What Is Jewelry Appraisal & What Is It For? (Explained by Licensed Appraiser)

As a jeweler, I am often asked these questions: “How much can I sell my jewelry for?” “I was offered this set of jewelry; can you check the price for me?” “Can you check if these jewelry items I’m thinking of purchasing are legit?” These are typical questions that I hope to shed light on as a licensed jewelry appraiser.🎓

What does a jewelry appraiser do, and what cases require a jewelry appraisal?

What is appraising?

Jewelry Appraiser Inspecting Jewelry With a Loupe

Black’s Law Dictionary defines appraising as the process of evaluating something to determine its potential value. It’s the valuation or estimation of the value of a property by a disinterested third party.

👉🏻A jewelry appraiser has to possess the technical skills and knowledge to aptly identify, grade, and assess the condition of the item for appraisal based on industry standards of grading a diamond and other precious stones. After the appraiser is able to expertly assess the item, they must have an intimate knowledge of the industry and the market for them to put a price on the appraised item. They determine the value based on how much the market is willing to pay at that specific moment, while maintaining the objectivity of someone who is not interested in the item being appraised.

Let’s put this in jewelry speak: The customer has a diamond ring, and he wants to know its value because he intends to sell the item. The diamond has no certificate or any written document specifying the quality of the diamond. The jeweler, therefore, must accurately and scientifically give their opinion on the 4Cs of the diamond (referring to cut, color, clarity, and carat). The jeweler must also have the expertise—supported by training, education, and experience—to be able to assess the 4Cs. In this instance, the jeweler acts as a gemologist, a specialist on gems or someone who can confidently grade the diamond as per industry standards.

One way to check if you are dealing with an expert is to ask for their credentials, including where they graduated from, like the Gemological Institute of America (GIA).

Typically, a jeweler who has been in the industry for years, also manufactures jewelry. They know the direct and indirect costs associated with making the same diamond ring and know how much they can sell the same ring based on prevailing market conditions. Because of this knowledge and experience, they can properly and correctly advise the customer how much the diamond ring can be sold. This is the jeweler acting as a jewelry appraiser; someone who is extremely knowledgeable about the jewelry industry and the factors affecting it.🕵🏻

What are the valuation methods of jewelry appraisals?

There are two major valuation methods used in jewelry appraisals, which I will discuss in the succeeding paragraphs. 💡A licensed appraiser knows and should always determine the purpose of the appraisal because the valuation method depends entirely on this.

Cost Approach Method

The example I narrated above is an example of the cost approach method. How much will it take for me to make the same diamond ring with the same design and with the same stone quality? What is the spot price of gold? What are my manufacturing costs? This approach is always used when you want to:

  • Insure your jewelry 
  • Figure out how much an exact replica or comparable jewelry would cost to manufacture or reproduce

Now, let’s take the same customer with the same diamond ring. The customer decided to just pass on the diamond ring to his children. What will now be the ring's value since the purpose of the client on the ring has changed? The diamond ring will now become part of the estate.

Market Data Approach

The market data approach or fair market value method is usually utilized. This method considers how much the market is willing to pay for a particular property or item at the time of the sale; at what price will the item exchange hands between a willing buyer and a willing seller neither of whom is in any duress. 

At what price is John willing to buy the jewelry being sold by James without either of them feeling pressured to do so at this very moment? 👩🏻‍🏫This approach entails exhaustive and intensive analysis, research, and knowledge about the industry and the factors that influence the buying and selling behavior of the market. The values are mere educated estimates based on the present condition of the jewelry item. This approach is best for cases when you want to:

  • Donate or gift your jewelry 
  • File for a loss
  • Prepare for estate planning  
Market Data Approach for Jewelry Appraisal

For example, how would a parent ensure that if they give their son property worth $1,000,000, the corresponding jewelry they will give to their daughter will be equal to that amount? Note the word equal; the real property they’re to give their son must be equal in value to the jewelry they give their daughter. The process of deriving and determining that figure must be the same for there to be an equitable distribution of the inheritance.

It is the same concept when you are applying for a housing loan or selling a house. The bank will send their appraiser to assess the condition of your house. After thoroughly inspecting your property, the bank will get back to you regarding the loanable value of your property. The cost approach method is employed by the bank to come up with the loanable value.

Taking the same house with the intention to sell it this time, you would typically hire a real estate broker or research online how much a house like yours would sell based on location, similarities of your house with other properties that have been sold, and the like. You are employing the market data approach to come up with a value for your property.

Reporting and writing standards: Why does it matter?

But it doesn’t just end there.

The jewelry appraiser must write a report on their assessment. The written report must conform to the writing standards set forth by the Uniform Standards of Professional Appraisal Practice (USPAP) for the diamond ring to be deemed properly appraised. The purpose of USPAP is to promote and maintain a high level of public trust in the appraisal practice by establishing requirements for appraisers.

If the customer wishes to ensure their diamond ring, the insurance company will require an independent appraiser report which will become the basis of the insurance policy. In the same way, an estate lawyer will base their computation on the estate tax according to the appraiser’s report on the estate value of the diamond ring.

Simply put, a proper and correctly written appraisal report will be part of the legal basis when applying for insurance for your jewelry item or when your lawyers or financial advisors plan for your estate.

Aside from the valuation method employed, one very important aspect of jewelry appraising must be observed: impartiality.

⚠️The appraiser must NEVER advocate for the client. There should be no emotional attachment tied to the item being appraised, more so to the person who requested the appraisal. In fact, these relationships must be disclosed in the appraisal report. The appraiser must even divulge if they have a vested interest in the item being appraised. In certain circumstances, they are even expected to refuse the jobs. Objectivity is of utmost importance.

Even how the jewelry was appraised is indicated in the report. Were the stones measured in their loose state or were they already mounted or fashioned in the jewelry? What were the lighting conditions when you did the assessment? Did you physically go to the client or was the jewelry brought to you? Even the tools you used to appraise the jewelry are indicated. When coming up with the value, did you consider the economic conditions?

Buyer Choosing Jewelry at Store

Conclusion

To sum it all up, a jewelry appraiser provides an estimated value of a jewelry item that can be bought or insured based on how the market is trading such an item. They prepare the jewelry appraisal, which is a factual written report that supports the interests of both the client and third party who will be included in the transaction at some point in time.

An appraisal is usually requested for insurance and estate planning purposes hence, especially when dealing with the aforementioned cases, working with a licensed jewelry appraiser is highly recommended.

About the Author
Willyn Villarica
Willyn Villarica is a 3rd-generation jeweler from the Philippines. She is a licensed Graduate Gemologist from the prestigious Gemological Institute of America (GIA) and the first Filipino Candidate Member of the National Association of Jewelry Appraisers (NAJA). She loves to travel, listen to classical music, and watch movies.
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