What’s It Worth? The Thing About Appraisals: It’s Complicated

Often, when asked to appraise an item of value, visitors in our stores or offices seem a bit befuddled and sometimes even annoyed at our resulting follow-up questions. When we ask “What kind of appraisal value?” we always explain that the conventional definitions of appraisal often differ from the official meanings of the word. Here I will share a condensed version of the various definitions and uses of the word.

1. Retail Appraisal This one is tricky, since many retailers utilize a huge markup in their stores while others have a much smaller markup. Additionally, smaller inexpensive items will often – even in the finest stores in the land – have a markup of 200 to 300 percent, while more-expensive items, such as $100,000 diamonds or gem-quality emeralds, typically have a much smaller percentage markup. The ring pictured here, an E Color (EX/EX/EX), internally flawless 1.17ct in a simple mounting, may retail appraise (depending on the store) for $12,000-$15,000.
2. Insurance Appraisal Also tricky, as many insurers (and many states) have different rules. But for the sake of argument and simplicity, let’s say retail and insurance values tend to be similar.
3. Wholesale Value It is important to note that some jewelers have not paid for their goods. This type of sourcing is called “memo,” and jewelers who stock their stores with memo goods often pay a higher price for the luxury of not paying for it in cash. Wise jewelers who are not undercapitalized own their goods, and their resulting cost is much less. The same ring could be purchased at the wholesale level for $10,000-$25,000, depending on method of purchase.
4. Fair Market Value This is generally defined as willing seller + willing buyer, with neither being in distress or under financial constraints. This is a value you might achieve if selling to professional buyers/dealers. The ring pictured might bring $7,000-$10,000, depending on the dealer’s needs at the time.
5. Liquidation Value This typically means that the seller is under financial or time constraints and must sell quickly. In this case, if the seller is not careful and does not shop around, or if the ring pictured is offered to a jeweler who has no real need for it, it may only bring $5,000-$7,000. The bottom line is to take a careful approach when getting something appraised. Understand the definitions of the word and know exactly what you want.

Comments, questions or suggestions for this column, please send to jeffreyphess@aol.com.

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