Appraising Archival Cultural Property in a Descendant Market
Cultural institutions are struggling with the valuation component of archival cultural property donations. By working with qualified appraisers who are skilled in valuation and who hold a strong understanding of archival cultural property, the donations of archival cultural property can return acquisitions by donation to their former glory, and donors can be awarded with the tax breaks that certified cultural property affords.
Image courtesy of Kelly Juhasz
The institution as active purchasers of archival cultural property has decreased substantially since the early 2000s to the point where it can be said that the institution as buyer of comprehensive fonds is no longer the most viable market in Canada and the United States. Their budgets for acquisitions have substantially diminished, and most of their collections are expanded by way of donations. For example, in the United States, there are five universities and colleges with large endowments that can command a higher budget for archival purchases thus beating out almost everyone else. Of the literary fonds placed on the market between 1950 and 2010, five institutions purchased 32 out of 79 collections available for sale.[i] This leaves the majority of collecting institutions unable to compete in the marketplace. As a result, the institutional market for the collection of large archival collections and comprehensive fonds may no longer be the best market for qualified appraisers to use in determining fair market value.
So why did this happen?
Institutions – the largest collector of archival documentary materials – began to shift their focus to accessibility, digitization, and facility storage space. Technology and the internet offered new ways for users of archival collections to access the collection records and materials. Although this greatly enhanced usability of the collections, it significantly decreased budgets for acquisitions. In fact, there was a sharp decline in the proportion of the collections budget devoted to acquisitions and a substantial shift to facilitating online access.
Another consideration affecting institutional budgets included the demand for off-site storage as on-site facilities began to fill up. The amount of storage space and special preservation needs of archival materials (i.e., film and textual documents) have also had an impact on what new materials the institutions would bring in and the size of fonds and collections they could accept.
Fonds: A fonds is an archival science term referring to a group of documents that share the same origin and may have developed organically through the daily work of an individual or organization.
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The goal of a large institution is to create comprehensive collections documenting the entirety of a person/company/organization’s life/history and contributions to society or their field. To this end, institutional budgets are, in part, for the purchase of individual or small groupings of documentary materials related to the collections they already have.
Aside from the powerful, well-funded institutions, the third consideration affecting the market of archival materials is the rise of the private collector. Unlike the institutional buyer, private collectors began buying rare and scarce materials to enjoy as well as an investment, and in some cases, purchasing fonds with the intent of donating to an institution down the road. These collectors have significant buying power and can often outbid an institution or simply receive the opportunity to purchase a fonds without an institution ever knowing the fonds was available for purchase. For rare documentary materials, this new collector has helped push prices higher for specific materials and thus pushing the institutions out of the market.
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The fourth consideration is the institution shying away from the detailed applications required for cultural property certification programs because of a lack of understanding of the professional appraisal process and recognized appraisal methodology in a changing marketplace. The applications for Canadian archival cultural property are in a steady decline over the years. Of all cultural property applications, the category of archival materials decreased from 14% in 2016-2017 to 5% in 2021.[ii]
How can appraisers estimate fair market value when the markets are descendant?
The sales of archival collections and fonds are mostly closed and restricted to one institution at a time. Rarely are large archival collections or fonds listed for sale on an open market where any and all institutions have equal and adequate time to buy, and where there are records of asking and realized prices available to use as market evidence. Whereas there are still purchases of archival cultural property by institutions, these sales are increasingly rare, and the sales records are not accessible to most appraisers as well as the other institutions.
Because of the depressed sales activities from institutional buyers, it is imperative to look elsewhere. One potential approach is to look at niche markets or a segmented market of single or small groupings of archival documentary records more commonly traded within specialty dealers and auction houses. Not only is this a more open and unrestricted market, but it is also one that allows for the justification of an opinion of fair market value using actual market data.
The segmented market approach offers an opportunity to estimate the fair market value of the archival fonds by dividing the fonds into categories of similar records and then presenting the sum of all the categories as the final value.
In using the segmented market approach, the best indication of fair market value lies in how the individual records found within the fonds would perform in the marketplace. In estimating fair market value, it is the sales comparison approach that is, more often than not, the most applicable to archival cultural property and satisfies the definition of fair market value.
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This segmented market approach allows for a different way of seeing the fonds or collections. Although different from the rules of archival description, approaching the fonds in this segmented manner for monetary appraisals allows for a detailed examination of similar records and their unique value characteristics. This approach provides an opportunity for a more accurate assessment of market performance when comparable sales for complete fonds are not available. This approach also makes the appraisal process of archival fonds more manageable and helps narrow down the search for comparable sales evidence.
The monetary valuation of archival cultural property involves all the records in the fonds or accrual, though some records may or may not have a hypothetical seller or buyer in the market but are still integral to the fonds. The appraiser must be able to determine which of the records have market value and base their estimation of fair market value upon relevant market characteristics.
The appraisal report and final opinion of fair market value must be credible and reasonable. To achieve this, the value conclusion must be supported by reliable market data. The appraiser must present a reasoned justification that clearly explains how and why they reached the numeric value they did. This explanation of how the market data relates to the archival cultural property is often missing and is one of the most common flaws in appraisals being conducted today.
The reasoned justification is the appraiser’s opportunity to reconcile their research and market analysis and present the basis on which their valuation is formed and must explain how the archival fonds and records meet the criterion set out in the definition of fair market value.
Where can appraisers learn more?
To learn more about appraising archival collections and materials, consult Strategies for the Monetary Appraisal of Archival Cultural Property I created for the Canadian Cultural Property Export Review Board posted on their website: https://ccperb-cceebc.gc.ca/en/resources/principles-policies.html
These strategies are designed for archivists, librarians, and appraisers, with a focus on productive actions and strategies that support the creation of a justified estimate of fair market value in monetary appraisal reports for archival cultural property.
Sources:
[i] Amy Hildreth Chen. (2020). Placing Papers – The American Literary Archives Market. Page 61.
[ii] Canadian Cultural Property Export Review Board’s Annual Reports and Quarterly Reports, https://ccperb-cceebc.gc.ca/en/resources/annual-reports.html
About the Author: Kelly Juhasz is the principal of Fine Art Appraisal + Services, an art advisory and appraisal consultancy offering a range of services for fine art and archival collections in Toronto, Canada, serving clients throughout North America. Kelly is an accredited member of the International Society of Appraisers, the past president & current member of the Board of Directors of the Canadian Chapter of the International Society of Appraisers, and was president from January 2016 to December 2021. Her appraisal knowledge of personal property is recognized by government agencies, legal firms, and cultural institutions throughout North America.
Kelly Juhasz holds a Master of Information Studies, Archival Science from the University of Toronto and a BA (Hons), Art History from the University of Ottawa (partially completed at the University of Siena, Italy). She also holds a Master’s specialization in Knowledge Media Design, University of Toronto; a BA, Communications, University of Ottawa; and a Marketing Diploma from the Academy of Design.