“An appraisal is a written statement prepared by an impartial, qualified appraiser, setting forth an opinion of defined value of an adequately described jewelry item, as of a specific date, and supported by relevant market information.”   

 

First, an appraisal is an opinion; and any person can have an opinion. What makes the written document by an appraiser, an appraisal, are two qualifying conditions or requirements, according to the North American Conference of Appraisal Organizations (NACAO).

 

1.)    The appraiser must be Impartial or unbiased towards the client, or even towards the jewelry item itself. The appraiser must remain objective

 

2.)    The appraiser must be Qualified. He or she must be proficient in both the subject being appraised; in this case jewelry, and must be skilled and knowledgeable in the methods of appraisal principles in determining value.

 

 

However, there are different types of appraisals for different circumstances or intended uses. The type of appraisal most people are familiar with is called a Replacement Value  appraisal. This type of appraisal is usually obtained to secure insurance coverage of a jewelry item. The appraisal should provide sufficient information for a customer to replace his or her jewelry with a similar kind, quality and value. It is an opinion as to the amount of money that would be needed in order to acquire a comparable item. The value figure must be based on market data and not on mere speculation.

 

 It can be based on the Manufacturing Cost - the actual cost to manufacture a comparable replacement item. This is known as the Cost Approach. A second method for determining Replacement Value is based on the  Current Market Price which is the current asking prices of comparable items, in the most relevant market.  This current market price is sometimes known as the Market Research Approach which utilizes actual current retail asking prices of comparable jewelry items.

 

The two approaches can lead to different Replacement Values. The Cost Approach can vary widely as it usually applies an unspecified markup to the manufacturing cost. This markup may vary from jewelry store to jewelry store, depending on the stores individual cost of the item and the amount of monies the store must factor in to make a reasonable profit. Different costs can lead to different Replacement Values.

 

The Market Research Approach utilizes valuations based on verifiable data. It too can lead to different  Replacement Values, because different jewelers can offer similar jewelry  items at varying prices. The current trend in the discipline of jewelry appraising is to utilize the Market Research Approach. The Cost Approach is generally reserved for unique one of a kind, hand crafted or custom made jewelry items.

 

 

 

Whichever method is used, The Cost Approach or the Market Research Approach, it is always improper for an appraisal to be used for other than its intended use.

 

 Example: If a customer is seeking a Replacement Value appraisal for insurance of his or her jewelry, the appraisal should supply accurate, verifiable data to replace the item with a comparable item in the event of a loss. The Replacement Value appraisal cannot be used, for instance, to represent the price at which an item could be sold in the secondary market. This would require a Fair Market Value appraisal or Marketable Cash Value Appraisal. Likewise, Estate Appraisals are used to satisfy U.S. Treasury Department regulations as to values of jewelry items for the Internal Revenue Service.

 

 

 

Appraising Personal Property: Principles and Methodology            David J. Maloney, Jr.

 

The Practical Guide to Jewelry Appraising     Cos Altobelli, CGA   American Gem Society