Considerations for Determining a Blockage Discount
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Wednesday, October 8, 2025 in Education, Ask ISA, Office Hours
When calculating a blockage discount, the appraiser must carefully evaluate a number of interrelated factors and considerations.
First, market absorption plays a critical role. The appraiser assesses how many potential buyers exist compared to the volume of property being offered. For instance, if 500 similar works are introduced into a market with fewer than 100 active buyers, price reductions will likely be required in order for the property to sell effectively.
Next, the similarity of the property must be considered. Works are segmented into logical categories (such as artist, medium, period, condition, or subject matter) based on how the market typically organizes them. Highly similar items are generally harder to sell than varied works from the same maker, since buyers may not want multiple near-identical examples.
The time required to sell is also essential. The appraiser estimates how long it would realistically take for the entire collection to sell, recognizing that sales volume in the first years may look very different from sales in later years. The longer the liquidation period, the more it reduces the present value of the proceeds.
Finally, the appraiser must determine the appropriate methodology to achieve credible assignment results. Appraisers first determine the fair market value of individual works without considering blockage, then apply an appropriate approach for discounting. There is no single approach or formula that can be used in all instances. Courts have often favored the present worth (value) method to model the effect of blockage over time, but this formula is not the uniformly prescribed. Appraisers must exercise professional judgment, supported by relevant market data, to determine the appropriate application and calculation of blockage discounts. In some cases, consultation with a business valuator, or other specialist, may be required. Critical considerations include identifying potential buyers, estimating which works will sell quickly versus slowly, and evaluating factors such as condition, quality, and collector interest.
Importantly, all of these considerations will vary based on the specific property being appraised. Market dynamics, buyer behavior, and sales patterns can differ widely between categories and within categories such as fine art, decorative objects, or collectibles, and the appraiser must adjust their analysis accordingly.
Ultimately, applying a blockage discount ensures that valuations reflect real-world market behavior rather than the total aggregate of all individual values. By accounting for supply, demand, and time to market, blockage discounts can provide a more accurate valuation. Both U.S. and Canadian appraisal practice recognize blockage as an essential tool for aligning value with marketplace realities when applicable.