These documents are used by insurance companies to determine the cost to replace a piece of jewelry or to compensate the owner in the case of loss, theft, or damage, according to the owner’s insurance plan.
This type of appraisal usually considers the cost of replacing the jewelry if it was crafted by a goldsmith or by purchasing a new one from a retailer or designer.
Generally, an insurer will request that the value of high-cost jewelry items be reassessed on a regular basis. In the event of loss, theft, or damage, the value is reassessed regardless of the appraisal’s date.
Fair Market Value Appraisals
In contrast, fair market value appraisals determine the price that a jewelry item would get if sold in a particular market and are often used in divorce settlements or in the distribution of estate property.
Fair market value is the price “that would be agreed on between a willing buyer and a willing seller in the appropriate market, with neither being required to act, and both having reasonable knowledge of the relevant facts.”
That official definition is a bit convoluted, but basically every item of jewelry “belongs” in a certain market. For example, a generic pair of small diamond stud earrings, even of excellent quality, should not be valued based on their potential in the high-end auction world. Likewise, an unusual specimen of rough emerald crystal should not be considered for sale in the scrap gold market.
It is the job of the professional appraiser to gather all the relevant facts about both the jewelry item and the marketplace. The appraiser must also consider the most recent gold and gemstone prices and the geographical location of the hypothetical sale.
For either appraisal type, the appraiser must prepare the official document that lays out the item description, the determined value, and the supporting evidence for the evaluation.
The appraisal process for a single item of jewelry can take quite some time, so you can imagine how long it takes to appraise a large estate’s worth of jewelry! This is why professional appraisers are appropriately compensated for their work and the reports that they produce for their clients.
In my next blog, I’ll discuss the most common form of appraisals—the replacement cost estimate.
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