The methodology used to determine value will vary depending upon the kind of value being sought (i.e., retail replacement value, fair market value, etc.) and the assigned use of the appraisal. Of critical importance is the fact that appraisers do not create value. Rather, the appraiser reports value, based upon reality in the marketplace.
Retail replacement value for insurance should be based upon typical or “modal” selling prices in the marketplace or at the market level appropriate to the specific item.
Fair market value, on the other hand, is a legal concept with its definition sometimes varying from one jurisdiction to another. The Internal Revenue Service has carefully defined fair market values for use in appraisals for Charitable Contributions, Estates, and other tax related functions. Some states defer to federal guidelines for fair market value, while others have adopted their own, albeit similar, definitions.
Accurate appraisals are dependent upon research conducted by the appraiser with regard to value. This does not mean necessarily that the appraiser must specifically research each item being appraised. This would create prohibitive fees because of the time involved. Research can be generally divided into two categories: Ongoing, and Specific.
Most of the items commonly submitted for appraisal, such as diamond engagement rings, tennis bracelets, stud earrings, and other conventional, “staple” items, can be dealt with through the appraiser’s ongoing research. By participating in the jewelry industry and appraisal profession, attending trade shows, subscribing to trade publications and price guides, talking with manufacturers and jewelers, and “shopping” in jewelry stores, appraisers can keep track of many kinds of jewelry, and typical selling prices.
However, faced with an unusual item such as a fine Art Deco diamond bracelet or an 1860’s Cartier brooch, the appraiser is likely to have to conduct specific research relating to that particular item. This research can be time consuming, and clients should be prepared for the fees that are a part of this process. In some cases, the professional appraiser may have to pay an expert in a particular field, for access to that expert’s knowledge. These fees must of course be passed along to the client or built into the charges for the appraisal.
Posted in: Appraisals and Gemology