Glossary

Glossary of Useful Terms

Unless otherwise specified, definitions are sourced from International Society of Appraisers and Appraiser Association of America

ALTERNATE VALUATION DATE: most frequently used for estate appraisals, date six months to the day after the date of death, with all items in the estate valued on the alternate date not just the personal property

ACTUAL CASH VALUE: an insurance term usually defined as Retail Replacement Value minus depreciation, or replacement cost less depreciation (depending on your jurisdiction). It is often interchanged with the term market value. Depreciation, in this instance, typically refers to an incremental reduction in value based on age/life formulas commonly used within the insurance industry. Actual cash value is usually established by the adjuster.

BLANKETED COVERAGE: Blanketed coverage is a structure of insurance that “blankets” multiple items with coverage protection within a single policy having one total amount of insurance that is applied to numerous items.  The purpose of this structure for a consumer is that rather than having to document the precise value of every item they would like to have insured (which is what they can hire an appraiser to do for them), with blanketed coverage, they just set a total monetary amount for coverage and all the items they would like to have insured count against that amount of insurance financial compensation in the event of loss of the items.  The tricky part is making sure the blanket is set high enough that one is adequately protected.  It works very well in settlement claims against the blanketed coverage if only one or a few items are destroyed (the vase breaks, a small fire damages the paintings in one room) but may be insufficient if an entire house burns down and all the art and antiques are lost. (Source: Worthwhile Magazine™ Editorial Team)

BLOCKAGE DISCOUNT: principle applied to valuation of large groups of similar and like items, if sold during a limited period of time, might result in a depression of the prices one might expect if the items were sold separate in an ordinary market cycle.

CATALOGUE RAISONNE: A catalogue raisonné is defined by the International Foundation for Art Research (IFAR) as “a thorough, reasoned and systematic documentation of all works by an artist – the oeuvre – in a given medium (such as painting, sculpture, prints) known at the time when the catalogue is prepared.” [Source of Definition: https://www.ifar.org/cr_glossary.php]

CHARITABLE CONTRIBUTION: a contribution to an organization which is officially created for charitable, religious, educational, scientific, artistic, literary, or other good works. Such contributions are deductible from gross income.

COMPARABLES: prices realized for similar or comparable item to those being appraised, which have been sold in the most appropriate market.

COST: the amount of money paid for an item.

COST APPROACH: compares the item being appraised with the cost to replace (by purchase, production or reduction) the item with a new or comparable substitute.

DISTRESS (FORCED) LIQUIDATION MARKET: any market circumstance where property is sold quickly, within a very restricted time frame, without the freedom to consider exposure or price and often without regard to the most appropriate marketplace.

EFFECTIVE DATE: the date as of which the value conclusion applies, e.g. the date of loss in an insurance claim or the date of donation for income tax purposes.

FA (FINE ARTS): acronym that may be required by insurance companies to designate those objects on an insurance appraisal that include decorative art and antique objects such as furniture, metals, textiles, drawings, paintings, prints, and sculpture as oppose to FAB or SS.

FAB (FINE ARTS BREAKABLE): acronym for fine arts breakable objects that may be required by insurance companies to designate those objects on an insurance appraisals such as glass, porcelain, marble, and mirrors as opposed to FA or SS objects that may be subject to a higher insurance premium.

FAIR MARKET VALUE: Fair Market Value is used in all appraisal reports for United States government federal functions such as non-cash charitable contributions for income tax deductions and estate tax.  Fair Market Value is also frequently encountered in equitable distribution and family distribution appraisal reports.  The formal definition for Fair Market Value is defined by the United States government as “Appraised "Fair Market Value" is the IRS definition as stated in the Treasury Regulation Sections 1.170A-1 (c) (2) is "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 to sell and both having reasonable knowledge of relevant facts."  (Source:  Treasury Regulations Sections 1.170A-1 (c) (2).  Fair Market Values are most commonly interpreted as being sourced from auction sold prices, and based on the Technical Advisory Memorandum 9235005 [May 27, 1992], fair market value should include both auction hammer price and buyer's premium. In plain language, fair market value can be thought of as the price that an interested but not desperate buyer would be willing to pay and an interested but not desperate seller would be willing to accept on the open market assuming a reasonable period of time for an agreement to arise.

HISTORICAL COST: the cos of the item when it was first place in service (also known as base price).

INCOME APPROACH: the comparison with the income producing record of similar property and/or the application of present value formula to determine present worth of income anticipated to be generated in the future through sale or lease.

INLAND MARINE POLICY:  originally, this was adapted from insurance for boats (a marine policy) and used to describe insurance for things that moved around but not on the water (i.e. inland).  Movement was the crucial theme, describing coverage for things like cameras, catering equipment, and musical instruments that don’t remain in one fixed location.  Over time though, an inland marine policy has expanded its associations beyond things that move and into the context of referring to a type of special extra insurance, which sometimes includes valuable articles policies for personal property such as art and antiques that may not necessarily move.  For a consumer, it can be completely mystifying to hear about an “inland marine policy” for an art collection as the phrase makes absolutely no sense without being aware of the evolution of the terminology within the insurance industry. (Source: Worthwhile Magazine™ Editorial Team)

INPAINTING: Inpainting is defined by the American Institute for Conservation of Art and Historic Works (AIC) as “the addition of appropriate media to fills, repairs, and areas of loss in a work of art or artifact to restore visual integrity by compensating losses of media, or in some cases support, without compromising original intent or materials. The intent is to suggest the continuity of image and/or background, to create the illusion of wholeness, and to minimize the distraction of losses.” [Source of Definition: http://www.conservation-wiki.com/wiki/Inpainting_(PCC)]

LIQUIDATION VALUE: Liquidation value represents the price realized in a forced sale within a short time that is lacking adequate advance marketing.  Due to the rushed timeline and the limited buyers who would be informed of the sale at short notice, prices are very low.  A critical difference between a sale at liquidation value and a sale at fair market value is that the liquidation value sale does not have a willing buyer, but rather one is forced to sell by extenuating circumstances.  Liquidation Value is often used in bankruptcy contexts.

MARKET VALUE: most probable amount of money a buyer would pay and a seller would receive for an item within an identified market. It is similar to fair market value except the lack of compulsion to buy or sell is removed.

MARKETABLE CASH VALUE: the net proceeds of a sale (expenses might include advertising, auctioneer/broker’s commission, transportation costs, photography costs, etc.).

MOST APPROPRIATE MARKET: the venue in which the appraiser determines can object can be sold most easily and at the highest price. (Comment: Frequently in the case of personal property, where comparables are scarce, the most appropriate market can be a combination of auction sales and private gallery sales.)

NET VALUE: a term commonly used in equitable distribution proceedings to indicate the market value of property less any encumbrances or expected selling commissions or costs.

ORDERLY LIQUIDATION MARKET: the market in which property is regularly sold in an orderly and advertised fashion but for which time constraints apply such as auctions, galleries, and estate tag sales.

ORDERLY LIQUIDATION VALUE: the most probable price for which an item would change hands between a knowledgeable buyer and seller if sold in an orderly manner and allowing a reasonable amount of time to complete the transaction in an appropriate marketplace. The “reasonable amount of time” is the crucial differentiating element between orderly liquidation and liquidation values.

ORIGINAL COST: the cost of acquisition to the current owner.

PRESENT WORTH: an accounting term which represents the current amount of money that would be the equivalent of income generated by the sale of property at some point in the future or the stream of income generated by leasing property for a specified amount of time.

PRICE: the amount of money asked for an item where a sale is contemplated. (Comment: Price may be artificially high.)

PRODUCT DISPARAGEMENT: Disparagement is defined by Merriam-Webster as the publication of false and injurious statements that are derogatory of another's property, business, or product. [Source of Definition: https://www.merriam-webster.com/legal/disparagement] For product disparagement, there are four aspects that a plaintiff must have to successfully make a claim: (1) falsity of statement, (2) publication to a third party, (3) intention of malice, and (4) special damages. [Source of Definition: Judith B Prowda, Visual Art and the Law: A Handbook for Professionals (London: Lund Humphries, 1998), 437]

PRODUCTION COST: the total cost of constructing an equally good substitute or equivalent item.

QUALIFIED APPRAISER: a definition, codified by the IRS, encompassing any appraiser not disqualified by the IRS, who states themselves to be qualified to appraise the property in question.

QUALIFIED APPRAISAL: according to the IRS, an appraisal which has been prepared by a qualified appraiser in accordance with any specific IRS rules and regulation which may apply.

REPLACEMENT COST: the amount it would cost to replace an item with one similar and like quality purchased in the most appropriate marketplace within a limited amount of time. Replacement Value is also defined as: the highest price in terms of cash or other precisely revealed terms that would be required to replace a property with another of a similar age, quality, origin, appearance, provenance, and condition within a reasonable length of time in an appropriate and relevant market.

REPLACEMENT COST NEW: the amount it would cost to replace an item with a new item of like kind, quality, and utility. (Comment: It considers that items may be upgraded to the latest model or style.)

REPRODUCTION COST: the total cost of constructing an exact replica by a qualified artist or craftsman, using the same materials and construction techniques as the original.

RETAIL MARKET: the market in which items are sold to the end consumer in a retail setting.

RETAIL PRICE: the asking amount that the end consumer is asked to pay for an item in a retail setting.

RETAIL REPLACEMENT VALUE: As defined by the Appraisers Association of America, appraised "retail replacement value" is defined as the highest amount in terms of US dollars that would be required to replace a property with another of similar age, quality, origin, appearance, provenance, and condition within a reasonable length of time in an appropriate and relevant market. When applicable, sales and/or import tax, commissions and/or premiums are included in this amount.”  (Appraising Art: The Definitive Guide to Appraising the Fine and Decorative Arts, 2013, Appraisers Association of America, page 438.)  You may also see this level of the market described as “replacement cost,” which is a term used by the International Society of Appraisers.

RIDER:  A rider is an extra option of protection that is added to an insurance policy.  A policy for scheduled items (like those an appraiser would appraise in an appraisal report) would be a rider, which is also a type of inland marine policy.  A rider is also sometimes called a floater. (Source: Worthwhile Magazine™ Editorial Team)

SALES COMPARISON APPROACH: the comparison of the subject property with similar properties, which have been sold in the past.

SALVAGE VALUE: the amount that can probably obtained from a damaged item or for the components of a damaged item.

SCHEDULING THRESHOLD: A “scheduling threshold” is an insurance world phrase that refers to the amount of money an item must be worth to require that an insurance appraisal report is needed to protect it with insurance coverage.  Any item that falls under a scheduling threshold could be protected with blanketed coverage based on the property class or scheduled individually at its value without an appraisal requirement. Sometimes, the insurance company could use a detailed receipt or invoice for an item to schedule it at its valued amount.  (Source: Worthwhile Magazine™ Editorial Team)

SCRAP VALUE: a type of salvage value in which the amount would probably be obtained for an item that was being broken up to obtain materials. It recognizes the intrinsic value of materials comprising the item.

SENTIMENTAL VALUE: the non-monetary satisfactions of an item by its owner.

WHOLESALE MARKET: the market in which wholesalers can sell to the trade and dealers can buy for resale to the public.