[Author’s note: Personal property appraising is still a young profession, with the first comprehensive education programs offered in 1982. As with any profession, there will be differences of opinion on the application of principles to particular problems. JCK readers may submit their views through letters to the editor or contact the author directly.]

Jewelry was stolen from my customer last week. She has a “cash value” insurance policy and needs an appraisal of the items for their value at the time of loss. I had sold her some of the items, but for others she only has an old appraisal with rather brief descriptions and photographs. Can I write a “hypothetical appraisal” on the items that I did not sell her based only on her photographs and the prior appraisals? Are there any related considerations for the items that I originally sold her?

Appraisals of lost or stolen items are fairly routine. The process is basically the same for items physically in hand as it is for those described or pictured on paper. The fact that you cannot physically examine the items should not hinder your ability to appraise them and offer an opinion of the dollar amount based on a hypothetical description.

The client, in this case, is lucky to have photos. Often, you have only terse written descriptions, or worse, the client’s memory.

This also speaks to the second question regarding items you did sell to your client which were part of the loss. A cash value policy limits the insurer’s liability to the value of the actual item at the time of loss, in its quality and condition at that time. The appraisal must be based on information provided by the client, and on the disclosed critical assumption that those facts are accurate.

Appraising IS hypothetical: It is ironic that appraisers often panic when faced with this kind of situation and worry over how to handle it.

We usually write appraisals based on a number of such hypothetical facts that are assumed but not necessarily evident. Whenever we appraise finished, mounted gemstone jewelry, we must base our conclusions as to worth on educated, critical assumptions about quality and even identity. This applies not just to the gemstones but also to metal content and elements of construction.

The same holds true for items such as name-brand watches which we can not always take apart to appraise. We should not open watches when not properly equipped to do so or where the act could result in voiding the client’s warranty. Yet, we can appraise the watch, based on certain assumptions.

Appraisers of realty and of various specialty items face this all the time. It’s not a problem if we understand that appraisers are not necessarily identifiers. Just as real estate appraisers can do their job without disassembling a house, we as appraisers of jewelry can estimate an item’s value without damaging or disassembling a client’s property.

We often need to proceed with an appraisal where identification procedures are not possible or within the scope of the assignment, or where grading ability is severely limited. We approach the task based on the “readily apparent identity” of the item or of some of its component parts.

Our job is to provide an estimate of monetary worth given the description of the item and its apparent quality and condition. Depending on the client’s wishes and intended use (“function”), we also might function as gemologists or metallurgists and provide a gemological appraisal or an evaluation report.

Clients might want stones removed once they understand grading limitations or the metal tested once they understand the possible damage and limited results. But, this isn’t necessarily the norm. It depends on the needs of clients and third parties and on their understanding the costs versus benefits versus risks of different services we can provide.

Bottom line is: be clear on the facts to which the opinion of monetary worth applies and be up front with the client and in any third-party report that we do not necessarily attest to the correctness of the facts. We primarily are providing an estimate of the worth of those facts in the market place. We shouldn’t hide the possibility that our estimate might change if the facts were to change.

Indeed, we sometimes are not permitted to determine the correctness of the facts. Say, for example, we serve on an “appraisal panel” arbitrating an insurance loss. The language of the policy or court decisions usually makes it clear that our only job is to provide an opinion on the amount of the loss based on the facts before us. It is not to debate the facts. That is between the insurer and the insured.

Doing the job: Here are some basics to keep in mind when appraising by photograph.

1. “Appraisal based on hypothetical facts” is more correct and to the point than erroneous and misleading terms like “hypothetical appraisal” or “hypothetical value.” Appraisals, estimates and reports themselves are not hypothetical. They are only hypothetical in that they are “based on hypothetical facts.” Our opinion of the worth attached to that set of facts is very real – as are the appraisal and the report.

2. The report should clearly state that it is based on “critical assumptions” regarding the type, quality and condition of the item(s).

3. The basis of assumptions made should be clearly stated. For example, if the appraisal is based on a photo, be sure to state any of the picture’s limitations. Also include any information – such as comments from prior appraisers or the original manufacturer – used to supplement the photo.

4. Clearly state that we have provided an opinion for a particular set of facts, and that if the facts were different or changed, our opinion might change as well.

Elly Rosen is a freelance appraisal principles consultant in Brooklyn, N.Y. Through Appraisal Information Services (AIS), his Appraisers’ Information NetWork OnLine (AIN) offers: subscriptions for appraisal con- sultations; The Appraisal Reporter (an appraisal principles journal) with gemological appraisal supplement; a Glossary of Appraisal Terminology; and a related Laws DataBase. Rosen also offers appraisal report “boilerplates,” formats for various types of appraisals and client information brochures, and an audiotape lecture series on appraisals.

Rosen was one of the principal developers and instructors of the Certified Appraiser of Personal Property (CAPP) program from 1982 to 1993. He also is a member of the Jewelers Vigilance Committee’s Appraisals Task Force and was one of the principal developers of the new JVC Guidelines for Insurance Replacement Estimates and the Rapaport Retail Markup Survey. Rosen will take questions from JCK readers at (718) 692-1975 or via e-mail to AISnetwork @aol.com or to ais@polygon.net.