Appraisals are prepared for the following uses:

Insurance - to have insurance that will cover your valuables, insurance professionals have suggested considering the following criteria:

• Property exceeds $250.00
• Market is not commonly known
• Characteristics that indicate the property’s value might not be recognized
• If the property needs to be insured by a floater

There are also times that an appraisal is needed in support of a claim

Donations – IRS requires an appraisal if the item or group of items donated exceeds $5000. IRS publications with additional information are Publication 526, and Form 8283.

Estates – Appraisals are needed frequently at times of crisis such as divorce, death, or whenever the estate must be divided. Appraisals are therefore an important part of estate management and planning.

Types of appraisals:

Consultation/professional opinion – Not an appraisal, but an opportunity to discuss things with a professional, have property evaluated, and receive recommendations.

Formal written limited appraisal – This is a restricted use, and is usually for the owner only. It might be used when the client desires to sell or buy an item, and is interested in the value for those purposes.

Formal written complete appraisal - The purpose and intended use is clearly indicated.

• Summary – has all the information on the item, and the value (see section on what elements an appraisal should have)
• Self-contained – has all the same information in addition to all the information and notes gathered by the appraiser

Hypothetical appraisal – must be labeled as hypothetical, the reason a hypothetical appraisal is needed must be stated, and the assumed conditions must be stated.

Types of values:

Replacement Value

• Comparable – price required to replace a property with another of similar age, quality, origin, appearance and condition within a reasonable length of time in an appropriate and relevant market.
• Cost New – cost to replace a property with an equivalent or substitute which is new, using modern materials, techniques and standards.
• Reproduction Cost – cost to reproduce a replica of the property at current costs.

Fair Market Value – price at which the property would change hands between a willing buyer and a willing seller, neither having any compulsion to buy or sell and both having reasonable knowledge of relevant facts.

Market Value – similar to fair market value except that the provision for lack of compulsion to buy or sell is removed and the assumption of a sale with a specified time frame is added.

Liquidation Value – price in terms of cash if sold quickly

• Orderly – property changes hands in an orderly; generally advertised, with reasonable time constraints, in a relevant market
• Forced – sold immediately

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