Appraisal question

[Dreamer_D]

How should the appraised retail replacement value relate to the actual value you paid, if the appraisal is done correctly? For example, if I paid $7000 USD online for a diamond ring, how should the appraisal relate to this value?

I have seen different rules of thumb discussed, so I would like to know what the experts say.

 

[Dreamer_D]

Bump for the pros hanging around today!

 

[denverappraiser]

There’s not really a good answer to your question, which is part of the problem. The general requirement for insurance appraising is to estimate what an item of like kind and quality would cost to replace in the local marketplace, new and at retail.

Read that last sentence again and I’ll parse it a bit. There’s several zingers. ‘Retail’ is not a fixed figure as not all stores charge the same for their goods. The range is actually considerable. I dare say there are stones that a discount Onliner would charge $5000 for that could be bought locally anywhere from $5k to as much as $10k. The appraiser has to pick what they consider to be the most appropriate marketplace and they won’t always agree. This gets hotly debated at the appraiser conventions. Should it be a price that’s sufficient to buy it at any store you happen to wander into, the typical store (whatever that is), the store that your insurer is likely to be shopping at, the place where YOU bought it or somewhere else entirely? Should it pay for the first one you find or is ok to shop around a bit for the best deal (rather like you did when you bought it in the first place)? Not everyone will answer these questions the same way and it makes a big difference to the final value conclusion. The solution lies in the interview between the client and the appraiser at the beginning of the session to be sure that both you and they understand what is being asked. Even the correct answer to the wrong question is doing you no favors.

With mountings it’s often even worse. It’s often necessary to assume that the replacement will need to be custom made using US labor even though the original was clearly not. Why? Because it may not be a model currently in production where they can simply order in another one. Where your cost is $500 at the discount joint, it may be necessary to pay $1200 to get someone to make a replacement. That’s neither evidence that you got a good deal at $500 or that it’s a ripoff at $1200. The key is to understand and to be clear about what is going on. Appraising isn't rocket science, it isn't guessing, and it isn't a psychic power either. It's supposed to be a logical progression describing what something is and what it's worth to whom, when and under what circumstances.

Neil Beaty
GG(GIA) ICGA(AGS) NAJA
Professional Appraisals in Denver

 

[Dreamer_D]

Thanks Neil. That is all about what I suspected.

I guess in the end this matters most when it comes to defining "like kind and quality" with my insurance agent in the event of a claim. I had an appraisal done for strictly insurance purposes by an AGS gemologist locally, who also runs a retail jewelry store. His estimates for two of my rings were basically exactly what I paid one year and two years ago, and for the diamond solitaire was about 40% more -- the diamond would cost more at a retail store so I would expect it to appraise higher than the internet price. I asked him what his values were based upon as he mentioned that he bases it on how much he would sell such items for in his shop (basically... with input from Rap sheets etc I think). So the appriased values actually seem pretty spot on for me, rather than inflated as I sometimes see.

 

[denverappraiser]

It’s a common practice for sellers to use appraisals as evidence of a ‘good deal’ and there’s a whole industry around producing documents for this purpose. For the most part this is utter nonsense and it’s done to promote the interest of the jeweler, not those of the consumer. That's why they're 'free'. It sounds like you’ve got a fine appraiser. He clearly defined what question was being asked (What would YOU charge for an item like this?) and then answered it, presumably correctly.

Neil Beaty
GG(GIA) ICGA(AGS) NAJA
Professional Appraisals in Denver

 

[Dreamer_D]

Thank you so much for your help Neil. You are a great asset to Pricescope.