Most people have a general idea about the worth of their house or real estate; however, few know the value of the personal property inside the home. Everything from Grandma’s Bristol vase to dad’s four-poster bed that he had shipped from his parents’ home in Michigan has a value. These values should be known in case a crisis occurs and/or an estate needs to be equitably distributed to family members.
There are several ways to value an item, and each will yield a different result. For example, let’s say the grandfather clock (tall case clock) that has been proudly standing in the corner of the grand entry of a family’s estate for several generations needs to be assessed. The cherry case was made in 1809 in Pennsylvania and its works are from London. The clock is in excellent condition and is in working order. Though the emotional value to the family is priceless, there are actual values that could be assigned to the clock.
First, lets say the family wants to insure the clock. For this we would have to estimate the retail replacement cost. It would be extremely difficult to replace, and it would take a great deal of time, energy and resources to find a similar clock. Since there is a known history of ownership and the original bill of sale is still attached to the clock, this heirloom has provenance value as well as intrinsic value. Estimated replacement cost would be around $27,500. The insurance company will likely require an appraisal before insuring the clock.
One family member believes the clock should be sold, and the money from its sale divided among the heirs. Since the clock would most likely be sold locally, a local retail market value must be established. How much money has been recently (last two years) exchanged for similar clocks right here in Phoenix? The family could net about $7,000 locally if it sold the clock outright.
Another family member suggested they instead donate the clock to a charity that will use it and not sell it, and use the value to offset the estate. We now need to look at the clock at fair market value: how much money would likely change hands between a willing and informed buyer and seller, under no compulsion to buy or sell? In this case, a certified appraisal report is required by the IRS in order to establish and validate the fair market value. Fair market value is often higher than market value, because one is not limited to a particular geographic area and there is no compulsion to buy or sell. For this clock it may be around $25,000.
A third member of the family wants to have a quick liquidation of the entire estate including the clock. It all needs to be gone, so she can get back to Ohio! In an orderly liquidation, such as in an advertised auction, the clock would most likely fetch around $2,000. In forced liquidation, such as an “Everything Must Go” sale, or sale of the estate to a liquidator, it will likely bring even less, in the $500 to $700 range.
So, when we are asked to ascertain the value of an item, items or even an entire estate, our first questions are always “What is the purpose of the appraisal?” and “What do you intend to do with the item?” The value determined depends squarely upon the clients answers to those questions.
The tall case clock is ticking… Please send your appraisal questions to the editor now!
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