Appraisal values

[strmrdr]

In a free market the value of anything is what someone is willing to pay for it and someone is willing to sell it at in that market

With that in mind please explain how appraisal values are arrived at and which ones should be included.

Rockdoc asked in another thread:
...................................
RockDoc


What Value should go on an appraisal for insurance purposes?


Retail Replacement Value?


B&M store prices


Internet Price?


Some other value?



What''s the general consensus from both appraisers and consumers?

.........................

I think that is a good starting point for this thread.

 

[Richard Sherwood]

The vast majority of gemstones are purchased through bricks & mortar stores at average retail values.

Therefore I feel that the default appraised value should be at average retail, unless a lesser value is requested by the client.

An appraisal at extremely competitive internet pricing does not give the client much of a buffer in the event of a loss. There are many instances where a vendor can not replace this year what they sold a diamond for last year.

 

[Modified Brilliant]

Date: 12/17/2005 11:50:31 PM
Author: Richard Sherwood
The vast majority of gemstones are purchased through bricks & mortar stores at average retail values.

Therefore I feel that the default appraised value should be at average retail, unless a lesser value is requested by the client.

An appraisal at extremely competitive internet pricing does not give the client much of a buffer in the event of a loss. There are many instances where a vendor can not replace this year what they sold a diamond for last year.

I''m in agreement with Richard on all points. We''ve recently experienced increases in diamonds and metals over the last 12-18 months. Vendor costs have increased and the consumer is paying more than they did a year ago. There''s little reason to believe that this trend won''t continue, although no one can predict the future. I feel that "average" retail is the proper replacement value for insurance purposes.

www.metrojewelryappraisers.com

 

[strmrdr]

As a comsumer, however the appraiser wants to justify my cost + 30% is aok with me :}
Thats is my comfort zone with the way most insurance policies are written right now.
I feel that should give me a 3 year safety zone with Debeers increases and the rise in gold/plat.

 

[denverappraiser]

My value definition for pre-loss replacement insurance type appraisals of new merchandise will usually include something like this:

“The necessary funding required to allow the item to be replaced in a reasonable amount of time and in the usual marketplace with another of like kind and quality and having similar materials, condition, techniques, authorship and other qualities as defined in this report.”

The ‘usual marketplace’ is also defined in the report and, as has been pointed out above, the usual marketplace for replacement may not be the same as where it’s being purchased and the transaction at hand may not be easily replicated even if it is. In most cases, the usual market is a local retail specialty jewelry store and this often involves higher prices than the transaction price at an internet broker but this can vary drastically depending on the details of the item. Sometimes it’s quite a bit higher than the purchase price, sometimes not.

I do, however, disagree with the policy of increasing the value based on a prediction of future pricing trends. The appraisal should have a valuation date and the item should be valued as of that date. This date is usually the date of inspection and there are plenty of exceptions but it can never be in the future.

Neil Beaty
GG(GIA) ISA NAJA
Professional Appraisals in Denver

 

[strmrdr]

That is not how insurance works Neil, If its valued today and insured for that amount they would be badly under insured after the DeBeers price insrease in Jan.
By using a different market your stating a value high enough to give some breathing room for it to be replaced in the market it was bought.
In the end the numbers will likely be the same, my approach is more honest and probably illegal LOL

 

[blitz]

Bluenile.com was the 10th largest retailer in the country as per a recent edition of The Loupe.

I belive the appraisal methodology taught is, The most frequently occuring price within the marketplace that the item is most commonly sold. The mode, not the average.

Within my report, I state:

Replacement cost (for insurance) is the retail price at which the public would most commonly purchase each piece. The following types of replacement costs have been considered and the appropriate cost will so be noted per item:

Replacement Cost, New of a subject item is the buyers cost of a duplicate new item or Reproduction Cost of a duplicate new item.* or buyers cost of an equally good substitute new item or production cost of an equally good substitute new item.*

Replacement Cost, Used of a subject used property item. Buyers cost of a duplicate used item in the same condition as the subject used item.** or Replacement Cost of an equally good substitute used item in the same condition as the subject item.**
*retail new market **retail secondary market

 

[dawson37]

This thread has been very helpful. I had a ring designed by a jewelry artist I know. The ring therefore is a custom piece of art and I''m not sure how that will affect the appraisal for insurance purposes. What would be the best way for me to get an insurance appraisal on a custom piece? I live in the Boston area if that also helps. Thanks in advance. - Ben

 

[RockDoc]

Date: 8/11/2006 4:04:13 PM
Author: dawson37
This thread has been very helpful. I had a ring designed by a jewelry artist I know. The ring therefore is a custom piece of art and I'm not sure how that will affect the appraisal for insurance purposes. What would be the best way for me to get an insurance appraisal on a custom piece? I live in the Boston area if that also helps. Thanks in advance. - Ben

This is a bit more of a challenge for the professional appraiser than a typical mass produced item.

Just some of the considerations for valuing this article ( but not all ) are:


1. What kind of insurance policy type are you going to purchase. If it is a replacement policy the following are considerations.

A. Does the jewelry craftsman that made the item have Critical Acclaim in the market place?
B. Is the critical acclaim international, nationwide, or just locally?
C. Is the a one piece custom made item?
D. Is the jeweler who made the item, still producing it - or taking in the same type of work?
E. Would the jeweler agree to make another piece if in the future there is a loss?
F. If the item was cast, is there a mold for it, and if so who has possession of it?
G. What is the type of manufacture of the item?
H Would the jeweler sell this in the future for the same price? If there is a price change, why?

All of these issues at a MIMIMUM need to be written about in the appraisal, if it is for a replacement type policy.

For a stated value type policy..... probably a little less narrative would be required in the report, but the appraiser needs to do the required research of the above before he can make a value conclusion.

One cannot appraise something for insurance acquisition without knowing the type of policy and on what basis the claim will be settled. The practice of preparing a valuation report when the type of insurance coverage and the methodology of how the claim will be settled is not known is professionally negligent. Those appraisals done without the appraiser knowing how the claim will be settled are just totally useless.

Adding an amount because of funding "requirements" in anticipation of a price increase for a replacement policy is not a valuation I would recommend being disclosed as such. State the current replacement value for the appropriate market and if you ( as the appraiser or both in discussion with the client) don't feel the funding is adequate then state both the value and the extra amount separately accurately defining what the difference is and why it was applied.

This would save someone for being accused of crystal ball vision into the future type methodology.

However, if in a replacement policy, the insurer is going to be replacing an item at the insurance company's price, then probably both values should be noted in the report so the client and the insurer can decide which is more appropriate.


Rockdoc

 

[denverappraiser]

Date: 8/11/2006 4:04:13 PM
Author: dawson37
This thread has been very helpful. I had a ring designed by a jewelry artist I know. The ring therefore is a custom piece of art and I''m not sure how that will affect the appraisal for insurance purposes. What would be the best way for me to get an insurance appraisal on a custom piece? I live in the Boston area if that also helps. Thanks in advance. - Ben

Start by shopping for an appraiser who knows what they''re doing. That''s the home turf forJeff Averbrook (PS Username Modified Brilliant). He''s well qualified and should be able to help you out.

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

 

[oldminer]

The degree of thorough answers you have gotten here from the "qualified" is excellent advice for people. Appraisals for insurance are not forecasts of the future. When an appraisal clearly spells out the market that is the correct one for the item and the consumer, the appraiser will be on the right path. In markets like the Internet where mark-ups are quite low, an insurance appraisal based only on that market may well be a short term paper since prices can rise above replacement value on the report at any time. Since consumers are mostly unaware of price increases after their purchase, I rarely recommend use the minimal mark-ups of the internet for replacement appraisal work, but it is totally ethical to use any appropriate mark-up so long as it is proper and explained. Some clients want the lowest mark-up to save on premiums and when fully informed of the potential consequenses few end up wanting such a problem filled document.

This is a very short paragraph on what is a very long subject. It is missing a lot of the facts, many of which RockDoc and others here have begun to explain. No one is going to give all the details, but the logic of doing no harm to the client is clearly the most important issue. Trained appraisers help to protect consumers and as a by-product assist vendors in making sales at all market levels.