There are several types of valuation which may be given for an antique or a piece of precious jewellery.
A valuation is more than assessing the monetary value of an item. It covers describing an item, appraising it and assigning a monetary value. It is only possible to arrive at a monetary value when you have considered the other factors of the valuation.
A professional valuation will have all the aspects given in writing and will include : the date, the name & address of the business carrying out the valuation, the purpose of the valuation (see below) , the description, the appraisal, the monetary value and the valuers signature
The description covers the physical properties of an item eg Its size and weight, what materials it is made of and any manufacturers or hallmarks.
The appraisal covers less tangible factors such as rarity, and quality. Condition will also be taken into account.
There are several types of valuation. The description and appraisal remain the same for all types; it is the monetary value which changes according to the type of valuation. The type of valuation given will depend on the purpose the valuation is required for.
The types of valuation are:
1. Insurance replacement
This is the most common type of valuation undertaken by Cecilia Vintage Jewellers. It is required by insurance companies if an item has been lost, stolen or damaged and the customer is making an insurance claim. An insurance replacement valuation may also be required by insurance companies before they will cover a high value item. The monetary value assigned in this type of valuation is based on the current retail price charge by a jeweller including VAT. This will usually either be a NRV (New Replacement Value) usually used for items under 50years old or SHRV (Second Hand replacement Value) for items between 50 and 100 years old or ARV (Antique Replacement value) for items over 100 years old.
If an item is relatively rare and not likely to be available from an antique dealer, auction house or jeweller, the monetary value can be based on the cost of re-creating the item. This is known as the Facsimile Value or FV
2. Private Sale
This is the amount a customer will receive if they wish to sell the item to another private person. This value would be somewhere between the price a jeweller would pay for it and what they would sell it for – this value would benefit both the buyer and seller in a private trade.
Value for Probate is known as ‘Confirmation of Will’ in Scotland. It is the monetary value assigned to deceased persons items. This is the value the item is likely to fetch if offered on the open market on the date of the persons death. Frequently this will be the price it would fetch at auction and this is consequently lower than the insurance valuation.
4. Loan Security
The value that a Pawnbroker or other institution would put on an item offered as security against a loan. The level fixed would not be higher than the probate valuation.
5. Capital Gains Tax
Capital Gains tax is payable on the sale of certain assets when you gain more money for the item than was paid for it. For example you buy a piece of jewellery for £8000 and sell it 5 years later for £11,000 then there is a Capital Gain of £3,000.
Capital Gains tax is only payable on items of Jewellery individually valued at £6000 or more and an individual can currently make £8800 in capital gains per annum before the tax is payable.
The value would be based on a balance between current auction prices and current retail price
6. Family Division & Divorce
This is where assets need to be valued when an estate is split under divorce proceedings. The monetary value is similar to the value assigned at Probate.
People often wonder why do the amounts given in a probate valuation differ so much from those given for the same item on an Insurance valuation?
A Probate valuation is based on the figure that an item is likely to achieve at auction. The Insurance valuation is usually based on the retail price.
The price a piece of achieves at auction is usually less than the retail price especially as antiques are frequently purchased by dealers for resale.
– If a piece of Jewellery achieved £100 at auction the purchaser will pay a % on top of the price to the auctioneer. This % varies between 10 and 25 % depending on the auction house. The total paid eg auction price plus the commission is the amount the purchaser pays
– Items sold at auction is frequently sold to dealers who wish to sell on the item for a profit. In order to achieve a profit they will need for the hammer price plus the commission to be well below the retail price. The dealer will base the price paid he is willing to pay for the item at auction at the price he reasonably expect to sell the item for minus the cost paid for the item and also minus the cost of bringing that item to sale. Costs of bringing the item to sale will include repair and cleaning costs for the item and also sum towards the overheads of running the business
– A dealer turning over more than £67,000 a year needs to include VAT in the price of an item.
So lets assume that a jeweller buys a diamond ring for £100 at an auction where they pay 15% commission. The Jewellery hands over £115 and takes the ring back to his shop where a tiny repair is carried out to one of the claws to ensure the diamond is held firmly and the ring is cleaned so that it looks its best in the window. Including the time spent on the cleaning and repair the Jeweller had now invested £150 in the ring. He normally works on a 25% profit margin and so needs to re-coup £180. In order to recoup £180, the jeweller must add tax on taking the price to £206.80. A likely retail price will be at least £210 (or more if the jeweller believes that the ring is worth more).
I hope this little guide helps – please keep checking back for more.