Glossary and Other Things You Should Know!
A Certified Automotive Appraiser Is:
A member of a "governing body" who has completed a comprehensive and dedicated program of education and testing. The program emphasizes the legal, ethical and applied aspects of personal property appraising, as well as the additional authorities of the automotive specialty field. This certification requires peer review of actual appraisals, professional development critiques and a minimum of an 80% passing grade on all portions of the Automotive Personal Property examination sanctioned by the body. Recertification is a requirement and the specific time period to perform the necessary retesting, varies by governing body. It can be at a minimum of 1 year, or up to a maximum of a 5-year period. The Certified Appraiser is engaged in a professional activity. A profession is based on an organized body of specific knowledge. The general public does not possess this knowledge. It is of such a character that it requires a high degree of intelligence and a considerable expenditure of time and effort to acquire it and become adept in its application.
A Certified Automotive Appraiser shall continually expand their knowledge of valuation theory and their expertise in the field. They shall also be knowledgeable of the current laws and government regulations of their country, state and region, relating to the automotive appraisal profession field.
Uniform Standards of Professional Appraisal Practice
Established industry standards based on sound appraisal principles are one of the keys to preserving the publics right to expect their appraisals to reflect the utmost in accuracy, competency and integrity. Honesty and knowledge are key to success in any field, but a successful Certified Appraiser must also rely on the application of his specialized appraisal education, enlightenment and aptitude testing, which is based on a standardized body of knowledge within the industry.
A Competent Automotive Appraisal Contains:
An accurate and full description of the vehicle, which is written so that the vehicle can be identified without access to photographic records.
The date and location of the vehicle inspection and the effective valuation date.
A description of the methodology and resources used, to render the vehicles value.
An explanation of the purpose for the appraisal.
A statement by the appraiser, that there is no financial interest in the vehicle. If there is a financial interest in the vehicle held by the appraiser of record, it is disclosed within the report.
A description of the appraisers qualifications or resume.
The appraisers signature and certification/registration marks or embossments.
An Invalid Auto Appraisal Is:
Handwritten or Unsigned.
The appraisal fee is based on a contingency of the vehicles value.
The purpose is not stated.
The appraiser is not certified or registered as an automotive appraiser.
The vehicle is of a type that exceeds the appraisers expertise.
The appraiser is unable to defend the appraisal in a court of law
Reason For Appraisal: Some of the more common reasons why a vehicle may need to be appraised are; insurance, appraisal clause, arbitration, loan, equity loan, bonded title, donation, sale, purchase, divorce, business dissolution, estate settlement, taxation, bankruptcy and foreclosure/repossession.
Owner/Agent: The undersigned Appraiser did not verify the ownership of the vehicle being appraised or to whom the vehicle is titled or registered (unless specifically mentioned in the course of the appraisal). An agent may be anyone who initiates the appraisal with or without permission of the owner, e.g. courts, attorneys, insurance companies, purchasers, lenders, lienholders, etc.
Limiting Conditions Affecting Appraisals
In many situations, the validity and accuracy of an appraisers conclusions to the value of a vehicle are contingent upon the validity of statements, information and or data. Accurate appraisal practice requires that the Certified Auto Appraiser state any contingent or limiting conditions, which would affect the appraisal. An example of this would be that the value is contingent upon the completion of the projected work or restoration on the vehicle, etc.
Hypothetical Appraisals
A hypothetical appraisal is an appraisal based on assumed conditions which are contrary to fact or which are improbable of realization of consummation. The automotive appraisal industrys position on this is that there are legitimate uses for some hypothetical appraisals, but that it is improper and unethical to issue a hypothetical appraisal report unless (1) the value is clearly labeled as hypothetical (2) the legitimate purpose for which the appraisal was made is stated, and (3) the conditions which were assumed contrary to fact are set forth.
Appraisals Where Access To Vehicle Information is Denied
Appraisal assignments sometimes are ordered where some pertinent information about the vehicle that the appraiser deems pertinent to the making of a valid appraisal are in existence but access to the information is denied to the appraiser, either by the client or some other party (for example: the prior file on the vehicle from a restorer of record, the manufacturer or a public agency). In such a case, the appraiser at his option, may properly decline to carry out the appraisal. In the event he considers such information essential to the making of a valid appraisal, he may not properly proceed with the assignment.
Ranges Of Value For A Vehicle
Some appraisal assignments may call for the determination of a probable range of value, either with or without a collateral statement of the most probable figure within that range. It is entirely within the scope of good auto appraisal practice to give a range of value. Inasmuch as the appraisers determination of the amount of a value cannot, by its very nature, be exact, it is good appraisal practice to append to such numerical results a statement as to the degree of reliability to be accorded thereto. Such reliability estimates are usually expressed as plus and minus percentages.
Inspection, Investigation, Analysis & Description Of The Vehicle
The valuation of a motor vehicle is a procedure based on an analysis of all the characteristics of the vehicle, which contribute to or detract from its value. Sound appraisal practice requires that the appraisers inspection, investigation and analysis be thorough enough to uncover all pertinent characteristics. Sound appraisal practice requires that the description of the vehicle which is the subject of the valuation, cover adequately, (1) identification of the vehicle, (2) statement of the legal rights and restrictions comprised in the ownership of the vehicle (if applicable), and (3) the characteristics of the vehicle which contribute to or detract from its value. The physical condition of the vehicle is an essential element contributing to or detracting from its value. Good appraisal procedures require adequate inspection and investigation to determine the accurate condition of the vehicle.
General Industry Vehicle Conditions
#1 - Excellent: Restored to perfection. A 95 100 point show car with no deductions for non-originality, condition, function, cosmetics, etc. A show car that is driven only in and out of an enclosed trailer. This is true concours quality, the type of car that routinely appears at the most prestigious concours delegance shows around the world and at the specific marque judged concours delegance shows also. This car is correct down to the last nut, bolt and washer. It needs absolutely nothing. In a regional show featuring 200 cars, there might be 3 or 4 true concours quality vehicles present, while even the best of show at a local event with 100 cars might not be a condition #1 concours car. A completely original vehicle that is 100% free of defects and is generally considered immaculate and looks as if it is sitting on a showroom floor, prior to being sold for the first time.
#2 Very Good: Exceptionally clean and original car that is normally described as an extremely well maintained original, showing very minimal wear and use. A very clean car that is free of any major defects. The exterior paint and body, along with the interior have only very minor wear (if any) and blemishes that can be described as insignificant. The chassis, engine and compartment are free of oil leaks and excessive dirt buildup. Can also be described as an ex-concours showcar that is past its prime and is being driven, but very well kept. This car was restored to a high quality previously and now is in possession of only very minor flaws. This car would win a trophy in a local or regional show but is not 100% detailed.
#3 Good: A "good" vehicle rating means that the vehicle is free of any major defects and shows regular wear to most all areas. Many street driven vehicles owned by consumers fall into this category. Also, a good amateur restoration, all presentable and serviceable inside and out. Plus, combinations of well-done restoration and good operable components, or a partially restored vehicle with all parts necessary to complete it and/or valuable NOS parts.
#4 Average: A driveable vehicle needing no or only minor work. Probably has some mechanical defects, but is still in safe running condition and is totally presentable as a standard example of a normally driven transportation vehicle. Also a deteriorated restoration or a very poor amateur restoration. All components may need restoration to be "excellent", but the vehicle is mostly usable "as is".
#5 Fair/Restorable: Commonly referred to as a daily driver or a car stored in a barn for years that is relatively complete and restorable without an unreasonable amount of work and expense. The vehicle needs a complete restoration of body, chassis, interior and mechanical components to bring the vehicle to a #2 condition. The vehicle may or may not be running, but is not weathered, wrecked or stripped to the point of being useful only for parts.
#6 Parts Vehicle: May or may not be running, but is weathered, wrecked and/or stripped to the point of being useful primarily for parts. The vehicle is incomplete to various degrees. The vehicle is not restorable and is just "to far gone" to restore, but is too good to send to the crusher for recycling.
Methodology of the Appraisal Report
Market Approach: Appraisal based on the compilation of information with the value being determined by comparison of similar vehicles recently sold, currently being offered for sale or verifiable expert opinions from qualified dealer principals or auction house authorities
Income Approach: Appraisal based on the amount of money a vehicle is able to generate through promotions in addition to it's market value.
Cost Approach: Appraisal based on the amount of money required to replace the vehicle in it's entirety, e.g. kit cars and replicas. Replacement meaning "like-kind" and condition. Reproduction cost "new", not considered.
Kinds of Value
There are eight basic types of value. In practice, the market value of a vehicle for any particular time is based on actual conditions existing at a specific time and place.
Fair Market Value: A legal term meaning the highest cash or equivalent price estimated in terms of money which property would bring if exposed for sale in the open market place, with reasonable time allowed in which to find a purchaser buying with full know-ledge of its uses and purposes to which it is adapted and to which it is capable of being used, and neither buyer or seller being under any compulsion to buy or sell. The most probable buy-sell price would be its insurable value.
Actual Cash Value (ACV): An insurance term that usually means the sum of money required at the time of loss, to acquire a similar vehicle, as the property destroyed, less any appropriate depreciation for previous use
Liquidation Value: An impending sale with limited conditions. An orderly liquidation is planned disposal with price consideration. A forced liquidation is immediate disposal without price consideration. An absolute auction has no reserve price.
Replacement Value:A term used when describing the cost to replace an automobile in the exact or equivalent condition and with the same components, less any depreciation due to use or deterioration. This would include cost of custom fabrication, upgrading and any modification cost to duplicate the appraised automobile.
Salvage Value: Parts value without consideration of the specific vehicle the parts came from.
Hypothetical Value: The value of stolen or damaged vehicles, which are not always available for physical inspection, based on assumed conditions, sometimes contrary to fact, with limiting conditions.
Reconstructive Value: A vehicle's value in pre-accident condition is estimated, based on it's post-accident condition with applicable limiting conditions.
Provenance or Historical Value: An additional value assigned to a vehicle above it's market value due to proven ownership, association, manufacture or show and racing history.
The Standard Retail Value of The Vehicle
Being Appraised
ACTUAL CASH VALUE/FAIR MARKET VALUE* is the price at which the property would change hands between a willing buyer and willing seller, neither being under any compulsion to buy or sell. Both parties to the sale having reasonable knowledge of relevant facts ... in the most common market. Fair market value for the purpose of this appraisal is defined as the highest price in terms of a single cash payment of money, which the vehicle will bring if offered for sale on the open market place. A reasonable time is assumed to buy said vehicle, with full knowledge of all the adapted and potential best uses and possessing a specific purpose in mind to justify the investment. The relationship of both buyer and seller shall be at arms length. The market value estimated, and the costs used, is as of the date of a loss or other stated date of value
Evaluations are based upon comparable vehicles found on the open market to be or have been advertised for sale, with allowances made for additions or deductions based on comparable equipment and conditions set forth by advertisers and by a vehicle's owner of record. Any deductions from value are discernible, measurable, itemized and specified in dollar amount in compliance with sections 790.03 (H) (4), 710.03 (H) (3), 1872.4, and title 10, chapter 5, subchapter 7.5, section 2695.8 of the California Insurance Code and Federal Insurance Statues.
*Black's Law Dictionary defines fair market value as "The price a willing and knowledgeable buyer would pay a willing and knowledgeable seller, neither party being under duress and both having a reasonable knowledge of relevant facts..."
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