Value Is A Moving Target

As an appraiser, the question I hear most often is: what's it worth? I don't just hear the question at work; I expect to get the question there. I mean I hear it at the mall, in line at the grocery store, at parties, and sitting in the doctors office. What is my antique furniture worth? What's the value of my art? What can I get for my collectibles? In a social setting, I find the question annoying; I feel a bit like the doctor who, when at a party, is always asked for a free diagnosis. To many, I'm sure my answer is equally annoying. I always tell them that it depends.

You see, value is a moving target; it changes constantly. You know from shopping in retail stores that prices are subject to change from store to store and season to season, but when it comes to antiques and collectibles, people tend to think that an objects appraised value is like money in the bank. Not so. The value of an object is dependent on the market demand for the object, the supply of the object, the condition of the object, the usefulness and/or significance of the object, and the circumstances under which the object will be sold. No matter how beautifully made something is, if it's too big, the wrong color, is commonly available, or must be sold in a hurry, the value of the object drops precipitously. Ultimately, the value of an object is what someone is willing to pay for it. What one is willing to pay will vary with how badly or how soon they need it. When would you pay the most for a household generator: when the weather is calm, or when a hurricane is approaching? I'm sure you get the picture. My intent in this article is to give you a broad view of the key valuation aspects involved in an appraisal. In future articles, I will discuss each aspect in detail.

When approaching a personal property appraisal, there are four valuation aspects that an appraiser will consider. First, a description of the object itself, discussing in detail its condition, utility, age, and quality. Secondly, the object must be placed in its historical context. Is the object genuine, or a fake? What is the style? Are the materials appropriate for the time period? Thirdly, the intent of the appraisal must be established. Value cannot be assigned until the purpose of the valuation is known and stated. A value for insurance purposes will be higher than a liquidation value. A fair market value will differ from cash value. Estate value will be lower than divorce value. Lastly, the market in which the object is located or sold will affect the value. Where there are a lot of potential bidders for an object, the value increases. Farm tractors sell better in farm country than in the city, because there aren't any farmers in the city. Consequently, a tractor will likely be worth more in Hillsville, VA than in Los Angeles, CA. This market area aspect of valuation often escapes people who use blue books and price guides to value their objects. If no one in your market area will pay the price listed in the blue book, then the blue book price is wrong for your market area and does not correctly represent the objects value.

Finally, know that appraisals for estate purposes, insurance, divorce and other reasons are all time-sensitive. The value provided is for right then, right there. Don't think that the value assigned will be good next year or the year after, because value is a moving target.

Appraisal vs. Opinion of Value

On my last Alaska cruise as an art auctioneer, my friend Tamara, the ships' Port Shopping Ambassador, related the following story: a passenger purchased an item of jewelery from a store in Skagway for around $10,000. The following day, the passenger got a serious case of buyers remorse, and sought to return the jewelery on the basis that the item was misrepresented and overpriced. To prove the item was overpriced, she took the item to a second jewelery shop to ask the shopkeeper to appraise the item. The appraisal offered was nowhere near what she paid for the item. In fact, the second shopkeeper told her that she had overpaid, and that she should return the item and then come back, because he could offer her a higher quality item at a lower price.

I'm sure that this situation is as transparent to you as it was to me: the second shopkeeper was trying to make a sale at the expense of the first shopkeeper. That this sales tactic could work is rooted in the passengers ignorance of the difference between an appraisal and an opinion of value. The ignorance of this difference has cost clients of mine thousands of dollars in lost insurance claims and missed opportunities. Knowing the difference between an appraisal and an opinion of value will be to your advantage.

An opinion of value is an opinion offered on the basis of experience and expertise. Such opinions may or may not be valid, depending on the qualifications and ethics of the person offering the opinion. The persons offering such opinions are not required to be independent, impartial or objective. They can, and often do, have conflicts of interest and hidden agendas. An opinion of value has no requirements for documentation or evidence. Those offering an opinion of value are not held to the same legal and ethical requirements as a certified appraiser. Let's say that you took a Picasso etching to an art dealer who gave you his opinion of its value, called the opinion an appraisal, and then offered to buy the painting for the appraised price. The dealer would have offered you no evidence to back up his claim of value, and clearly had a conflict of interest. His opinion of value is worthless.

The value offered in an appraisal, on the other hand, has been researched and evidence is offered to support the value claimed. Most often, evidence is offered in the form of comparable sales; that is, what items like yours have actually sold for recently in your market. In addition, a proper appraisal follows the format of the Uniform Standards of Professional Appraisal Practice (USPAP) which has been authorized by Congress as the source of appraisal standards and appraiser qualifications. USPAP is generally recognized by the courts and by the IRS. A USPAP-compliant appraisal clearly establishes the details of the appraisal, the appraiser, the intent of the report, assumptions, limiting conditions, and all evidence supporting the conclusion. When done, the appraiser must sign and certify the report. Such a report will stand up to legal and IRS scrutiny and the value offered can be trusted.

Now that I've established what an appraisal is and isn't, let me throw a wrench in the works. If you called five appraisers to appraise the same item, you may get five different appraised values for the item. How can that be? An appraiser must make certain assumptions and adjustments in arriving at the value of your item. Unless sales evidence can be found for an item exactly like yours, adjustments will have to be made to compensate for differences in age and condition. Making adjustments is more art than science, and ultimately depends on the skill and experience of the appraiser. Also, the intent of an appraisal will have a bearing on the value. Appraisals for insurance replacement, estate liquidation, fair market value and cash value will all yield different numbers. If the value of your tangible personal property is important for estate, tax, divorce, or other legal consideration, please don't rely on an opinion of value to make your claim. Call a certified personal property appraiser.

16 Ways To Turn Estate Personal Property Into Cash

O.K.; you've been appointed Executor of the Estate. You don't know if this is a blessing or a curse. There is a stack of bills to pay: utilities, mortgage, funeral expenses. Heirs and relatives are clamoring for "their share". Before the bills can be paid, you have to collect all the money that is due the deceased, and liquidate all the possessions that won't be distributed to heirs. What's the best way to liquidate the furniture? The clothes? Kitchenware? The lawnmower? The car?

In this article, I'll discuss 16 ways that an Estate Executor can turn Estate Personal Property into cash so that the bills can be paid and the Estate settled. They are:

1. Estate (tag) sale: These sales are run by tag sale companies, and are done inside the deceased's home. For a percentage of the proceeds, a tag sale company will come in and sort, tag, price and display everything in the home. From the grand piano all the way down to a half can of Ajax, everything gets a tag and a price. The sale will be advertised and promoted. On the day of the sale, buyers will take a number and be admitted into the house a few at a time. When one buyer leaves, another is admitted. The tag sale company will handle all the money and provide an accounting of what was sold, and for how much. they will also handle price negotiations with the buyers. It is rare that everything in the house is sold at a tag sale. There will be a fair amount of stuff left over to dispose of.

2. "Dealer Only" tag sale: These are estate sales that are promoted as a private sale to dealers in antiques, jewelry, books, and collectibles. The sale is run by a tag sale company and is conducted in the decedent's home.

3. On-site auction: At an on-site auction, everything in the house is taken outside in the yard to be displayed and sold. Often, the auction company will provide tents, seating, and porta-potties for the crowd. The auction company will handle all the advertising and promotion. The auction "block" will be set up and everything will be sold to the highest bidder. There is seldom anything left after an auction.

4. Gallery auction: If your estate is to be sold at an auction gallery, everything in the house that is saleable will be picked up and moved to the gallery, where it will be sold to the highest bidder. Auction galleries will seldom take "run-of-the-mill" consumer goods that could be purchased for pocket change at a thrift store. Galleries are interested in high-end products.

5. Online auction (ebay, etc): Online auctions are good for small items that are easy to ship, or for large, expensive items (like boats, cars, or RV's) that buyers are willing to travel to pick up. You can list the items yourself or, for a fee, hire a company to photograph, list, sell, pack, and ship your items. You can find a list of "third party sellers" on ebay.

6. Half.com: www.half.com is an online service that is affiliated with ebay. New and used merchandise is offered for sale. Unlike ebay, there is no bidding; items are offered at a fixed price and can be purchased directly online. Nine categories of merchandise are offered for sale: books, music, movies, video games, software, electronics, sporting goods, trading cards, and toys.

7. Amazon.com: If you have a collection of books to sell, nothing beats Amazon. You can list your books for free, amazons commissions are reasonable, and they will deposit the money right into your checking account.

8. Retailer sale: Items that are commonly purchased used (cars, pianos, guns, musical instruments) are often purchased by retailers that sell the same items new. You can call the dealer directly, tell him what you've got, and he'll usually make you an offer. Dealers like to have some used items around for customers that don't want to buy new.

9. Consign to broker: Boats and boat trailers are often sold by yacht & boat brokers. You can find them in the yellow pages under "yacht brokers".

10. Newspaper classified: You can list anything for sale in the newspaper classifieds. The downside is, newspaper classified ads are expensive, and someone has to be available to answer the phone and show the property offered for sale.

11. Craigslist: Craigslist is a popular online advertising site. You can list your items for free at www.craigslist.org

12. Antique stores: Antique stores often buy entire estates. If you are looking for a fast sale with no fuss, this may be your best option. The downside is that this method brings only a fraction of the money that other methods bring.

13. Used furniture and appliance stores: Used furniture stores will often buy your "non-antique" furniture.

14. Consignment stores: If you must get a certain price for your property and are not in a hurry, consignment stores might be the way to go. Most consignment stores will continue to reduce an items price until it sells. My opinion is that it takes too long to sell items in a consignment store, and the prices received are no better that at an auction or tag sale.

15. Wholesale distributors: Wholesale distributors don't usually purchase used property, but they can sometimes tell you who does. If you have used medical equipment, stair lifts, hospital beds or other hard-to-sell items, call the manufacturer or distributor and they can usually point you in the right direction.

16. Charities: If you believe that "a penny saved is a penny earned", then donating property to charity is a way to increase the "bottom line" of your estate liquidation. Just like on your personal taxes, estate property donated to charity is a tax deduction and will net you more cash (check with your tax advisor). Be sure to use a recognized charity that will give you a receipt.

Once the property is liquidated, it's time to clean up the house to prepare it for sale. My next post will discuss 7 ways to get the real estate sold.

How To Inventory & Value Estate Personal Property

There's an old saying that goes "What's the best way to eat an elephant? One bite at a time!"

Personal property is the "elephant" of an estate. It's the responsibility that can take up most of your time, and it provides the estate with the least amount of money for the effort involved. But, dealing with the personal property cannot be avoided. The property must be inventoried, valued, distributed, or sold. Let's start our analysis by looking at what property we have (inventory); then we will determine what it is worth (valuation). In a future post, we will determine what to do with it (distribution/sale).

When you go to the courthouse, the clerk will provide you with the form you will need to fill out for the inventory. The form will ask you to provide general categories and a value for each category you have listed. For example, you would list: "furniture, $1500; office equipment, $300, etc.. You won't have to list the items separately, such as "sofa, $100; chair, $5; typewriter, $25. I suggest that you do keep a list of the individual items, though. Although you won't have to go into a lot of detail for the court, you will likely want a more detailed inventory for yourself. You'll want this for two reasons: to track the sale of estate property, and to protect yourself against claims of heirs and/or creditors.

You don't have to get real fancy with with the inventory; pencil and paper will do. If you are so inclined, there are "home inventory" record books available at office supply stores, or you can purchase software online. There are also companies that specialize in taking home inventories.

You'll need a helper. One person sorts and counts while the other writes. Start inside the house, and work your way from the top of the house to the bottom (or vice-versa). Go room to room with a consistent pattern so that you don't miss anything: always clockwise or counter-clockwise around the room. Write down what's on the walls as well, not just what's on the floor. For "small goods", write down identifiable groups of items such as "200 hardcover books, 100 paperback books, 42 nick-knacks, etc.. On your list, put a star next to any item that you think may be valuable. If the nick-knacks are Hummels or Lladros, the vase is Heisey and the books are first editions, they are valuable items. When you are finished, follow the same procedure for the outbuildings: the garage, shed, workshop, or whatever. If there is a rented self-storage unit, vacation home, recreational vehicle or boat, they will need to be inventoried as well.

When you file the inventory at the courthouse, you'll need to state a value for the personal property. For run-of-the-mill household items, a good resource for determining the value is the software program It's Deductible that comes bundled with the income tax program Turbo Tax. It's Deductible can also be purchased separately. The software lists the "thrift shop" value for most household items, and it's easy to use.

For the items that you have identified as being valuable, It's Deductible won't work. There are several ways to determine the value of single items or collections. A good place to start is ebay (www.ebay.com). To use ebay to help set your values, you will need to be a registered user. Registering for ebay is free; just follow the instructions when you get to the website. Once registered, type in the item you are researching, and ebay will search for the item. When the search results come up, scroll down and look on the left side of the page to where it says "Search Options", click on "completed listings", then scroll down further and click on "show items". The search results displayed will be for completed auctions, not for auctions in progress. The prices listed in green are items that actually sold; the prices in red are for items that did not sell. If you find your item listed, and the price is green, you have a good value. Compare the details of the item you found on ebay with the details of the item you have. Use the closest match as your value.

If you are unable to find your item listed on ebay, it's time to go to the library or bookstore. There you will find an assortment of price guides for every sort of antique or collectible. You will also find "blue books" for automobiles and equipment.

If you have lots of items and no time to research, then it's time to call in an expert. In your local phone book you will find jewelers, antique dealers, auctioneers, appraisers, and other professionals who will tell you what the property is worth. What they will offer you is an opinion of value, not an appraisal. An appraisal is based on actual sales data, not an opinion. I'll cover appraisals below; for now, just be aware that there is a difference. For probate valuation purposes, the value placed must be the fair market value at the time of the decedents death. This is the value you should ask your expert to provide.

In my home state of Virginia, individual items or collections that are valued over $500 must have an appraisal. Personal property appraisers are not licensed like real estate appraisers, but the content of their reports is regulated. For a personal property appraisal to be valid and accepted for tax purposes, it must be performed by a qualified expert and follow the federal guidelines of the Uniform Standards of Professional Appraisal Practice (USPAP). Most real estate appraisers do not appraise personal property. You can find a personal property appraiser online by checking the websites of the Certified Appraisers Guild of America, the National Association of Auctioneers, or the American Society of Appraisers.

Estate Executors will find that the inventory and valuation of estate personal property is their most time-consuming task, but there are resources available to help.

An Estate Executors' To-Do List

I just got off the phone with Nancy. She is feeling a bit overwhelmed. Her mother has just died, and Nancy has been appointed executor of her mothers' estate. Nancy has a full time job and a family of her own. Her mom lives in a different state. Nancy doesn't see how she will have time to be an executor, but her sense of loyalty to her mother and responsibility to her family compels her to "step up to the plate" and get the job done.

Nancy is in for some tough times. While still dealing with the emotional loss of her mother, she will have to empty her mothers house of forty-five years of accumulated memories. Everything in the house will have to be inventoried and values assigned. Her mothers doll collection and her fathers coin collection will have to be appraised. The inventory and appraisals will have to be submitted to the Probate Court. Property will have to be distributed to the heirs according to the Will. Then, the entire contents of the house, the furniture, appliances, bedding, pots & pans, clothing, car, even the lawn tools will have to be sold so that the house can be readied for sale. When both the titled and non-titled property are liquidated, the debts and taxes will have to be paid to settle the estate.

My purpose here is to help executors like Nancy understand the "big picture" of what must be done to settle an estate. Keep in mind that I am not a lawyer or an accountant, and I am not offering legal or accounting advice. The information I am offering is based on my experience as an Estate Property Specialist. If you have questions or concerns, my recommendation is to seek legal advice. A good Estate Attorney is an asset.

Let's start with an overview of an Executors' responsibilities. As executor, your first duty is to initiate probate, which is the formal process of "proving" the Will and confirming your appointment as executor. The Clerk of your county Probate Court can provide you with the forms that are appropriate for your county. My experience with probate court clerks is that they are very helpful and responsive to your requests. Many of the forms you will need can be downloaded over the internet at your state or county website.

The details and deadlines in settling an estate will vary from state to state. In general, there are 16 items that will be on your "to-do" list. They are: 1. Locate the will 2. Apply to appear before the Probate Court 3. Notify the beneficiaries named in the Will 4. Determine the debts of the deceased 5. Arrange for publication of "Notice to Creditors" and mail a notice to each known creditor 6. Send notices of the persons death to post office, utilities, banks, and credit card companies 7. Collect any money owed to the deceased 8. Inventory the assets, assign values, and have appraisals done if necessary 9. Check with the deceased's employer for unpaid salary, insurance, and other employee benefits. 10. file for Social Security, civil service or veterans benefits 11. File for life insurance and other benefits 12. File federal and state tax returns 13. Pay valid claims against the estate 14. Distribute assets and obtain receipts from beneficiaries 15. File papers to finalize the estate 16. Obtain a lawyer or accountant, if necessary.

Do you need a lawyer or accountant? Technically, no. There is no law in place that says you must have an attorney, or that estate taxes must be done by an accountant. But, remember this: taxes and probate can be complicated issues. Mistakes will delay the closure of the estate and the distribution of inheritances. A good lawyer and/or accountant is an asset. Legal and accounting fees are paid by the estate. My advice is to shop around for an experienced probate attorney. Fees vary widely, so be sure to find out what the estate will be charged for legal services before making a commitment.

I'll give you the same advice I gave Nancy: Stay organized, and you will be able to get through this. Find out what your deadlines are, and make a check list with "to be done by" dates. Prioritize your tasks, and dig in. Having a checklist will help you maintain control and minimize the effect on your personal life.

Who Gets Grandma's Yellow Pie Plate?

Your teenage grandkids probably don't want to inherit the collectibles you now cherish. but don't despair; the value one places on family heirlooms changes as one matures. To a 15 year old, grandpa's journal is just a dust collector. When that 15 year old reaches 45, the same journal becomes a treasure of family history.

What treasures are stored in your home that you want to pass on to members of your family? Will your family members cherish and enjoy them as much as you do?

In my business as an Estate Property Specialist, I have discovered that deciding who gets Grandpa's baseball glove or Grandma's cookie cutters can be among the most challenging decisions a family can make. Although these items are "just stuff", the personal belongings of a loved one can trigger memories and feelings about the person that once owned the item. I once watched two siblings resort to shouting to see who would get mom's favorite Christmas tree ornament. I have often been told by Estate Attorneys that it is frequently the personal property, not the titled property that causes the most problems when settling an estate.

There are no magic formulas available for deciding "who gets what", but research has identified six steps in the process. They are:

1. Understand that the gifting of your personal property may have emotional consequences for your family.
2. Determine what you want to accomplish. Is it your goal to maintain privacy? To have an "equal and fair" distribution? To preserve and care for the item given?
3. Decide what is "fair" in the context of your family.
4. Understand that belongings have different meanings for different individuals.
5. Consider distribution options and consequences.
6. Agree to manage conflicts if they arise.

Most of all, you have to "decide to decide". After all is said and done, the property is yours and you may do with it as you please. Don't let your family fight over your possessions. Be proactive; discuss the distribution of your property wit your family members, and make a list so that your wishes will be known. My mother spent the last decade of her life discussing with her five children "who would get what". She kept a list, and put a sticker on the bottom of each item so there would be no question as to what her wishes were. Although there was one item that I wanted that went to a sibling, I was comforted to know that mom's wishes were fulfilled.

For those of you with complex family issues, help is available. The University of Minnesota Extension Service has a workbook entitled "Who Gets Grandma's Yellow Pie Plate?" that is available by calling the Extension Service at 1-800-876-8636. Also, I teach the "Yellow Pie Plate" workshop, and would be pleased to present it at no charge to your local club, church group, or organization. For information, please visit my website at www.waynejordanauctions.com.

Downsizing Mom

I told my wife that the url for my new blog was going to be "downsizing-mom.com". She grimaced and I got "the look". "Downsizing Mom"? she said; "sounds like a weight loss blog".

She's right, in a sense. Throughout our lives, we tend to accumulate "stuff". Clothes, furniture, appliances, vehicles. We surround ourselves with the things we love. Our "stuff" reflects who we are. As the years go by, "stuff" accumulates. We become "overweight" with our "stuff".

Eventually, we have to get rid of the bulk of what we have accumulated, whether we want to or not. A spouse dies. We grow old and cannot take care of our home. An injury makes us less mobile. We know that the time has come to make a move that will improve our quality of life. At that point, the "stuff" we have accumulated becomes a burden. We are faced with decisions about what to keep and what to get rid of. The very thought of packing up a lifetime of memories can be so overwhelming that we often become paralyzed and choose to "stay right where we are". If we are lucky, we get to make the transfer decisions ourselves. If not, the decisions will pass to our children or executor.

Downsizing and/or liquidating an estate is emotionally draining, but it does not have to be a traumatic experience. The keys to success are advance planning and an organized approach. With that in mind, the focus of my future posts will be threefold:

1. Pre-planning for personal property transfers
2. How to downsize effectively
3. Estate Liquidation

Family dynamics will change from family to family. There is no "one size fits all" solution for estate transfers. As we move forward, I hope to hear from some of you. What challenges have you faced in liquidating a loved ones estate? Have you found effective ways to deal with the anxiety? What professionals have you found to be helpful or troublesome?

Somewhere, there is a family whose challenges are just like yours. If solutions can be shared through this blog, we will all benefit.