As a GIA Graduate Gemologist and Registered Master Valuer, I get the opportunity to see a variety of jewellery items. Many of these items come with appraisal questions such as “what is it worth?”, “where can I sell it?”, or “is this real?”? I am sure that at some point you have asked yourself at least one of these questions.
Today, online forums and communities are overflowing with pictures, questions, and items for sale. A simple post can receive several responses within minutes. For people not in the jewellery industry, finding answers to these questions can seem daunting. I compare it to how I feel when I go to the mechanic. All of the options are overwhelming when you don’t have knowledge or experience in that particular field.
In this three-part article, I am going to provide answers to these common jewellery appraisal questions.
Part 1:
So, what it’s worth?
This seemingly straightforward question is actually one of the most challenging to answer. Why? Because there are several answers and technically all of them can be correct. Let me explain.
When starting a jewellery appraisal assignment, the first thing the appraiser does is establish the function of the appraisal. In other words, why do you need the appraisal (to obtain insurance, to settle an estate, etc.)? The reason why you need the appraisal (the function) serves the purpose. The purpose determines what value method will be used (replacement value new, fair market value, etc.) in the valuation process. Without understanding why a client needs an appraisal, an appraiser cannot possibly determine the appropriate value.
I bet you are asking yourself now “well, what difference does the value method make?”. Let’s try and answer this question by examining a classic solitaire engagement ring.
For example, let’s assume this platinum four-claw ring is set with a 1.29 carat diamond. The diamond is H colour, VVS1 clarity (very very slightly included one), and has an excellent cut.
Now let’s look at the numbers
Appraisal Function: Insurance Appraisal Purpose: Replacement Value, New
Appraised Value: $27,400.00 CAD
Appraisal Function: Estate Appraisal Purpose: Fair Market Value
Appraised Value: $17,000.00 CAD
As you can see there is a significant difference between the stated values. The appraised value for insurance purposes represents the cost to replace the item with a new comparable item. Appraisers determine the value by using the cost method or market data sales method.
The cost method breaks down the item into its parts (metal, stones, etc.) and then calculates the cost to reproduce the item taking into account labour costs and retail markups. This is the most common method employed by appraisers.
The market data sales method uses recent sales of comparable new items in the appropriate market to determine the value. This method is more accurate and must be used when appraising antique jewellery (even the best jewellers can’t recreate an item’s 100+ year old heritage in the workshop).
“Fair market value is normally the highest price, expressed in dollars, that property would bring in an open and unrestricted market, between a willing buyer and a willing seller who are both knowledgeable, informed and prudent, and who are acting independently of each other.
-Fair Market Value Definition, www.canada.ca
The appraised value for estate purposes represents the fair market value of the item in its current state (ex. second hand). Appraisers use recent sales data of similar used items in the appropriate market to determine the value. Even if the item was never worn, it is still considered second hand.
The same item being appraised for liquidation or bankruptcy would likely have an even lower value due to the time sensitive nature of the sale. The immediate need to liquify assets increases the pressure to sell. This forces the seller to entertain lower offers than it would if there was no need to sell.
For many, there may be a sentimental value attached to the item as well. Although the item may be priceless to you because of where you got it or who gave it to you, the appraiser (and buyer) will not share the same sentiment. The value of the item is based solely on the parts that make it up (unless the item has a well documented and significant provenance).
To answer the original appraisal question, “what is it worth?”, there is no simple one size fits all answer to the question of value. The purpose and function of the appraisal will dictate what type of value the appraiser will research. The item’s quality and condition will also directly influence the appraised value.
The next time you ask the question “what is this worth?”, do everyone a favour and make sure you know why you need the value information. Once you know your “why”, your local jewellery appraiser can help you determine “how much”. If you have questions about your jewellery, please contact AC Appraisals at info@acgemlab.ca.
Next week’s question, “where can I sell it?”.
Written By: Alanna Campbell, March 7, 2021
Opinions and experiences are my own.