All About Appraisals
Understanding Value, Purpose, and Pricing
Two of the biggest misconceptions we see clients face revolve around the word “appraisal.” The first is confusing a financial valuation with an independent diamond grading report, which can often be a costly mistake.
The second misconception is believing an appraisal is a single document that establishes one permanent, universal value. In reality, the monetary value of a piece of jewelry changes dramatically depending on why it is being appraised. An appraisal is a legal document that assigns a value based on a specific set of market conditions. Before you even begin the process, you must first answer one critical question:
"What do you need the appraisal for?"
Here are the three distinct types of jewelry appraisals and how they are used:
Retail Replacement Value (Insurance Appraisal)
- The Purpose: This is the most common type of appraisal. It is used exclusively to obtain insurance coverage in case your jewelry is lost, stolen, or catastrophically damaged.
- The Value: This number represents the absolute highest valuation. It calculates exactly how much it would cost to completely remake or repurchase the item brand new, at current retail material and labor prices, in today's market.
- The Reality: You cannot sell your jewelry for this amount. This number exists solely to protect you against the cost of a modern-day retail replacement.
Fair Market Value (Estate, Divorce, or Resale)
- The Purpose: This appraisal is used for legal matters such as estate tax calculations, dividing assets in a divorce, or establishing a fair asking price to sell the piece to another private individual.
- The Value: This number represents what a willing buyer and a willing seller would agree upon in the current market for a used piece of jewelry.
- The Reality: This valuation will be significantly lower than a Retail Replacement appraisal because it accounts for wear and tear, and removes the retail markup and manufacturing labor costs.
Liquidation Value (Immediate Cash Value)
- The Purpose: This valuation is used when you need to sell a piece of jewelry immediately (for example, to a pawn shop, a gold buyer, or a liquidator).
- The Value: This is the absolute lowest valuation. It disregards the design, history, or retail brand of the piece and calculates strictly the raw "scrap" value of the precious metals and the wholesale liquid value of the gemstones.
Our Appraisal Policy at Joel McFadden Designs
Our Holly Springs, NC. studio is primarily focused on the master-level craftsmanship of custom jewelry. Because appraisals require entirely different, dedicated market research, we do not operate as a general appraisal service for the public.
- We ONLY appraise jewelry that we have custom-made in our studio. Because we engineered the piece, we know exactly what materials, time, and labor went into its creation.
- We ONLY provide Retail Replacement (Insurance) Appraisals. These are provided for our custom clients so they can properly insure their new JMD piece.