“What’s this worth?” is a question we hear all the time. So let’s take a look at value and the way it is determined.

The Traditional Definition of Value

Value is the price a willing seller and knowledgeable buyer can agree on.

What is a Willing Seller?

A “willing seller” implies a person free from duress. For example, if you need to sell something quickly to pay emergency medical bills, you would be under duress. In such circumstances, what you’re willing to sell for wouldn’t be a good indication of value.

What is a Willing Buyer?

A willing buyer implies a person that is under no pressure to buy, that sees value in the item being sold and is willing to negotiate with the seller on a price that is acceptable to both parties.

Five Types of Value Appraisals

For appraisals, we need more refined definitions of value. Many people assume that a gem appraisal sets a definitive price for an item. Actually, the price depends on the type of appraisal done and can consist of four different types of values.

  • Original Value

For example, say you’re the executor for an estate. It includes a 50-piece set of sterling silver dinnerware purchased in 1940 for $150. That figure is the original value, established at the time of sale.

  • Insurance or Replacement Value

Replacement value is the cost necessary to replace the appraised items. Replacements may encompass new items of the same kind and quality or similar items of the same kind, age, and quality. This definition takes into consideration wear and defects. This is the HIGHEST value that can be assigned to an item.

  • Fair Market Value or Estate Value

Fair market value falls somewhere between the simple definitions of original value and replacement value. For example, an original value of $150 for that set of dinnerware from a receipt from 1940 is no longer relevant. By the same token, a $5,000 replacement value for a set of used silver dinnerware is too high. The fair market value would be a realistic price at which you could sell the dinnerware set.

The fair market value definition modifies the traditional definition slightly. The price a willing seller and knowledgeable buyer are likely to agree upon in their local marketplace is the fair market value. For example, you may find similar dinnerware sets currently going for an average of $50 per piece. This helps establish a fair market value for the set at about $2,500. This value is approximately ½ of the Appraised Value or less, depending on how much the Willing Buyer is willing to pay for the item and how much the Willing Seller is willing to sell it for! Just because the market price has been “established”, doesn’t mean that the item MUST be sold for that amount. It is a guidline.

The best way for you to receive top dollar for your pre-owned jewelry item, is to SELL it to a Willing Buyer. This is often someone that you know, that may even want to help you out because they have a relationship with you, someone that LOVES the jewelry piece for what it is and how it looks. In cases like this when you have someone (often a relative or good friend) would LOVE to buy it from you, you can expect to sell it approximately ½ of what you paid for it. It is your responsibility to negotiate this transaction so that all parties are satisfied.

When appraising for fair market value, you would take into account a combination of factors, including:

  • Recent auction records.
  • Secondhand market information.
  • Relevant price guides.
  • Information from stores selling similar items.
  • Condition
  • Liquidation or Scrap Value

If you need to sell for quick cash, you need a liquidation or scrap value appraisal. For example, this is the value of that silver dinnerware set if sold quickly, without the time to research the best source or wait for an auction. This exemplifies selling under duress. (If a bankruptcy court forces someone to sell his or her goods, there may not even be a willing seller).

Under these circumstances, the appraiser multiplies the weight of the dinnerware times what a scrap dealer will pay for the silver.

  • Cash Value Insurance

In the event you have a piece of jewelry stolen and you’d prefer cash instead of a replacement, you’ll need cash value insurance. Insurance companies charge much higher rates for this. Therefore, it’s uncommon.

If you haven’t purchased cash value insurance and your insurer makes you a cash offer for a loss, it will be much less than the replacement value.

For further questions and appraisal inquiries please contact us.