Interview with Heidi Lee-Komaromi of HLK Art Group: Understanding Pricing and Appraisals in Art

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Heidi Lee-Komaromi, Art Advisor and Appraiser at HLK Art Group and course instructor of Art Wealth Management, explains how art appraising and advising overlap, the difference between art appraisals and auction estimates and the importance of USPAP compliant appraisals.

What lead you to become a certified art appraiser as well as an art advisor? Do the two areas of expertise overlap?

Whenever I help a client buy or sell a work of art it is essential for me to have a thorough and accurate understanding of an object’s value in order to a conduct a successful transaction, evaluation or loan so indeed art appraising and art advising overlap to a great degree! As such, early on in my career I became a qualified professional appraiser and certified member of the Appraisers Association of America, a major respected appraisal accrediting organization in the US.  

How is an art appraisal different from an auction estimate?  

An art appraisal is a legal document that offers an opinion of value of an artwork that can be relied on by third parties such as attorneys and the IRS. It also has enough credibility to stand on its own merits. A properly conducted appraisal requires extensive research, analysis, scholarly documentation and calculation while following specific guidelines in compliance with the Uniform Standards of Professional Appraisers Practice (USPAP). An experienced appraiser must be able to determine which type of appraisal and which kind of value is appropriate to apply and they are able to defend their value conclusion through an extensively written document.

In contrast, auction estimates are not intended to be relied on by third parties nor are they meant to be an accurate reflection of an object’s value. However, they do give prospective bidders a better context to help them understand what the current market for that object is. Estimates are based on comparables from which a median range is taken where the auction house believes the current market exists. Estimates serve as an effective tool for auction houses to entice potential buyers by either placing intentionally low estimates to attract more bidders or intentionally elevated estimates to give the perception of high quality in an effort to maximize the potential hammer price.

In which cases does an appraisal need to be USPAP compliant and why?

If you need your appraisal to withstand the rigors of the law, IRS scrutiny or to be mostly reliable, a well researched and well written report that is USPAP compliant would be necessary.  However, many appraisers are requested to provide expedited opinions of value that may not meet the minimum standards of a formal appraisal (ie. TV shows, newspapers, inquiries to help with an internal review or pre-sale) so the Appraisers Assoc. of America has now allowed for sub-services to be conducted where appraisers can administer Professional Opinions of Value (aka Value Opinions) without being subject to violation of the AAA Code of Ethics. 

Learn more about pricing and appraisals in art. View the teaser from Heidi's Module below!

Read the transcript

In module two Heidi is going to talk about pricing and appraisals. It's important to understand this because there's a number of factors that go into determining value in art in the same way that the value of financial assets are determined. By its very nature art is a difficult asset to appraise.

Heidi is going to discuss these factors as well as external factors. For example, in the primary market prices are mainly driven by galleries and dealers and in the secondary market, benchmarks exist, such as auction data.

Heidi discusses the value of these data points for collectors and how they should be interpreted. Lastly, she discusses the different types of appraisals and the importance of obtaining USPAP compliant appraisals for insurance estate planning and other purposes.