Leon Castner, ISA-CAPP, is a Certified Appraiser of Personal Property, a Certified AQB USPAP Instructor, and Senior Partner of National Appraisal Consultants. Mr. Castner is an NAJA guest journalist and the following article is reprinted with his permission.
In the age of Covid-19, the appraisal process has taken a huge leap backward to the old days of the desktop appraisal. If you’re as old as I am, you can remember what a desktop appraisal stood for; a shortened version of a full blown formal appraisal, often without the use of a computer (we didn’t have them) and probably looking at information supplied by the client, a bank or attorney, using only handy tools that set on your desk like a scale and ruler.
In more general terms, a “desktop” appraisal was opposed to a drive-by appraisal (windshield) or an on-site appraisal, terms used in the real estate industry. The on-site appraisal meant getting out of your car and entering the front door.) The windshield appraisal meant a cursory view from the main road, going twenty miles an hour or more, sufficient to indicate approximate size, quality, and neighborhood, from which to form a value opinion. Last, there was the desktop, an appraisal achieved without leaving one’s office and without a personal inspection (unless the client dropped the item off for examination). The desktop was the least effective of the three since it was based on the least amount of personal, verifiable information and was subject to all kinds of variables. (The desktop was sufficient for providing general ballpark ranges of value, but the level of credibility was usually low.)
In the machinery and equipment world, a desktop appraisal was usually done by referring to manuals, price guides, and blue books. The client would supply a make, model, and year, and the appraiser would calculate the approximate depreciation based on condition comments (if any) and come up with a wholesale and retail number based on the “blue” or “red” (sometimes “brown”) price guides. These valuations could be used for anything from a collateral loan to bankruptcy proceedings. The numbers were estimates but told the clients (usually not the owners) what they needed to know.
In much the same way, the gems and jewelry world had desktop appraisals as well. These were consultations or valuations based on GIA forms which would provide stone, size, color, cut, and clarity. The appraiser would check current pricing using journals and publications, spot metal quotations (using phone calls), and then calculate results. Items were often not seen.
Times have changed and, partly due to technology, we are able in most appraisal categories, to provide much more for our clients in what we still call a desktop appraisal. Of course, the biggest change is in instant photographs and computer technology. (The desk may not have changed.) Much of our work today, particularly with the pandemic, has left us in the desktop mode, so let us review the new and improved desktop appraisal.
A desktop appraisal is generally described as one that is done strictly without a physical inspection. It is based on either photographs provided by someone else and/or other data provided by the client. The appraiser has usually not seen the item(s) to assay a personal assessment but has been provided with sufficient photographs to assess the identification, the quality, and condition of the item. Once the appraiser is certain of the identification and has noted all the physical and value characteristics, then they are able to do the necessary research in the appropriate market for the stated intended use. After contextualizing and justifying the data, a final value conclusion is reached.
Of course, these appraisals are subject to the limiting condition of not having personally inspected the item, a condition of supreme importance in gemology. Therefore, it is based on extraordinary (critical) assumptions. They include the facts that the information you received is assumed to be reliable and true. If not, the results could be questionable and even false. That statement is declared in your report.
These are all acceptable USPAP procedures, under the right circumstances. USPAP does not require a personal physical inspection (See Advisory Opinion #1). The extent of the inspection process is an aspect of the scope of work and may vary based on assignment conditions and the intended use of the appraisal. Our signed certification included in any appraisal (oral or written) clearly states whether the appraiser has or has not personally inspected the property. Note: the primary reason for a personal inspection is to gather information about the characteristics of the gemstones or jewelry that are relevant to its value.
Let me be very clear. An appraisal based on limiting conditions such as not being able to physically inspect the item, may only be done if the conclusions are credible. If proper identification, authentication, or issues remain to cause confusion or question, the appraisal should not be performed. In those instances, the appraiser must insist upon a physical inspection, have a qualified colleague perform the inspection, or withdraw from the assignment. (This is probably the norm, not the exception, particularly with gemstones.)
Under USPAP, a desktop appraisal is no less credible than one where you go on site or have personally inspected the items, whether at a bank, the client’s home, or at your store counter. I Regardless of how the physical characteristics are gathered, the identification must be sufficient for the development of a credible conclusion. There is no such thing as a “lesser” quality appraisal, whether one calls it a “desktop” or something else.
Frankly, all of my appraisals end up in “desktop” mode, whether I go on location or not. My work area is my desktop, complete with computer, printers, smart phones, cameras, etc. When I return from my on-site appraisals I either enter the data into my computer or I begin research and analysis, 90% of which is done on the computer. As I gather my data, I am aware of what should be saved and/or printed out and what should be included in my workfile (in the cloud or on paper).
Of course, during a pandemic, most of us have stayed at home, working from computer images, Zoom meetings, Dropbox folders of photographs, and client’s verbal discussions. Our appraisals are by necessity “desktop.” Just make sure your procedures and methodology are no less demanding than any other time. This is not an excuse to let down your standards or provide something unacceptable.