What is it "Worth"?

In order to determine an item’s value, we must understand the intended use of the appraisal.  Will the item be insured?  Sold?  Is it part of an estate?  If so, is the concern equitable distribution or tax settlement?  Is it part of a divorce?  Will it be donated to a museum? Is it part of a bankruptcy or litigation?  The same item can have many different values depending upon what the client is going to do with it.  Therefore, what the item is “worth” is different in different markets, as related to different uses.

For example, items are insured against loss or damage.  If you lose your engagement ring, the value listed on your insurance policy will, in most cases, represent the cost for you to walk into a local jeweler and buy a new ring with the same characteristics (style of ring, type of metal, quality of diamond) as the lost item, known as “retail replacement value.”  However, if you are planning to sell the item – either through an auction, to another consumer, to an estate dealer – you are selling a used item.  Much like a car, the ring doesn’t have the same value after it has been “driven off the lot.”

Estate dealers, a common choice for selling jewelry, are part of the jewelry trade.  They have accounts and relationships with diamond dealers and jewelry manufacturers, and can purchase goods at wholesale prices whenever they wish.  Therefore, the offer they make on any diamond or modern jewelry item will almost always be below its wholesale value.

Many factors go into an offer to buy: Can the dealer resell the item as it is?  Is the style too dated? Does it need repair?  Will it the diamond be reset into something else and the gold melted down for its scrap value?  Estate Dealer #1 may have the perfect customer who will love your diamond ring, just as it is.  Estate Dealer #2 may not sell many diamonds that large, and may be concerned that she won’t be able to sell it for a long time.  Perhaps they both already have too much inventory and aren’t interested in buying engagement rings right now.  Each dealer will, therefore, offer you a different amount because the ring is “worth” different amounts to each of them.

In the vast majority of cases, when you are selling an item to someone in the jewelry trade, you do not need an independent, written appraisal.  Buyers will make their own determination about the item’s characteristics and its value to them.  Therefore, what the item is “worth” is different in different markets, to different buyers.

Appraisals for most other uses, such as estate settlement, divorce, and donation, utilize either “fair market value,” defined as the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts, or “marketable cash value,” defined as the amount of money netted upon orderly sale, within the most lucrative marketplace.  Liquidation value (either orderly or forced) may be used when property must be sold immediately or within a particular timeframe.

The intended use of an appraisal dictates the scope of work, including the correct value definition, which the appraiser must develop in order to then research the appropriate market.  It is important that the client clearly communicate the intended use prior to the appointment, as the final report will only be valid for that particular use.