On the level

Over the years, the appraisal profession has evolved. There are many levels of appraising and each requires increased expertise and education.

Level 1: Appraisals for insurance coverage

Private individuals purchasing insurance coverage for their jewellery require an appraisal report for replacement value, and many appraisers make a living from this type of report writing. This service encompasses ‘replacement value new,’ ‘comparable’ or ‘reproduction.’ Appraisal reports of this kind provide a detailed description of the item’s value elements (e.g. diamonds, gemstones, branding) and its condition. It also includes a description of the market where the piece is commonly bought and sold.

These appraisals provide researched, real-world prices at which the jewellery can easily be replaced, unlike ‘vanity appraisals’ where value is overly inflated. The client’s insurance company uses the report to decide whether they will provide coverage and the value it includes plays a large role in setting the insurance premium. When the client suffers a loss, the same report is subject to even more scrutiny to replace the item or for settlement purposes.

Level 2: Appraisals for resale

Used by private individuals, financial institutions, trusts, and estates, appraisals for resale require advanced education and specialized training in market analysis and report writing. Once you understand how your report is being used, you will then choose the type of value to research. For example, a client wishing to consign her pieces to a jewellery store requires a different type of value to one using his jewellery as collateral for a loan. These value types include ‘market value,’ ‘marketable cash value,’ ‘orderly liquidation,’ and ‘forced liquidation.’

Level 3: Appraisals for government

If you choose to perform this type of appraisal service, you will need an understanding of government requirements and their definitions of value. These appraisals are used by trusts and estates for estate tax filing and also by individuals making a tax deduction for donating jewellery to a charity. Determining fair market value is often required and the definition of this value is provided by the federal government. There is increased liability to the appraiser for this type of service. As such, do not attempt to provide it without direct knowledge of comparable market values.

Level 4: Appraisals for litigation

Experienced appraisers are sometimes asked to serve as an expert witness for litigation. This can involve appraisal report writing, appraisal reviews, pre-trial consultation for attorneys, and court testimony. Needless to say, there is increased liability with this type of appraisal work, but also increased rewards. Once again, advanced education is required.