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The 'Appropriate Marketplace' Issue

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It is the appraiser’s responsibility to determine the appropriate market place relevant to the items under appraisal, so says USPAP (Uniform Standards of Professional Appraisal Practice). In most situations the scope of work -- the purpose and intended use of the appraisal -- will be an important element in deciding the appropriate market place for the items under consideration. If you are preparing an appraisal of the fair market value of items for estate purposes, is the appropriate market place for the item(s) different from that you might use if the appraisal is for insurance purposes? I think it often is, although there might be some situations where the two values intersect.

Watching the "Antiques Road Show" it is easy to hear specialists from around the country give value opinions that don’t take into account the differences in regional markets. The question of appropriate market place, as it relates to location of the objects in a specific appraisal assignment is very important. Some things sell much better in certain markets. For example, fancy china figurines typically sell better (and for a lot more money) in Miami, Florida than in San Diego County. English 19th century flow blue china sells much better in the mid-west than here. If the item is significantly valuable, it might make good appraisal sense to consider the costs and problems in getting the item to a better appropriate market, and consider using that better value on the appraisal. Certainly we do that with important paintings. Time is another issue that can cloud the appropriate market issue. What if you decide the appropriate market is far away from the location of the property, or you are imagining a big city auction sale which may be months down the road? Some appraisal value definitions have a time factor, and some don’t. For example, the IRS estate definition of Fair Market Value does not have a clause about reasonable amount of time for the transaction to take place. (Treasury Regulation Sec. 20.2031.-1[b])

What I learned at the 7 hour update USPAP class is that I need to be far more aware of various appraisal value definitions than I currently am. It doesn’t help that the different appraisal organizations have their own versions of these definitions. Or that various State & Federal courts have different wordings based on precedent rulings. There are new USPAP changes that make appropriate market place and highest and best use (from the Real Estate world) sort of synonymous. At the moment all I can do is make certain I explain the marketplace I am using, but it would be most helpful if the various stakeholders could get together and agree on some definitions.

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