can often be broad. Also, remember that your effective date is going to be the date of loss or the date the loss was discovered. Don’t forget to ask your client for this important date.

 A reminder that as appraisers, we must never act as advocates. We must remain impartial in these situations and give opinions based only on relevant facts.

 Chapter 11 in the Core Course Manual discusses insurance coverage and claims. Last year Heather Looney presented an ISA webinar on damage claims. Her presentation is available for purchase on ISA’s website.

 Q: What is the difference between salvage value and scrap value?

You may have to determine salvage or scrap value when conducting an appraisal for a damage loss claim. In order to understand the difference, let’s look at the definitions. Salvage value is defined as the amount that could most probably be obtained from a damaged item or for the components of a damaged item (Core Course Manual, Glossary-11). You may be asked to determine the salvage value for a damaged painting, antique table, computer, or other kind of item. What if your item contains intrinsic materials? Then you would determine scrap value. Scrap value is a kind of salvage value and is the amount that would probably be obtained for a property that was being broken up to obtain materials. It recognizes the intrinsic value of materials comprising the original item. For instance, a damaged gold necklace would have the intrinsic value of the gold content. A wrecked car may have scrap steel.

 Q: Can I conduct a damage loss claim appraisal if the property is no longer available for an inspection?

Yes, you can conduct an appraisal on property that no longer exists based on assignment conditions and extraordinary assumptions. These are important elements for any appraisal assignment. If they exist, all assignment conditions and extraordinary assumptions must be described completely in any appraisal report, so your intended users are aware of what conditions affected the development portion of the appraisal assignment.

 Assignment conditions are defined in USPAP as: Assumptions, extraordinary assumptions, hypothetical conditions, laws and regulations, jurisdictional exceptions, and other conditions that affect the scope of work. Assignment conditions affect the development part of an appraisal assignment and often necessitate the use of extraordinary assumptions. For this particular example, the assignment condition is that the property no longer exists and therefore is not available for an inspection. As such, you must talk to your client to obtain the relevant information on the property – do they have any photos, receipts, old appraisals, or other documentation?

 As a result of the assignment condition, you are making the following extraordinary assumptions:

• Items existed as of the effective date
• Condition of the items (good, fair, etc.)
• Descriptions/Identification (authentic, age, provenance, dimensions, etc.)
• Further, you need to include a statement saying that if any of these extraordinary assumptions are found to be false, then it could alter your value conclusion.

 Q: What are limiting conditions? I thought these are things that limited my inspection.

USPAP has defined assignment conditions, but there is currently no formal definition for limiting conditions. As such, personal property appraisers can look to other appraisal disciplines for their standard use of the term or a court case. The Connecticut Superior Court case, Renewal Capital, LLC v. Joshua Martin, et al., Superior Court, Judicial District of Hartford at Hartford, Docket No. HHD-CV18-6088271-S, provides guidance on limiting conditions. Although it involved a real estate appraiser, we can apply the court decision to personal property. In summary, the court found, “limiting conditions utilize the basic assumptions about things the appraiser is not qualified to determine and it limits the appraiser’s liability and limits the scope of the appraiser’s responsibilities in an appraisal assignment.”

Limiting conditions affect the reporting side of the appraisal assignment. They tell the client what your report is not.

For example:

• The appraiser is not a conservator, so the appraisal report must not be considered a formal condition or conversation report for the property.
• The appraiser is not a professional gemstone grader, so the appraisal report must not be considered a formal grading report for the property.
• The appraiser is not an authenticator, so the appraisal must not be considered an authenticity report.

There are several limiting conditions that are generally applicable to most appraisal assignments; however, there are also some that will be property specific.

 Q: I have been invited to participate in an “evaluation day” this autumn at the local museum. I will sign USPAP certs for each item, but want to know if others use a “disclaimer” or “disclosure” type document for the participants/clients. If anyone uses one, would you be willing to share?

ISA follows USPAP’s guidance on these types of events. ISA does not recommend any specific documents to be used in conjunction with these events but refers to USPAP Standards 7 and 8. Standard 8-3 Please refer to  where it discusses oral reports and the record keeping rule. I suggest getting feedback from your peers by posting on the Facebook forum. Someone may have a recommendation that they employ in addition to those required by USPAP.

 USPAP addresses a similar question in FAQ 6. Note that since you are providing an opinion of value, you are acting as an appraiser; therefore Standards 7 and 8 apply. You should also review applicable rules, including the Ethics Rule, Competency Rule, and the Scope of Work Rule. Your oral report must address the substantive matters of an appraisal report. Further, you would have to prepare a workfile as required by the Record Keeping Rule.

 Q: I'm doing an insurance appraisal that includes a Chiswick silver plated epergne. It is missing the glass inserts. Since all of the similar pieces offered for sale included the glass components, should I cite a Hypothetical Condition that the piece is being appraised as if it was complete?  And base the Replacement Value on the offering prices of complete epergnes?

No, using a hypothetical condition is likely not appropriate because the client isn’t asking you what the epergne would be worth if it was complete; the intended use is for insurance coverage. The client needs to be made whole in the event of a current loss – no more, no less.

 You should determine replacement value for the epergne in its current condition as of the effective date. If you can’t find comparable cost data of an epergne missing its glass inserts, then  you’ll need to adjust your comparables. You should be adjusting your comparables as you compare them to your subject property. If you only find comparables that include the glass inserts, then you are likely going to have to decrease the replacement value of the subject property to account for this difference. If the client finds the glass inserts at a later date, then you may need to update the appraisal by conducting another assignment since the property has changed.

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