What is an appraisal?
“My sister said I should get an appraisal…”
As you can imagine, many people come in to our fine jewelry gallery, asking for “an appraisal,” but they don’t know if they actually need one.
At one end of the spectrum are folks that want the value of an appraiser’s expertise, but without paying the commensurate rate for that expertise: “Can you just tell me if it’s real or not?” Well, don’t be surprised if a legit appraiser is not going to do much more than a quick look and a guess if you want free advice. You see, at that point, the appraiser is doing you a personal favor by engaging the value of their experience to your benefit…but for most expert appraisers, that generosity only extends to what can be determined at arm’s length or with only the simplest of testing.
At the other end of the spectrum, there are folks that might be ready to sign up for paying an appraiser’s hourly rate, but not actually need to spend a dime: “Yeah, I need this appraised so I can sell it.”
To make sense of the latter example, we should probably delve first into the mystery of:
What Kind of Appraisal?
That’s right. There are different kinds of jewelry appraisals. Here’s a partial list:
- Retail Replacement Value Appraisal
- Commonly requested for the purpose of insuring
- Possibly useful for estate planning
- Occasionally requested for “Damage and Loss” assessment Partially useful in preparing for sale to an individual (in conjunction with Fair Market Value appraisal)
- Fair Market Value Appraisal
- Estate Appraisal
- Donation Appraisal
- Tax purposes, generally speaking
- Partially useful in preparing for sale to an individual (in conjunction with Retail Replacement Value appraisal)
- Marketable Cash Value Appraisal
- Requested in divorce calculations
- Useful for estate planning
An appraisal is typically a written document, signed by the appraiser who 
performed the assessment. So, when someone strolls in, wanting to cash out their jewelry, but requesting an appraisal, we try to set them straight as early in the discussion as possible.
You see, the closest thing to what they want is a "bid to buy." That’s right—they want to know what the Fair Market Value of their item is. Well, there’s a far more reasonably-priced way to get that information than securing an appraisal…and that’s to ask, at places in the area that are actively engaged in purchasing such items from the public, what their offers would be. Because that is the definition of Fair Market Value: what a willing buyer and willing seller would agree to, price-wise, for the item to change hands, at a certain place, at that particular time.
You don’t need me to put on a formal piece of paper my highly educated, expert guesstimate what that amount might be. You can get actual offers at no charge whatsoever. And as the willing seller, it is your prerogative to find the highest offer.
If you hired me to perform a Fair Market Appraisal on a piece of jewelry, and then you brought that piece to a pawn shop, do you think they would care about the dollar amount listed on the appraisal I just calculated?
Nope.
Because their purchasing decision will be based on other information the appraiser was not privy to: (1), "shoot, I sure already have a lot of this same stuff in stock—I’m going to offer low"; (2), "shoot, my wife would sure like that, I better offer enough so I can get my hands on it"; (3), "shoot, I’m low on inventory like this, I better go straight down the middle."
Willing buyer, willing seller. You do not have to sell it if you don’t like the offer. But you just found out what the market will bear, without paying for an expert appraisal.
And then there’s the myriad reasons for which you are required to get an appraisal, which are all insurance-, legal-, or tax-related.
Insurance appraisals are based on Retail Replacement Value in most cases. They can occasionally be based on Auction Replacement Value. Either way, preparation of such documents will bill out by a qualified appraiser based on an hourly rate.
Fair Market Value appraisals and Marketable Cash Value appraisals require greater expertise, primarily because they are associated with legal events. Because of that, they often bill out at double or triple the hourly rate of insurance appraisals.
Keep peace in the family...
If you want to save you and your family a lot of money and heartache, consider this: if you specify in your will nothing more than a “percentage split” or “equal division among parties” regarding your jewelry, you will be requiring your heirs to get an Estate Appraisal performed. In most cases, because of how jewelry collections tend to accrue, there won’t be an equitable way to split up your jewels. Invariably, one or two pieces will be worth more than all the others combined.
So, in order to follow the stipulations of your will, your family will have to liquidate all the items, and split up the resulting funds according to your instructions. Or, someone within the group of heirs would need to be able to “purchase” the items from the estate.
Typically, that’s not what people have in mind when they set up their will. What people intend is for some pieces to go to each heir. At that point, each heir can decide what to do with their pieces: keep them, re-set them, sell them.
So, it’s my recommendation that you instead have a Marketable Cash Value appraisal performed. In fact, you wouldn’t even need to get it typed up—because you will just learn the values of each piece, and then you would personally assign specific pieces to specific heirs, right in the text of your will (or in an addendum).
At one-third to one-half the hourly rate of an FMV appraisal, and with all the peace of mind that picking specific pieces brings to a difficult time, you will be doing everyone a huge favor.
What makes me qualified to appraise jewelry?
In addition to being a GIA Graduate Gemologist, I have also received specialty training from esteemed, appraisal-specific organizations, including the American Gem Society and the American Society of Appraisers. I am qualified as an expert witness, and have performed in that capacity a number of times.
What pieces should I get appraised for insurance?
My recommendation is to insure anything that would be an economically difficult for you to replace out of pocket. That number is different for everyone. The values that are determined for insurance appraisal are determined as the average amount one would need to pay in a specific area, at a specific time, for a similar or like item. Unless a piece is described specifically as custom-made, involves techniques protected by patent, or is made by a known artisan, your insurance will not cover trying to replicate the original item.
You mentioned hourly rates. How do I figure out my cost to have something appraised?
As you can imagine, the amount of time it takes to appraise a piece of jewelry varies drastically. Gold chains usually take no more than ten to fifteen minutes apiece. Conversely, a piece with many different types, sizes, shapes, and grades of gemstones can take several hours…as do antique pieces that require diligent research.
But let’s talk more typically…a one-carat diamond solitaire ring:
Assuming the diamond in the ring is not of the highest three clarity grades, this ring would generally take
- 20 minutes to appraise for insurance purposes x $100/hour = $34
- 35 minutes to appraise for estate purposes x $300/hour = $175
[The additional time involved in an estate appraisal has to do with all the back-end referencing the appraiser must do, as they must be prepared to defend their conclusions in court.]
But no matter what type of appraisal, the complexity (and therefore the price to perform it) varies with:
- how many different types of gems require identification, measurement, weight calculations, color grade, and clarity grade
- providing any grading reports from laboratories will cut back on that time
- how unusual the gem shapes and types are
- how many different design elements require detailed description in order to adequately aid in later replacement, if needed
What now?
If you’re realizing that you possess jewelry that has values higher than you could comfortably afford to replace, it’s time to get those items appraised and insured. Most insurance companies require items be reassessed every three years. [Please note that my re-up rates are as reasonable as they come.]
If you’re at that stage in life that you are getting your will in order, consider scheduling a Marketable Cash Value appraisal, so you can be in control of determining which heirs inherit which pieces, and save a lot of future unfriendly debate among your family members.
No matter what—know that if you have questions about the identification or appraisal of your gems or jewelry, no matter the reason, I am ready, willing, and able to answer them!
Your local jewelry appraiser,
Babs
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