If you have ever watched Pawn Stars on the History Channel, then you have already witnessed multiple property appraisals in action. The scenario usually plays out like this:
First the seller brings their valuable thing to the pawn shop. The pawn shop’s owner confesses that he doesn’t know very much about the thing – but as luck would have it, he does already know an expert on the thing. The expert examines the thing, and uses his expertise to judge what price the thing would fetch if it were sold at auction that very day. The seller asks the pawn shop owner for the same price that the expert estimated; the pawn shop owner offers significantly less, because he wants to turn a profit should he sell the item at auction. The seller agrees, haggles or declines the owner’s offer. Cut to commercial.
A personal property appraisal is usually more formal than its depiction on Pawn Stars, but you already understand what it is in essence: a numerical opinion value of property that isn’t real estate, such as furniture, artwork, antiques, jewelry, equipment, collectibles and firearms.
What’s in a Personal Property Appraisal?
A personal property appraiser’s job is to deliver an opinion of value (with an emphasis on opinion, as there is no exact and objective standard for an item’s worth). As a professional, the appraiser endeavors to deliver an opinion that is at once competent, independent, impartial and objective. As such, a personal property appraisal typically includes (but is not limited to) the following elements:
- Title Page, which identifies the item, its location, its value, and the date of its valuation
- Letter of Transmittal, which includes a cursory description of the item, explanation of its examination, identification of its current owner, and opinion of value
- Table of Contents
- Certification, in which the appraiser typically avers that they conducted the appraisal in accordance with Uniform Standards of Professional Appraisal Practice (USPAP) standards
- Summary of Important Inclusions, which once again identifies the property and provides an estimate of its defined value
- Purpose and Intended Use of the Appraisal, which identifies the client and whom the appraisal is meant to inform
- Scope of the Appraisal, which identifies the information the appraiser considered and the analyses they implemented during their appraisal
- Identification and Description of the Personal Property
- Ownership and History of the Personal Property
- Highest and Best-Use Analysis, which indicates whether sale of the property is possible, legal and economically feasible
- Cost Approach, which estimates the cost of the property if it were brand new
- Physical Deterioration, which identifies the characteristics of the property that account for its lower value than that of an analogous but otherwise brand new equivalent
- Reconciliation and Opinion of Value, which is typically presented as a range rather than a finite amount
- Professional Qualifications of the Appraiser
In summary, a personal property appraisal is much more than an expert’s educated guess at an item’s market value. When conducted formally, it goes into extensive detail to explain exactly how the expert arrived at their final opinion of value.
What Are Personal Property Appraisals Used For?
You may have a fairly good idea of what your property is worth – but when something significant is at stake, an expert and official valuation is typically required by at least one of the parties involved. That’s why property appraisals are usually necessary under the following circumstances:
- Estate settlements – Part of the function of the probate process includes taking inventory and determining the value of the deceased’s assets. The information included in the Inventory and Appraisal document is used to determine the statutory fees paid at the closing of the estate, as well as how the estate should be distributed among heirs.
- Insurance claims – When a policyholder makes a claim for personal property that has been lost, destroyed or stolen, the insurance provider may ask for some formal evidence that the property (A) existed, and (B) was in fact worth what the policyholder claims. A personal property appraisal formally avers both of these vital pieces of information.
- Bankruptcies – Filing for bankruptcy requires listing all personal property and providing a replacement value for each item. A trustee may ask for written documentation supporting the debtor’s claims of value. When items are especially valuable, the trustee may only accept professionally written personal property appraisals
- Auctions – People buying property at auction do so in good faith that those items genuinely are as they are presented to be. That said, both the auction house and the bidders themselves appreciate protection against fraud. If Colorado Premier Realty & Auction Services were to auction off an 1895 Tiffany Studios stained-glass lamp, we would take every precaution against unintentionally auctioning off a forgery – hence our insistence on receiving a professionally prepared personal property appraisal.
While Colorado Premier Realty does cater to real estate agents in Denver, we also specialize in taxable and nontaxable property sales in Denver. That’s why Colorado real estate agents, asset managers, attorneys, and everyone else can count on us to auction off virtually anything for the best price the market has to offer. Please contact us today if you would like to learn more about how we can be of service!