As I have noted elsewhere, The success of an appraisal requires a critical understanding of the purpose for which the appraisal is needed.
In an actual case, culminating in a 700 page plus appraisal, the advisor had the appraisal done for estate tax purposes and, looking for a shortcut, made use of that estate tax valuation (Fair Market Value) appraisal in order to determine the value of tangible asset as part of an equitable distribution, including cash, to embattled heirs.
This was the start of the problem as this should have been addressed in a separate Marketable Cash Value document which would have more importantly made use of net rather than gross fair market value numbers (25% to 30% less). Also, the proper document leading to distribution would not have included a large number of illegal non-saleable assets (i.e., ivory, prohibited firearms, etc.) which, because they were included in the distribution, I was told, created a totally imbalanced real value allocation.
And again, the FMV appraisal was re-used to oversee the immediate liquidation of some of the heir’s assets for prompt cash-out. The immediate liquidation yield is normally less than half that of FMV, a truism that would have been reported by the appraiser in the normal course of events, had he been asked, giving the client an accurate expectation of sale results and not the angry reaction that the error generated.
Although I was not aware of any items retained in the estate by the beneficiaries, the value for insuring those items which would be properly noted in a separate Replacement Value document describing a substantially higher appraisal valuation.
The accuracy of the appraisal is as important as choosing the right type of appraisal , especially where taxes are concerned. The Art Advisory Panel that provides advice and makes recommendations to the Art Appraisal Services unit in the Office of Appeals for the IRS is the panel that helps the IRS review and evaluate the acceptability of tangible personal property appraisals of works of art involved in income, estate, and gift tax returns.
It must be noted that there are no licensure requirements for the appraiser of personal tangible assets (not so in real estate) and, as it is not regulated, appraising may be considered self regulated. Also, to be considered is the fact that all appraisal documents are, by their very nature and definition, subjective. It is therefore most incumbent upon the legal and financial professional to interview and review the credentials or provenance of the appraiser in depth in order to determine the level of expertise.