THE APPRAISAL CORNER

FIVE RETAIL VALUES

compiled by Wolf Kuehn, Director, Canadian Institute of Gemmology

1. AVERAGE RETAIL VALUE
Should be used when an insurance appraisal is requested and appraiser did not originally sell and/or cannot replace the item. This value should represent the average price that the same or similar item would sell for in a wide range of businesses selling single items to consumers in the appraisers geographic area. In the event of a single gemstone or a parcel of gemstones, average retail value is the price readily available to the public consumer locally or nationally depending on the item and type of consumer distribution market. Generally based on replacement with new merchandise.

2. REPLACEMENT VALUE
The same as the average retail value except the appraiser who may be a jeweller, manufacturer, broker or wholesaler can, and will upon request, replace the item with like or identical merchandise. For a retail jeweller, this is probably the fairest and most accurate way to appraise, based on his selling price of like merchandise, in the case of older merchandise, out of style or antique jewellery, the appraisal should carry a disclaimer, prominently displayed near the valuation, that the value is for replacement of similar size, type and quality and not exact duplication.

3. FAIR MARKET VALUE (F.M.V.)
A widely accepted definition " the value of the property is the price at which such property would change willing seller, neither being under any compulsion to buy or sell, and both having reasonable knowledge of relevant facts. The value of a particular item of property is not the price that a forced sale price in a market other than that in which such item is most commonly sold from consumer to jeweller or consumer to consumer through auction or other public sale and that market is proven to be the most common market, even though it may be only a fraction of the retail market for similar new merchandise, the former would qualify as the fair market value. In the case of parcels of gemstones the only market other than wholesale is from wholesaler to consumer, financial planner to consumer, than that transaction, providing it meets the other criteria of F.M.V., becomes the fair market value, regardless if it is for charitable donation or estate tax settlement.

4. LIQUIDATION VALUE
Cash value, broker value and auction value. (like all appraisal services, this type or appraisal should not be offered without through and current understanding of the liquidity of various gems and jewellery.)
Cash Value liquidations represents the most timely liquidations, and generally realise the lowest net sale price to the client. Cash value liquidations represents the highest of at least three bids by professional dealers who regularly buy and sell similar gems or jewellery less a 10% broker's selling fee. Cash value liquidation may apply to any piece of fine jewellery or unmounted gemstone.
Auction value provides a general indication of an average of available net prices realised at the most approximate consignment period of two to four months prior to auction sale date, and signing a reserve sale price commitment, usually but not always equal to the approximate cash liquidation price. The reserve price is the lowest price the auction house can sell clients consigned gems or jewellery, less their 10% commission. The seller's commission paid to the auction house (10%) applies whether the sale is successful or not. Not all the pieces of jewellery or loose gemstones are suitable for auction. Auctions can be risky, as they can be highly successful or costly to the consignor in terms of time and commission on unsold pieces. Consultation is prudent on a piece by - piece basis. Represents a consignment of jewellery or gemstones for an uncertain period of time to facilitate a retail brokerage sale of jewellery or unmounted gemstones. The net value is generally higher than the net cash liquidation value. Sellers can arbitrarily and voluntarily consign gems and jewellery for any amount less than the wholesale value. Not all items of jewellery or unmounted gemstones are suitable for a consigned retail brokerage.

5. RETAIL MARK - UPS
Much has been said about retail mark-ups, but usually, only to defend high multiple appraisals. There is no set standard mark-up that everyone adheres to. As a matter of fact, quite the contrary would be more true. Mark-ups must be dealt with individually by appraiser and geographic area. If the appraiser thinks clearly a retail appraisal should model the average retail sales for the same item, in the same geographic area, i.e. metropolitan suburban (if applicable) or rural. One should also consider suggested retail selling prices are nice to know, but are more often than not, discounted (sometime heavily) primarily in the metropolitan markets which are obviously more competitive than rural markets.

First published in Spanish in ART & VALUE, international bulletin of the Asociacion Española de Tasadores de Alhajas (Spanish Jewellery Appraisers Association), July 1996

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