Areas of Practice
The first step in determining whether you need an appraisal is asking yourself why you need an appraisal. A written appraisal report may be necessary for insurance, estate tax, charitable donation and equitable distribution purposes. If you want to "know what your artwork is worth" you need to determine what your end goal is. Appraisals can be written for the following purposes:
An insurance appraisal may be necessary to create an inventory of your property in case of damage. This appraisal uses replacement value to determine the value of each item.
ESTATE TAX APPRAISALS
An appraisal may be necessary for certain estates to determine estate tax. The estate tax appraisal uses fair market value to determine the value of each item.
CHARITABLE DONATION APPRAISALS
An appraisal may be necessary if you are donating an item for charitable purposes. This appraisal uses fair market value to determine the value of each item.
EQUITABLE DISTRIBUTION APPRAISALS
In situations where one needs to equitably distribute assets, such as a divorce, an appraisal may be necessary .This appraisal uses marketable cash value to determine the value of each item.
A misunderstood aspect of appraisals is the concept of value. Every work of art has multiple values, and depending on the situation the appraiser will use a different value in the appraisal. To know which value will be used you must know the purpose of your appraisal. The two most commonly used are fair market value and retail replacement value.
Retail Replacement Value
The highest amount in terms of U.S. dollars that would be required to replace the 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. Generally understood to be the value at which the items sells for in a gallery setting, although this depends on the specific market.
Fair Market Value
The price at which the property would change hands between willing buyer and willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of the relevant facts. Generally understood to be the value at which an item sells at auction.
Definitions from Appraising Art: The Definitive Guide to Appraising the Fine and Decorative Arts.