Definition of an appraisal:
An appraisal is an opinion of value for a particular market on a particular date. It is usually in document format, describing all qualitative and quantitative attributes necessary to arrive at the value conclusion.
1. What are the qualifications of the appraiser?
An appraiser is a skilled professional with expertise in both the subject matter being appraised as well as thorough training in valuation science, and experience with the market place for the item in question. It is important to understand that the designation “Graduate Gemologist (GIA)” does not indicate appraisal training or ability. GIA (Gemological Institute of America) provides training in gem identification, diamond grading and colored gemstone grading of loose gemstones. GIA does not offer training in appraisal methodology, market research, ethics, the Uniform Standards of Professional Appraisal Practice (USPAP) compliance or report writing. Only specific appraisal organization designations can provide any assurance of the appraiser’s qualifications.
2. Is the appraisal USPAP compliant?
USPAP (Uniform Standards of Professional Appraisal Practice) is a set of standards that were created in response to the Savings & Loan crash of the early 1980’s and particularly to prevent potential appraisal abuse in future real estate transactions. The standards were expanded to include personal property appraisal practices. In any litigation situation, a USPAP compliant appraisal assures the user their appraisal is performed to the current state of the art. It is one measure of the level of professionalism to which the appraiser subscribes.
3. Is the appraised value based on market research or is it simply a re-statement of the purchase price?
An appraisal is a statement of value, or the mean worth of an item in a particular marketplace. The “Price” is merely a statement of what an item cost, and it may not reflect the true value of the item. The appraisal should specify how the values were determined and if they are based on market research, the specific market should be stated. If the value is based only on the selling price of the vendor, it is not actually an appraisal and it may not meet the requirements of your policy.
4. If your insurance contract (policy) uses the specific wording that an “appraised value” or an “appraisal” must be provided to bind coverage; then the document you provide must meet that standard.
An “Estimate to Replace” or an “Insurance Document” is not the same as an appraisal, though it may be accepted by the insurance agent. However, in the case of a large claim, it may be rejected by the Insurance Company for not meeting the minimum standard requirement. Check with your insurance company underwriter before submitting this type of document instead of a competently written appraisal.
5. Is the description adequate to provide a stranger with enough information to re-create the item?
If there are photographs, are they accurate and detailed? Remember, this document is all the Insurance Company has to go by in case you file a claim; and it’s all you have to prove what you’ve lost. The more detail, which is normally included in your professional appraisal, the safer you are in the event of a loss.
6. Does the description contain references to acknowledged quality standards?
If the GIA color grading system is used, does the appraiser have master color grading diamonds as comparisons? What color description system is used for colored gems? In other words, be sure the quality grades and descriptions are up to the current standards, are repeatable, and accessible to third parties that may need to replace the gemstone or diamond.
7. Is the value accurate and current?
A properly prepared appraisal will reflect an accurate value in the current market. The price paid is not always the value. You may have purchased an item which was legitimately “on-sale” price, in which case your appraisal could realistically be higher than the sale price. Be wary when a jeweler gives you an appraisal for a higher price than what you paid, unless they state a legitimate reason for the difference in the appraisal. Remember, an appraisal, by definition, is based on researched values within a specific market.
8. Has it been more that 3 years since the values were updated?
Many insurance companies recommend a yearly update of values, and some require it. Most insurance policies do not include automatic increases to account for inflation and increases in the costs of materials and labor, and those that do, don’t accurately track and apply those years’ fluctuations in the market. Thus, your premium may continue to go up, even if the market is going down. It is best to update your appraisal on a regular basis. Your appraiser will often give you a discount, as they will not have to regrade your jewelry unless it has been altered or damaged.
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