Introduction to Determining the Value of Art

The value of a work of art is a peculiar beast, a schizophrenic chameleon. It is witnessed in a myriad of perplexing personas, corporeal and otherwise. Non-the-less, affixing a monetary claim to an art work is a necessary evil in a pragmatic sense and its worth is influenced remarkably by the hat you are wearing. To understand this matter more, one must realize that these values are transient within societies and cultures. Consequently, they must be adjusted over time and in accordance with one's rules and role as an evaluator or art patron.

So, you say: "What in da tar nation eez you talkin' 'bout dude?"

Let me try to explain. The title of this discussion, "determining the value of art", leaves an open ended definition of "value". As a former gallery owner, practicing artist, and as a professional art educator responsible for e-value-ating art daily, I know that there are two distinct classifications of value; tangible, or corporeal, something to which a price tag can be attached. The other, obviously, being ethereal that cannot carry a monetary fixation, but non-the-less, has definite "value" from a variety of standpoints. Within both of these there are also distinctions.

To initiate a dialogue on "value" in reference for money, let's assume you're an artist and want to sell a painting. How do you affix a sales price? This should be helpful to those wanting to know how initial prices of a painting are determined.

To start with, you have to consider legitimate expenses: outlay of materials, approximate rate of utilities while producing the work, expenses for research and photography, travel, fees for models, studio space rental, copyright use, framing, storage, etc. These are all things you can document with a paper trail and receipts. Next, you have to consider a wage for your time in production. How much is your time worth and dependent on your skill? Should you reasonably expect to get more if you have a master's degree in painting, or are a beginner? (It may be interesting to note that most artists in the U.S. do not even make minimum wage on the sales of their work.) Which brings up another issue, how do you recoup your expenses for classes and education or training in art? If you have limited edition signed and numbered reproductions of a painting made, how much should the price of the painting be raised?

These are just some considerations. Some artists simplify this by using a formula, like $6 per square inch plus the cost of framing.

So, you have a price in mind and want to be represented by a gallery. You go to a few galleries and find out their commissions vary from 30 to 50 percent of the sales price. After evaluating gallery requirements and expectations you decide that in order to get the price you had in mind, for example $850, now must become $1,140 with a 40% gallery take included. Other issues involved are not limited to whether or not the gallery can expect to sell it at that price in its market and the galleries' insurance liabilities and limitations.

Here are some other questions regarding artist's pricing. Suppose you have some paintings in galleries and try to liquidate some others yourself. From an ethical standpoint, can you sell a similar work for $850 (knowing it would sell easier at that price), or should you charge the same as the gallery, $1,140? Can a similar painting sell for more in a different location of the country? Watercolors typically sell for less than oils of comparable size, therefore, how do you adjust prices? What do you charge in adjustment for a vignette of the same dimensions as a full composition piece? Additionally, suppose you have participated in some juried exhibitions and some of your works have won awards. Do you now raise the prices of these, and if so, how much (I've known some who double the price.)?

The artist also sees value in their art as a possible source of residual income. This comes in two forms. One is through royalty payments with the paid use of their copyrighted and licensed materials. The second and more obscure to most, is through percentages of repeated sales of the same art work. This is accomplished in a contract purchase where the artist or their estate is guaranteed a certain amount of the purchase each time the work is bought by a different patron. Both of these require the use of a good attorney that specializes in art sales contracts.

Since I mentioned insurance before, let's look at value from under that hat. Dollar amounts may reflect differently from the insurer and the insured. What you think a piece is worth may need to be documented with a certified appraiser's estimate and even appraisers amounts will vary. Another method is to verify a "track record" of sales amounts. An owner of an art purchase will need to show a receipt. Since values of art vary over the years, one should get updated estimates that reflect inflation. On the other hand, an insurer of a gallery may just take a gallery owner's document on total amounts of consignment contracts.

Suppose you own art and want to donate it to a non-profit organization. Now the federal government has stepped in. If you want to claim an amount for tax purposes you have to verify a claim with a receipt. Unless you are the artist, then it's a whole other ball game. Uncle Sam now says you can only claim the actual value of the tangible materials that make up the piece. Your time and other expenses are null and void. So, your piece basically becomes worthless, which brings us to the next three berets of value I can relate to under the voice of experience, 1) estate of the deceased, 2) bankruptcy , and 3) loan value.

In the event of settling an estate, unless one has receipts to verify worth, you can expect to get, or list, garage sale prices (GSP). Here you also have the option of using a professional appraiser to assign a value. In the unfortunate case of a bankruptcy, you can expect to keep art listed as "wall coverings" also valued at "garage sale prices", to sell it at the GSP level, or at minimum, much lower values than your track record of sales. Banks have their own capricious policies in terms of the value of art as collateral. Some won't accept it, some require a certified appraised estimate, which will be in a range from "X" dollars to "X" dollars and as you can rightly guess, the lower amount will be used. Furthermore, you can expect the bank to allow no more than 75% of that number as collateral value. Some will have their own value of several art pieces (note the plural here) by stating that they will accept the art for a $500 loan, this is, in effect, actually a signature loan and the art has no collateral value.

Take the stance of an investor now. Several years ago "Money" magazine published their best long term investments for 15 and 30 year periods. Ranked at numbers 2 and 3 over these periods was original, contemporary art. If you are looking at long term strategies, then a serious glance at art values is important. As an investor, unless you purchase art at auction, you can generally negotiate a purchase price with a gallery or an artist. This demonstrates there can be a difference between perceived and real value for a work. If you buy art just because you like it, it may not be a monetary investment. Prior to investing in art, you need to consider all of the topics mentioned above in deciding what to look for as "value" in buying art. Two things here that also affect the value of art is the notoriety of artist in combination with market supply and demand.

With all this said, the ultimate monetary value of any art work is only the highest amount at any given time that someone is willing to pay.

Up to now we have taken a cursory look at art in terms of tangible market values. Here are a few non-monetary assessments of art work worth: cultural significance, educational and instructional relevance, historical documentation and study, therapeutic value (which can also be seen as an investment), and aesthetic attachment. Each one of these deserves their own treatise at another time.

The "value of art" to each person is a rough diamond. Increasing its worth will depend on the skill of the cutter to weld a working philosophical construct of value with practical applications to be employed as a tool to expose its many exquisite faces. Undoubtedly, theoretical physicists will prove a string theory for the universe before there is any global "value of art" recognized throughout all societies and cultures.

Robert E. Bear is a professional educator and national award winning wildlife artist. He has been recognized in Who's Who In America, Who's Who In American Education, and National Honor Society Outstanding American Teachers. He has created the Star Poster Program, the game of Gig'l(TM), and the team sport of Bearball(TM). His additional writings and paintings may be viewed at [http://www.ursidaeenterprises.com]

Introduction to Real Estate Insurance for Realtors and Mortgage Brokers

Insurance requirements have become such an integral part of the real estate and loan transaction, they must be included in any comprehensive discussion of real estate finance. Every purchase transaction will require title insurance, and every mortgage will require homeowners insurance. In some situations, lenders may also require flood insurance and/or mortgage insurance. Even purchasers of condominiums and townhouses will have other insurance options to consider.

Title insurance was devised to eliminate most of the problems created by abstract attorneys and the abstract opinion. Title insurers examine all the recorded documents pertaining to a specific property to produce an insurance policy that covers the purchaser, the lender, or both, from any defects to the title. Title insurance policies are now fairly uniform, and the insurance companies have the financial resources to defend and compensate their insured.

Owner's Policy

The owner's policy insures a purchaser that the title to the property was transferred free of any defects, except those which are listed as exceptions. The settlement agent will obtain and record the documents required in the title commitment. In most real estate transactions, the seller will pay for the owner's policy. The buyer pays for the lender's policy and endorsements.

The owner's policy is valid as long as the ownership of the property remains the same. Transferring ownership of the property to another ownership entity, such as a family trust or a spouse by a quit claim deed may void the title policy. Whenever possible, the owner should use a special warranty deed instead of a quit claim deed to facilitate changes in ownership. This will keep the title insurance intact.

Lender's Policy

Often referred to as a loan policy, this is issued to mortgage lenders to protect their interest. Typically, lenders require standardized forms be used. The lender's policy will guarantee the validity of the loan documents, and will follow the assignment of the mortgage or deed of trust when the loan is transferred.

Homeowner's Insurance

Also referred to as Hazard Insurance, homeowner's insurance provides protection against damage to real estate improvements, damage to contents, and liability coverage. Every time a home is purchased with a mortgage, the lender requires the owner (borrower) to obtain property insurance as a condition of the loan closing. This insurance must be maintained until the home is paid off. This is a comprehensive policy that provides coverage for most available perils, including full replacement of improvements, liability, temporary living expenses, outbuildings, and contents. The contents coverage extends to losses away from the premises, such as in a car or storage unit. The insurance premiums are usually included as part of the mortgage payment (the 'I' in the PITI payment).

Flood Insurance

Prior to 1968, flood insurance was virtually unavailable through either the private sector, or the federal government. Until then, the Federal Government attempted to control coastal and river flooding through re-channeling of water, and using dams and levees to restrict the flow of water. The dams had the added benefit of producing hydroelectric power, and providing storage for irrigation. But the increasing cost of these projects, as well as the high cost of flood- related damage, influenced the government to explore offering flood insurance to reduce the disaster related payments. Typically, floods affect entire communities or towns, so the local leaders often looked to the federal government to provide disaster relief for the victims. The question debated by the Federal Government was whether they were better off using their limited funds to provide disaster assistance to flood victims, or to provide federally sponsored flood insurance coverage. Congress realized the government could not keep absorbing the escalating costs to taxpayers for flood disaster relief. This led Congress to establish the National Flood Insurance Program (NFIP) in 1968.

Lenders Mortgage Insurance

Mortgage Insurance is provided to enable lenders to close loans with small down payments. It is usually required when the down payment for a purchase is less than 20%. Mortgage insurance is strictly for the benefit of the lender. In the event of a default or foreclosure, the mortgage insurance company will pay the loss suffered by the lender. Typically, when properties are foreclosed on, the sale price at the auction is less than the current loan balance. This difference (along with the foreclosure costs) is the loss suffered by the Mortgage Insurance Company. Depending on the situation, the MI Company may attempt to recover this loss from the borrower. They can file for a deficiency judgment in court. Mortgage Insurance is provided by both government agencies (FHA) and private insurance companies.

Condominium insurance is a master policy that protects both the condominium association and each individual owner.

Credit Life Insurance

This is insurance that pays off the loan with the death of the borrower. This is basically Decreasing Term Life Insurance, where the benefit amount decreases at the same rate the principal balance of the loan decreases. The beneficiary is the lending institution. Very few mortgage lenders offer this type of insurance, and even less require it as a condition of the loan. However, deeds and deeds of trust are recorded and become public information. Many insurance companies 'fish' this information, and send notices to all listed borrowers. They will send out official looking documents trying to entice the owners to purchase insurance. These offers are not a good value and should be avoided.

Summary

Title insurance protects both the purchaser and the lender for hidden defects in the ownership of the real estate. There are many endorsements that provide the lender additional protection that are charged to the buyer. Even though the seller provides the buyer with clear title, it is the buyer's responsibility to pay the necessary premium to have the lender included in the coverage when purchasing a property.

Landlords and tenants have special insurance needs that should be addressed. Owners of condominiums and townhouses need to purchase contents insurance.

Mortgage lenders do not require credit life insurance. Companies that promote this coverage are predatory companies that should be avoided.

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An Introduction To Batik

Nelson Mandela is often seen wearing an intricately patterned shirt in vivid colors. Most people probably assume this is a tribal design using an age-old African method of dyeing cloth. In fact, the shirts Mandela proudly sports have their origins halfway across the world, on the islands of the Malay archipelago, where the cloth is known as batik. The tradition of producing batik cloth was brought to South Africa by Javanese laborers forcibly transported by the Dutch East India Company to the Western Cape. The Madiba shirt (named after Mandela's clan name) adapts traditional batik using African colors and motifs and demonstrates its versatility and widespread appeal.

Batik is probably the most famous of the resist methods of dyeing cloth. Resist dyeing involves applying a substance that stops dye from reaching certain parts of the fabric in order to create a pattern. This method can use wax (as in Javanese batik), rice paste (Japanese tsutsugaki) or can tie off a section of the fabric ('tie-dye' or Indian bandhani). In most parts of South-East Asia, the wax is applied using a copper spout allowing the craftsman to create intricate patterns and differing width of line. New areas of wax can be applied and the cloth which is usually cotton or silk, can be re-dyed allowing for greater complexity in design and color. After the design and coloration are finished the wax is removed and the cloth is ready for use. These traditional methods of creating batik are extremely time-consuming and require a high level of skill so various labor-saving devices have been introduced to the process including brushes for the wax and copper stamps that apply the wax. Any hand-produced batik takes a long time and can be very costly, so much of modern batik cloth is in fact batik print, retaining the patterns and colors of batik but without using the wax dying technique.

There are batik making traditions in many parts of South-East Asia, particularly in Indonesia and Malaysia, each with varying designs, colors, and cultural influence. Perhaps the most famous and influential however is the batik of Java and specifically that originating in the royal cities of Yogyakarta and Solo. This batik is often produced in the traditional colors of black, brown, indigo and dark yellow, uses patterns representing folklore, tradition, and nature, and is of huge cultural importance to the Javanese. Batik cloth is worn at weddings, funerals, to carry babies, and is integral to Javanese cultural traditions such as dancing and puppetry. The vital influence batik has on the cultural life of Indonesia has been recognized by UNESCO which in 2009 declared Indonesian batik as part of the Intangible Cultural Heritage of Humanity: a living, cultural tradition, closely linked with the local community. UNESCO acknowledges Indonesian batik as a craft '...intertwined with the cultural identity of the Indonesian people and, through the symbolic meaning of its colors and designs, expresses their creativity and spirituality.' (Source: http://www.unesco.org/culture )

In modern-day Indonesia, batik has become a stylish and popular part of cultural life, vital to the creative economy, an important draw for tourists, and a key aspect of national identity. The flight attendants for Indonesia's national airline Garuda wear batik print as part of their uniform, as do those from the Singaporean and Malaysian national carriers. Young, fashion-conscious people are increasingly turning to batik shirts, dresses and scarves for casual wear, batik is increasingly popular for a number of social occasions such as weddings, as well as retaining its importance for cultural ceremonies, and batik is making its way onto the cat-walks and stores of top international fashion designers. It is increasingly popular worldwide too, and is used for furnishing, decorative purposes, tablecloths, and as a medium for painting and other artworks.

Daniel Shilson

See other articles on Batik here.