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Dollars and Sense

In popular methodology, the appraiser always renders a single value. Price guides, catalogs, field notes, wholesale lists, online sites and auction catalogs have been tucked away, to be retrieved and decanted like a fine wine for rendering a single value. If one were to peek in the quiver of a professional appraiser, they will most likely find an arrow marked "broad evidence." I hate to be the one to tell you but if you haven't discovered broad evidence then you need to sit down and take notes.

The broad evidence rule was spawned by the legal system for the insurance industry. It became evident to the courts - at least in some states - that insured clients were not always being properly indemnified when a casualty loss occurred. It wasn't because insurance companies didn't want to make their clients whole but that the value definitions were, well, lacking. Setting a value for some items just didn't seem fair and in reality, they weren't. The courts decided to request all the various possible values and prices so they could decide what would indemnify an insured. That is what broad evidence is - a gathering of all possible values from which the courts can select the best one to achieve indemnity.

It Started with Indemnity

Here are a few values that may be requested:1

        • Acquisition Cost
        • Market Value (Fair Market Value)
        • Cost of Replacement
        • Reconstruction Value
        • Value in Use
        • Actual Cash Value
        • Value to Owner

They may also require other facts such as the condition of the item. By the way, the broad evidence rule does not replace the market value rule or actual cash value requirements, it just extends them.

Broad evidence is, therefore, not a nebulous appraisal theory conceived by arm-chair experts at some appraisal conference. It is mandatory in some jurisdictions for casualty loss situations that are litigated. In fact, some of the states embracing broad evidence are Texas, New York and Florida, to name some.

Spread the Word

The methodology of broad evidence has merit elsewhere.

There are numerous instances when broad evidence would apply in other appraisal assignments. For example, perhaps an item being appraised for funding a living trust is actively bought and sold in two distinct markets equally - which is one is the correct one to research? Maybe reporting both value conclusions would be the best all around approach. That is broad evidence. The courts have deemed that appraisers are to report their value opinions and the Trier-of-Fact (a Judge or a jury) decides the value.

This Little Piggy Went to Market

CoinsWho said that one value was the rule?

Appraisals anticipated for litigation often require a broad evidence approach. What if the opposition's expert convinces the court to opt for a market you left out? Now your report is no longer in the race. On the other hand, if you also have a value conclusion for that other market, then your report will still be viable.

Of course, not all reports are destined to be used in a court room. A commonplace valuation assignment is one to determine tax liability. Tax liability includes estate and inheritance taxes, charitable donations, gifts, trust work and several others. Fair market value may be found in more than one market for a particular item. What about collector fairs? Or is auction the dominant market? No, maybe it is flea markets or garage sales? What about eBay? Which one is proper for a particular item? In which market is the item most often sold? If that is not clear-cut, the broad evidence approach applies.2


What is needed to produce a broad evidence report?

A description of the marketplaces and how transactions are performed within those markets should be included in the report. The appraiser's opinion as to which of the choices he or she thinks is the best choice. Last, of course, a value conclusion based on each market must be stated.

Here and There

Some appraisals do not lend themselves to broad evidence. Although the concept was invented for an insurance need, it is confined for the most part to casualty loss situations. For obtaining insurance, insurance companies want a single value. With a single value, they can ascertain their risk and set the premium - therefore valuations for obtaining insurance are not broad evidence compatible. Yes, there are exceptions when broad evidence is proper.

In addition to multiple markets, there exists the possibility that multiple value definitions can exist. In the casualty loss scenario, the courts request several value definitions. The first step is to research and determine if there is one fixed value definition required or the possibility exists for multiple value definitions. With the later situation, broad evidence exists as a choice. Broad evidence is not confined to different markets but also to different value definitions (possibly in different markets).

Do We Have a Date?

Most states have established a required date-of-value (or effective date) linked to a particular appraisal assignment. Divorce, depending on the state of jurisdiction, may use the date of separation, date of decree, date of division of the marital estate or the date of filing for the divorce. In a handful of jurisdictions there are no set rules on what is the date-of-value in a divorce valuation: New Jersey and New York, for example, allow the Judge to determine what the date-of-value will be. Broad evidence may be appropriate if the date-of-value is not predetermined by the Judge.


Complicated? You can have multiple markets, each researched with multiple value definitions which, in turn, can have different dates-of-value.3 In any case, can you see broad evidence as the best approach?


[1] Although some of these values may appear synonymous, in fact they are not.
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[2] Of course, only those markets that have a dominance of sales are to be researched and reported and not every market one can possibly think of.
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[3] This is called the "broad market value definition" rule.
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