The appraiser has three functions, all of them important to you.
First, the appraiser is an identifier. Your jewelry must
be identified as to the materials, workmanship, condition and any other elements
affecting its value, and then evaluated-ranked in quality in relation to all
other similar property.
Second, the appraiser is a valuer. A value must be assigned
to the jewelry that is appropriate to the purpose of the appraisal.
Third, the appraiser is a witness to the property. The
appraiser can attest in a court of law that the jewelry existed at a certain
point in time, and that it was in a certain condition. (That is why it is
necessary for your appraiser to examine your jewelry when you have the appraisal
Unlike real estate, that stays in one place and is sold in one market with
public recording of sales, personal property such as jewelry moves from one
location (market) to another. It is subject to a layered market including retail
of several levels, wholesale of varying levels, and markets for sale of used
(pre-owned) as well as new items. In addition, most of these transactions are by
"private treaty", and thus are not a subject of public record.
In addition, the value of jewelry is related to circumstances surrounding the
sale. The value must relate to the most common market for the item, considering
its condition and all other value factors. Value is always specific to a certain
date and a stated purpose and will vary according to the
Just as in valuing real estate, valuation of jewelry is largely a matter of
research. It is important to preserve any past documentation of your
jewelry-sales receipts, previous appraisals, guarantees or warranties, etc.
These record the history your jewelry, will aid your appraiser in assessing its
current value. They could also be important at some future date in proving your
history of ownership. At Jewels by Stacy Appraisals, we keep copies of your
documentation for five years-just in case your records should be destroyed along
with your jewelry.
The professional jewelry appraiser utilizes three traditional approaches to
value-market research of sales of comparable jewelry, the
cost of making a reproduction or a replica of the jewelry, and in rare
cases, an estimate of the
income producing potential of the jewelry.
Your jewelry will be valued appropriately to the purpose
of the appraisal.
Typical situations where an appraisal is needed are:
The vast majority of jewelry appraisals are written for insurance-related
matters. Yet, most purchasers of insurance and unfortunately the majority of
jewelers writing appraisals know little or nothing of how insurance actually
Theory of Insurance: Insurance is a
device by which an individual limits exposure to loss by sharing the risk with a
large number of other people. Everyone pays money into a pool in the form of
premiums. The insurer collects the premiums, investigates losses, and pays out
Insurance company profit margins are dictated by the laws of each state. The
companies maintain that percentage by keeping a ratio between their income from
insurance premiums and their payments in claims. If cost of claims goes up one
year, everyone's insurance premium goes up the next.
In effect, we all insure each other, with the insurance company holding the
money and collecting a commission for coordinating the effort.
For insurance to work for the benefit of all, each individual should purchase
enough insurance to cover the value of his property, and payment of a claim
should put the insured back in the position he was in before the loss-no better
and no worse off.
The first thing to understand is that insurance is not a lottery ticket.
Over-insuring property and collecting a claim for more than your actual risk is
fraud. Nor is insurance meant to be a convenient way for people to convert their
property into cash. Obviously, that would tend to make people careless of their
possessions, or tempt them into fraud, and everyone's insurance premiums would
be sky high. A majority of insurance contracts now provide for the replacement
of scheduled jewelry in case of loss, and repair and/or restitution for
diminished value in the case of damage. This keeps the costs of settlement (and
therefore premiums) lower.
The jewelry industry is notorious for jewelers selling an item for a certain
price, and supplying an appraisal for an inflated "value". I like to think that
if they understood more about how insurance works, and how much money their
customers were wasting in excess insurance premiums, all jewelers would
discontinue this costly practice. As we will see, excess coverage does not
usually pay off. And, since we are all in this insurance pool together, it
should not pay off.
Inflated appraisals have created a phenomenon, however, where rates are kept
artificially low by the many consumers buying too much insurance based on
inflated appraisals. This gives an advantage to people with appraisals stating
realistic values. Their premiums are lower, yet they are fully covered!
The consumer needs to understand that an appraisal does not change the
value of the property. Property is what it is, and the best insurance
appraisal is an appraisal with an accurate, detailed description and a realistic
assessment of the appropriate amount of insurance coverage needed.
Insurance Policies: Insurance policies
come in many varieties, and only an insurance agent can give you advice in this
area. A good place to begin is in understanding the difference between
unscheduled and scheduled property. The basic
homeowner's policy had some blanket coverage for unscheduled jewelry (jewelry
that is not listed) on the policy. This coverage is subject to a deductible
(often $500) and a ceiling of coverage (often $1,500) and these amounts can
often be modified for an additional fee. Normally, this coverage is good only
for fire or theft, not things like damage, partial loss ("The diamond fell out")
or mysterious disappearance ("My teenager had a party, and now my bracelet is
missing"). This policy does not require an appraisal to be submitted in order to
get coverage. These claims are settled according to a depreciated value, which
insurance companies call "actual cash value" and appraisers call "replacement
cost, comparable". Sales receipts, photos and written descriptions are helpful
in these claims.
By law, only an insurance agent can give you advice about insurance. Be
sure you have a clear understanding of the terms of your insurance contract, and
read the fine print!
A detailed description is especially important in insurance scheduling
appraisals, since in case of a loss your appraisal will be all you have left to
form the basis of your claim. Most people have
replacement policies, which give the insurance company the option
of replacing the jewelry rather than making cash payment. Therefore, the detail
and accuracy of description in the appraisal is paramount. In addition, the
appraisal should have photographs, an explanation of appraisal methods used, and
generally be able to stand up to the scrutiny of the insurance adjuster-and the
courts, if it comes to that.
Since contemporary jewelry scheduled on replacement policies is usually
new jewelry, the appraised value is often higher for insurance
scheduling than for other situations (where the jewelry is valued "as is"). If
the jewelry is older-antique or period pieces-then replacement with new jewelry
would not be appropriate. In those cases, the jewelry is valued according to the
purchase price of an equivalent piece of jewelry of the same period, style,
materials, conditions, etc.
The insured value is used to calculate the amount of your premium.
You will be charged a percentage of the insured value every year. Under
replacement policies, the insured value is used to set a
ceiling on the amount that the insurance underwriter will spend to
replace your jewelry.
The value for claims purposes will be determined at the time of loss.
Only detailed documentation will ensure that the replacement is of equal quality
to your original items.
Under agreed value policies, the amount that will be paid in case of loss is
agreed on in advance, with some exceptions. If a material fact is withheld that
would have affected the decision of the underwriter to issue the policy (such as
the actual price just paid) the claim may be cancelled altogether.
Please consult your insurance agent for clarification as to
the details of your insurance contract. There are many types of policies, often
custom-tailored to the needs of the insured, and laws regarding insurance vary
from state-to-state. Your agent will explain the difference between
scheduled and unscheduled and replacement
agreed value insurance. The best guide for knowing how your
claims will be settled is to
read the fine print in your insurance policy. Look under "jewelry
and furs" on the basic homeowner's policy, and for scheduled jewelry read the
terms in the insurance rider, floater or endorsement.
The amount of settlement for an insurance claim will depend on the type of
insurance you have and the wording of your insurance contract. Insurance claims
are complicated, and are settled according to the terms of your contract ("fine
print") not according to what you might expect.
Most companies provide replacement coverage of scheduled
jewelry, and will replace your jewelry or make a cash settlement based on their
cost to replace, not your insured value. This is what makes an insurance policy
different from a lottery ticket. There is no problem with this type of insurance
as long as you have a properly prepared appraisal document.
You should seriously consider having any replacement
jewelry offered to you checked for assurance that you are receiving an equitable
damage claims, an appraisal will be necessary to ascertain the
loss in value so compensation can be made.
The secrets of buying insurance:
1) Buy enough insurance so that you could replace the jewelry yourself, in
your accustomed marketplace, and don't waste money on excess insurance. If you
bought a diamond for $5,000 with an appraisal for $10,000 and you used the
appraisal as the basis for buying insurance, you will be paying double premiums,
year after year after year. And, as we have just discussed, this will not affect
the amount of your claims settlement in most cases. Enjoy the lower premiums
that are caused by everyone who is buying too much insurance coverage!
2) Consider keeping expensive, seldom-worn jewelry in a safe deposit box
covered by low-cost
vault insurance and pay normal rates only when you take the
jewelry out to wear it (ask your insurance agent.)
Because jewelry can be a high-value purchase whereby the consumer is usually
unknowledgeable, it is common for buyers to request an inspection period when
making such a purchase. Most reputable jewelers will agree to an inspection by an
independent, unbiased appraiser before the sale is finalized. This is usually
done with a
"provisional" sale, with a stated time period for returning the
jewelry. If you plan to make such an arrangement, you will need to co-ordinate
between the jeweler and the appraiser, so both the jewelry and the appraiser are
available when needed.
The Internet is simply another market, with its own cast of highly reputable and
unrepeatable characters. Many established jewelers now also market via the
Internet, and many crooks do the same. It pays to check out the credential of
the seller thoroughly before making a purchase. Websites like
Diamond Talk have forums where consumers share their experiences with
If you are having jewelry shipped to you and you want it checked out during
the inspection period, please check for appointment availability prior to
purchase. Direct shipment from the seller to the appraiser can sometimes be
arranged-check with the vendor.
An estate tax appraisal is a legal document for Federal tax purposes and/or for
state probate of property named in a will. The IRS requires that the property be
appraised at Fair Market Value, which is the amount for which the jewelry would
change hands, in its present (used) condition in its most common market, with a
disinterested third party for his/her own use, and with no compulsion to buy or
sell. (Examples would be sale from the estate section of a jeweler, or sale at
public auction.) There are other strict legal requirements that dictate how the
appraisal must be performed. Fulfilling those requirements can help avoid
red-flagging the estate for an IRS audit.
Property mentioned in a will needs to be appraised, either by the personal
representative or by a qualified appraiser.
Trusts & Conservatorship
Formation: Appraisals for trusts and conservatorships are similar to
appraisals for estate settlement, and are based on fair market value. They need
to be updated periodically.
"Living trusts" avoid state probate, but if the estate exceeds the estate tax
exemption (currently $1 million) property distributed from the trust is subject
to estate tax and will need appraisal.
Planning/Distribution: In estate planning or distribution, you will
want to take into account that one individual might receive jewelry, while
another might receive china, art or real estate, and the appraisal should
facilitate a fair division. In such a case the estate will often use the fair
market value (cost of purchasing similar items) for distribution. In other
cases, some people may be receiving jewelry while others are receiving cash or
cast equivalents. In those cases it might be preferable to distribute property
according to its marketable cash value-actual cash in hand after selling costs.
When planning your estate, these issues should be addressed with your estate
planner before engaging the appraiser.
Establishment of Tax Basis:
Often there is a benefit to appraising jewelry retained in the trust in order to
establish a higher tax basis-thus lowering the tax liability when it is
distributed to the next generation might.
In community property states, where the spouse inherits property tax-free, it
is often wise for the surviving spouse to obtain a fair market value appraisal
to establish a tax basis for his/her own heirs.
Resale of Property:
In appraisals for property that the owner wishes to sell, the method of selling
and the time available to find a buyer will affect the price that can be
achieved. As in the case of automobiles or any other personal property, value
fluctuates with the circumstances. "Market Value" is the gross price (without
regard to selling expenses) at which the property would be expected to change
hands, within a reasonable amount of selling time.
Often, however, the owner wants to know the expected net value after selling
expenses such as advertising, auction expenses, broker's fees, etc. If there is
plenty of time to find a buyer in the most appropriate market, and there is no
pressure to sell, the value will probably be
marketable cash value, (market value less selling expenses).
When there is a necessity of selling, such as to carry out the
provisions of a will or by certain court orders, but some time is available to
find an appropriate market, the value will probably be somewhat lower than
market value and is known as
orderly liquidation value. The amount of time available to find a
buyer is a key factor.
In some cases, extraordinary circumstances or court order may necessitate the
immediate sale of items without time to expose it to the most appropriate
market. It may need to be sold to a pawn broker, friend, or jeweler for its
immediate cash value, or
forced liquidation value.
is very closely tied in to emotions, and both parties are likely to have an
inflated idea of the actual current value of marital jewelry. Divorce is
traumatic and expensive enough without fighting over the jewelry. I say, let him
keep the big-screen TV and the sound system, and she gets the jewelry! Actually,
how marital property will be divided is governed by state law and varies from
state-to-state, so it is impossible to generalize. I suggest you not get an
appraisal for divorce purposes until so advised by your attorney. Then, be sure
the appraiser understands the measure of value to be used. It might be
beneficial for both parties to hire the appraiser jointly to appraise both his
and her jewelry-that way you can be sure the same standard of measure is being
used for both.
Unfortunately, jewelry sometimes becomes the subject of a dispute that needs to
be settled in the courts. Often, the matter could have been easily settled if a
proper appraisal had been obtained before the situation arose. Professionally
trained appraisers have the expertise to offer opinions of value in an unbiased
manner to aid the court in reaching an equitable decision. The problem I see
most often is that the appraiser is engaged too late to provide full benefit.
Engaging the appraiser
before depositions can often expedite an out-of-court