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WHAT IS THE PURPOSE OF A JEWELRY APPRAISAL?

There are three basic types of jewelry appraisals. These types of valuations are based on the requirements of the client and may be crafted to fit the purpose for the jewelry appraisal. Appraisals may be categorized as retail replacement, fair market value and liquidation. All three valuations are strictly opinions of value from the designated appraiser.

The most common appraisal is a retail replacement appraisal, which purpose is to identify the basic costs it would take to replace the item using current marketplace values in consideration of what the item would cost if it were to be replaced. This value is without consideration to reproduction or reconstruction costs. Retail replacement appraisals are used most frequently for insurance replacement purposes, because insurance companies commonly limit reimbursement beyond certain amounts unless documentation is provided. This type of report provides a detailed description of the jewelry item. Appraisal details may include total item weight, age, condition/quality, metal, measurement and quality of gemstones. A monetary value may or may not be placed on this report and the value may change due to current market conditions. Current market conditions that may be considered are the value of precious metals or minerals. The best appraisal is when the jewelry item has been viewed by the appraiser. Often appraisals will include a photograph of the piece.

The second appraisal type is a fair market value appraisal. The purpose of this type of appraisal is to establish a value based on what an item would sell for. This value is defined by Treasury Regulations, “as the price that a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having a reasonable knowledge of the relevant facts”. This type of value is more familiar to us as it is used when buying and selling real estate. This value is based on research looking at the most frequent sell of similar items with similar components being sold.

Fair market values are used to establish the value of items that are predominantly in used condition. This type of valuation is generally used for divorce or estate settlements. Often, estate valuations are involved in this type of appraisal. The valuation is generally based on fair market values. As a caution, IRS regulations may apply for federal tax liability purposes and individual state sales tax liability and regulations and laws may apply.

The third type of appraisal would be for liquidation. This would normally be a lower valuation than wholesale or replacement. This would be for a forced, distress or liquidation sale.
This type of appraisal would be for a bankruptcy sale or if the inventory was to be used as collateral for a bank or other loaning institution. Bankruptcy proceedings are governed by federal Bankruptcy Act and Official Rules and Forms.
A collateral report will be made for a bank or other lending institution. If the debtor is a wholesale dealer, the value may vary.

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