How to Handle Collectibles as Client Assets

When and how do collections have to be appraised?

Of the tens of thousands of collectors Heritage has assisted in disposing their collections, about 20% didn't know even approximately what their art and collectibles were worth.

Appraisals are required for insurance, estate taxes, charitable contributions and even gift-tax purposes, but few people realize the IRS requires different types of appraisals depending on the value and use of the collection.

Selecting a qualified appraiser is an important step and takes time. Collectors should pick appraisers who specifically confirm to Uniform Standards of Professional Appraisal Practice.

We often advocate third-party grading as the best method to protect their collection. Just like an appraisal, reliable certification can greatly increase a collection's liquidity and value, especially for:

• Coins (Numismatic Guaranty Corporation (NGC) or Professional Coin Grading Service (PCGS);
• Currency (Paper Money Guaranty, PMG, or PCGS);
• Comic books (Certified Guaranty Company, CGC);
• Stamps (Professional Stamp Experts, PSE) and
• Sports cards (Professional Sports Authenticator, PSA, or Sportscard Guaranty, SGC.

Certification by these major grading services both assures authenticity and adds value. However, certification fees may range from $15 to hundreds of dollars per item.

Before considering a grading company it is best to meet with an expert to determine if the added value will justify the cost of the service.

What are the best ways to sell a collection?

A common practice among inheritors is to sell a collection outright, thus generating fast cash for minimal effort, but often producing the least amount of money for the owner.

Another method is to use an agent. Generally agents charge a fix fee of 5 or 10% plus expenses.

Matching the right agent with the right material is a challenge, as it is hard for any expert to know the market on every item in a collection. Even the greatest experts often lack the imagination to predict auction values when an item is truly special. Furthermore, you need to fully trust that the agent will give you an honest accounting. Most will, but private transactions are somewhat opaque, so some agents may succumb to the temptation of using your items to return favors to friends, buying the best deals themselves or even shortchanging you outright.

That's why the auction method of selling has always been and will likely forever remain the best method to ensure your heirs receive as much value as possible from your collection. Auction is the fastest way a truly free market can set a value based on competitive demand in a transparent, level playing field.

Auction houses work on a percentage, so the more money you receive, the more money the auction house makes. Thus, their interests are aligned with yours.