RAPAPORT... Exactly what is the appraiser’s job? How do they make a judgment? To find out, we consulted with a group of experts, all gemologists and experienced appraisers who have been trained and accredited by major appraisal organizations, including the Appraisers Association of America (AAA), American Society of Appraisers (ASA), National Association of Jewelry Appraisers (NAJA) and Accredited Gemologists Association (AGA).
“The first thing an appraiser must do is identify what he’s looking at,” says Nancy Stacy, Jewels by Stacy Appraisals, Walnut Creek, California. And that means having expertise in the kind of jewelry being appraised and having the necessary equipment. The next step is assessing its value. “And unlike real estate,” Stacy continues, “personal property has many values, depending upon the market and the situation and the condition and so forth. An appraiser not only needs to know the purpose of the appraisal, but also have the expertise to match it with the appropriate definition of value.”
“An appraisal is an informed opinion of value,” agrees Charles Carmona, Guild Laboratories, Los Angeles, California. Moreover, says Joseph Tenhagen of the Miami-based firm bearing his name, the client needs to be assured that the appraiser is objective and unbiased.
THE PROCESS
Part of an appraisal is an assessment of the components of the piece. “You have to test and weigh the metal, and then there are the stones that are set in it,” says Carmona. “And you have to estimate the weight of the gems and estimate the quality, especially if they are buried deep in a piece of jewelry and you can’t tell the color of a diamond. There’s definitely art involved, as well as science.”
“The most important thing I’ve always stressed, and what I was taught,” says Rick Goodden, Goodden Jewelers, Inc. Kansas City, Missouri, “is to provide good details on the actual description of the piece — weight, color, clarity and all that. And then do the research on the Fair Market Value.”
The veracity of the document you produce is the important thing, concurs Alan Chappron, Seattle-based Gemological Consulting Servies. “You try to make it as accurate as possible given the equipment you have.”
PUTTING IT IN WRITING“Most of us use the standard Gemological Institute of America (GIA) terminology and follow that for the color and clarity,” says Tenhagen. “And then we also use proportions, and again GIA, American Gemological Laboratories (AGL), European Gemological Laboratories (EGL) all have their scales, and the International Gemological Institute (IGI) has one. You use whichever you feel is most appropriate.” It’s the 4Cs plus the other ‘C’ — how well it’s cut, as well as the optical symmetry and optical brilliance, he points out.
“A report is going to say what kind of metal it is, what the trademark on it is, what it weighs, the dimensions of all the stones,” adds Shane Denney, Denney’s Jewelers, Springfield, Illinois, “and the method of construction, if you know something about it.” In short, sums up Carmona, the report “has to have a sufficient description to justify the value. And to me, a good close-up photograph is the most important thing to illustrate the piece, in combination with a sufficient description.”
Basically, says Stacy, there needs to be enough descriptive information to identify the value characteristics of the item and to document what contributes or subtracts from its value.
If a jeweler is doing an appraisal on something he sold, adds Stacy, he needs to give the best description he can of its value characteristics so somebody would be able to replace the piece at a later date. “And if you sold it for a certain price, there’s really no reason to appraise it for a different price. If you feel you couldn’t replace it at the same price, then you need to explain why there is a difference between the selling price and the appraised value. And you should disclose that you sold it for x amount — that’s a material fact.”
TYPES OF APPRAISALS“Most of what we see day to day,” says Denney, “is someone has an engagement ring and needs to insure it.” And then, explains Tenhagen, “if a couple is getting a divorce, you’re going to do a Fair Market Value Appraisal for dissolution of marriage. If it’s an estate and someone dies and the jewelry is left to the heirs and they’re going to divide it and sell it, then you do a Fair Market Value for the IRS or for the estate’s value of the things. Or you might do an immediate Cash Liquidation Value if someone wants to convert that stone into cash.” If it’s for tax purposes, adds Carmona, “there is a whole different set of rules that the IRS sets up that you have to follow as far as valuing it in the second-hand jewelry market and not as new jewelry.”
If there are no tax consequences, explains Stacy, then the estate has a choice. “It can use the Fair Market Value, which is what the government requires for its appraisals, or the Market Value or Marketable Cash Value. There are also trusts for estate planning and conservatorships, where people are disabled or incompetent or too old to look after themselves.”
“And right now,” says Stacy, “I am getting a lot of people coming in to find out what they can sell their jewelry for. Again, that would be either Market Value or Marketable Cash Value. There is very little difference between the two; it’s basically just the fees involved. The Market Value would be what somebody pays and the Marketable Cash Value would be what the seller nets, after selling expensives. Fees can vary from 8 percent on eBay to 40 percent on consignment and, depending upon how big the estate is, up to 40 or 45 percent at auction.”
People are also asking for appraisals for items purchased on the internet, says Stacy. “All of the reputable online vendors are very cooperative about outside appraisals and encourage them.”
Glossary of TermsAAA: Appraisers Association of America
AGA: Accredited Gemologists Association
ASA: Accredited Senior Appraiser
ASA: American Society of Appraisers
CGA: Certified Gemologist Appraiser
CMA: Certified Master Appraiser
FGA: Fellow of the Gemmological Association of Great Britain
FGAA: Fellow of the Gemmological Association Australia
FMV: Fair Market Value, according to the federal
government, is the price at which the property
would change hands between a willing buyer and
a willing seller, neither being under any compulsion
to buy or sell and both having reasonable knowledge
of relevant facts.
GG: Graduate Gemologist
ISA: International Society of Appraisers
NAJA: National Association of Jewelry Appraisers
RJ: Registered Jeweler
Updating an AppraisalIt used to be, points out Miami, Florida, appraiser Joseph Tenhagen, “that we considered having a piece reappraised every three years reasonable, but you might have to get it done a whole lot sooner if gold goes up significantly or diamonds take a jump or the market is in a spiral. It’s no good to have an appraisal from three years ago when gold was $700 an ounce, or $650, if gold is now $900 something or the price of the diamond is 20 percent higher. Then people end up losing money and they get very upset. But it’s the owners’ responsibility to request an update.”
Anytime the value changes is time for a new appraisal, agrees West Coast appraiser Nancy Stacy, Jewels by Stacy Appraisals. “An appraisal is only good for one day at a time. It’s like a balance sheet — it’s a snapshot in time. You don’t know what something will be worth tomorrow. An appraiser can only tell you what something’s worth now or what it was worth previously at some specified date. But these days, with the value of the dollar still dropping and times being unstable, people need to at least call their appraiser and see if the values are still adequate in terms of insurance appraisals.”
Article from the Rapaport Magazine - June 2008. To subscribe click here.