Retail and Estate Appraisals

ESTATE APPRAISALS:

It is typically done after death and executed by the trustee, for equitable distribution to the heirs. The property officially changes hands on the date of the owner's death. It might take months to sort it out, but legally that property belongs to the heirs at the moment of passing.

Estates are subject to federal tax. Estate appraisals are subject to IRS scrutiny and necessitate market research for significant jewelry pieces. These appraisals will document sales prices comparable from date of death. 

Appraisal criteria for estate jewelry have been legislated to include specific information and data. But they do not include the same criteria as an insurance replacement appraisal, therefore the estate appraisal usually has a lower value. 

Fair Market Value, as defined by the U.S. Treasury:

The market value is defined as the amount that an item would change hands for, in its current condition, in its most common market. Value is used for estate-evaluation purposes and is an assessment based on what a willing buyer and seller would agree to without a forced sale.

An estate jewelry appraisal values the items in their current condition and selling price in markets that typically would buy or sell that type of jewelry. Examples include, an estate antiques market, a liquidation market, a pawnshop market, auctions and others depending on the condition and quality of the gems and jewelry (it is most often a used item). Neither the buyer or seller are under pressure to buy or sell and both being aware of the relevant facts concerning the item.

This type of appraisal differs from a typical retail jewelry appraisal for insurance purposes, which gives values based on the brand-new replacement cost. 

INSURANCE REPLACEMENT APPRAISAL: 

Insurance Replacement Appraisal is the most important reason for having an appraisal done. It is for jewelry insurance replacement value in case of loss, breakage, theft or disappearance. An appraisal provides you with protection for proper reimbursement.

If you lose your jewelry, you have a document describing your item in exact and extensive detail, including stone measurements, clarity and color, quality and value of the item. With this information, you can get the original item replaced with a similar one for “like-kind and quality.”

Diamonds and gemstones of the same size can range drastically in value according to their specific qualities and characteristics. Therefore, you are protected and assured that the replacement is on par with the lost item.

Most jewelry insurance companies request an appraisal for items above a certain value, for their homeowner’s policy. The appraisal validates their existence and condition, and determines proper coverage and premiums for the policy.

As defined by the Appraisers Association of America, appraised “retail replacement value" is defined as the highest amount in terms of U.S. dollars that would be required to replace a property with another of similar age, quality, origin, appearance, provenance and condition within a reasonable length of time in an appropriate and relevant market. When applicable, sales and/or import tax, commissions and/or premiums are included in this amount.”

Due to these factors, retail pricing tends to be much higher than the other levels of the market. This can contribute to misleading expectations of profit in a planned future sale if retail replacement values are the assumed future sale price. 

Most people selling items on the secondary market who aren’t professional dealers or without access to the assistance of professional dealers will find it difficult to obtain retail prices in a sale. They can more realistically expect future sale prices to be closer to the Fair Market Value and Liquidation Value levels of the market. 

Part of the reason retail prices are so much higher than the other levels of the market is that they reflect the overhead and carrying costs of the gallery or dealer maintaining the instant availability of the item. 

I hope this helps you understand the differences.