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One Work, Many Valuations: Why Pricing Art Is So Difficult
A single artwork can carry multiple valuations depending on whether the assessor is an auction house, an insurer, an appraiser or a dealer.
It’s tax time in the U.S., which means many collectors are trying to determine the value of works of art they’ve donated, because the Internal Revenue Service wants an exact number whenever a taxpayer claims a charitable deduction for a donated artwork valued at over $5,000. It describes that number as “the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts”—otherwise known as the fair market value.
Figuring out that price isn’t always easy, however. “You can’t always find a willing buyer,” Ralph E. Lerner, a lawyer and owner of Art World Advisors, told Observer, adding that he’s been representing clients contesting valuations “for 30 years.” The IRS suggests tax filers look at “comparable” sales, preferably sales that are close to the date of a donation, but artworks can be very unique, and “not every Picasso is the same.”
There appears to be no single way to value an object. Indeed, the New York City-based Appraisers Association of America identifies nine methods for establishing the value of an object: auction replacement value, fair market value, forced liquidation value, marketable cash value, market value, orderly liquidation value, retail replacement value, retail value, and salvage value. Beyond that are agreed-upon values (set in a policy by an insurance company and updated periodically), damage and loss appraisals, auction house estimates and auction sales records, as well as what dealers say something is worth. In short, the value of any artwork is situational.
Regular Antiques Roadshow watchers are used to seeing two sets of numbers—the first is the insurance valuation, and the other is what the piece might fetch at auction. There is almost always a difference. The insurance value is invariably higher, usually based on a retail replacement value. “You have something that has been destroyed, and you want it replaced in the most timely manner,” Deborah Spanierman, an art advisor and appraiser in Manhattan, told Observer. “You aren’t going to wait for a good deal. There will be no discounts. The painting may need to be framed and shipped to you.” The cost of all those things is part of this type of insurance settlement. Retail replacement value, she added, is often more expensive than fair market value or marketable cash value, which is the fair market value minus the costs of buying (an auctioneer’s buyer’s premium) or selling (a dealer or auction house’s commission and other fees).
An auction house’s high and low estimates are, at best, a guide to what something may be worth—particularly the low estimate, which is closer to the “reserve,” or the undisclosed lowest bid that a seller will take—but essentially are a form of marketing to prospective bidders. “Low estimates may stimulate a lot of bidding,” art advisor Todd Levin told Observer. “People think, ‘Gee, I can get it for this little.’” Otherwise, auction estimates are lures for bidders but may have only a tangential connection to an object’s value.
Auction houses garner considerable media attention when artworks sell for millions of dollars, but according to appraiser Sandra Tropper, “dealers often charge more for artworks than what the auction houses can get.” They do this because they have a greater investment in the works they sell, she noted. “Dealers provide more information about artworks to buyers; they pay to clean and reframe paintings, and they provide more of a guarantee to buyers, offering to take the piece back if you aren’t happy with it. Auction houses won’t take things back.”
Auction sales records are publicly available and provide hard facts about the prices buyers have paid for artworks, but those prices may not be typical of an artist’s market—again, not every Picasso is the same—and many artists don’t have auction records yet. In some cases, primary and secondary market dealers may be the best sources of information on an artist’s prices, although those sales and prices are not made public and are usually well guarded. When gathering information on an artist’s prices, both Tropper and Spanierman ask the dealers representing the artist what their works have sold for historically and currently. And then they hope they are being told the truth.
“This is a relationship business,” Spanierman said, “and I have good relationships with dealers. They need to tell me the truth.” When preparing appraisals for artworks in a client’s estate or that a client had donated to a museum, she expects dealers to provide correct pricing and sales information, “because my client may be their client.” Inflated prices may lead to heirs paying a higher estate tax, while artificially low prices will reduce the amount a donor can deduct on a tax filing.
Fair market value isn’t a single number but an analysis that considers several factors. Is the piece important in an artist’s body of work? Is this work from the most sought-after period in an artist’s career? Is this work in good condition, or does it require some degree of conservation? Have there been public sales of works like this one? Has there been much interest in the artist’s work in recent years? Does the owner of the artwork need to sell it right now (a forced liquidation value) or do they have time to sell it (an orderly liquidation value)? If the work has been damaged, is it repairable? If so, what was its fair market value before the damage, and what might it sell for now (damage and loss appraisal)? If the work is damaged and declared a total loss by an insurance company but might still have some value to a buyer—a damaged Picasso is still a Picasso, after all—what is that value (salvage value)? Is the work being used as collateral for a loan, at which point the costs of selling the piece, such as commission, insurance and transportation, are subtracted from its marketable cash value?
William Fleischer, president of the New York City insurance brokerage firm Bernard Fleischer & Sons, told Observer that “a particular challenge arises when no comparable works are on the market—something that happens when collectors are trying to complete a series or replace a rare piece. In those cases, appraisers often increase the insurance value by 20-40 percent to reflect scarcity and the difficulty of replacement. Without active sales, it becomes harder to know what a buyer and seller would agree on today.”
It’s worth noting that appraiser fees can vary widely, from $100 to $550 (based on location and experience), with the average for an experienced appraiser being $300-400 for appraisals of single objects or small groups of pieces. Appraisals of a larger number of objects would call for a different, negotiated fee. The two largest appraiser associations—the American Society of Appraisers and the Appraisers Association of America—list in their code of ethics for members that fees are not based on the value of items appraised, as that might skew an appraiser’s determination of an object’s worth. And if the artwork has provenance issues, that might also mean contacting not just an appraiser, but a lawyer who will also charge fees.
It can all be “very confusing,” said Sharon Chrust, an appraiser in Brooklyn, New York, “as most people don’t understand why there are all these different possible values for the same thing.” She noted the surprise of a recent client who donated graphic art prints by nine different postwar and contemporary artists to her alma mater, Wake Forest University, and learned that the donation’s value was less than the amount she was insuring these artworks for. “My client thought she could deduct more, and she wasn’t happy about it.”
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Tuesday March 17, 2026 |
