Appraisals: Fair Market Value vs. Insurance Value

Appraisals: Fair Market Value vs. Insurance Value

There are several reasons for which one could need an appraisal. The most commons of them are: 

  • Taxable estates
  • Gifts subject to transfer tax
  • Theft or damage
  • Division in a divorce or legal settlement
  • Donations
  • Sales
  • Restoration 
  • Insurance
  • Art Financing 

There are four relevant values of the item one aims to get appraised. 

  1. Replacement - Insurance Value: To determine the item's value, we need to consider how much it would cost its replacement. If someone wanted to buy that same item in a retail store, how much would it cost them? It also serves for insurance purposes in setting claims. It will cover the retail price plus expenses if the item was damaged, stolen, or if it needs to be repaired for a duplicate. It is a "wholesale" appraisal, and it tends to be 40% of the retail price. Usually, those prices are much higher because the gallery or the auction house needs to cover the expenses that come from operating their business. They have recognition and a reputation they need to keep. People might get confused about the retail prices, and they have misconceptions about the value of their item at a fair market price. 

  2. Auction - Fair Market Value: It's the value determined for any item of value at an auction where none of the sellers or buyers were forced to execute a transaction. Despite what many people might think, the auction value isn't always representative of what the item is worth. In many cases, bidders do their due diligence and are aware of the market value and potential auction value. They aim to get a lower price than the market value. At the same time, it could happen that the environment of an auction and the excitement they bring cause bidders to overestimate the value of a particular item in the attempt of winning. Also, emotions play a huge role, and many people might feel a specific connection with the piece of art that makes them want to have it at all costs. 

  3. Liquidation Value: Occurs in the case of a forced sale that needs to happen in a short time, where the seller is under extenuating circumstances. The liquidation value is characterized by a limited timeline and limited who might be informed of the sale at short notice; prices tend to be very low. 


You are always invited to come to our Brand New Gallery, APR57, located at 200 West 57th Street in New York City, for a free appraisal. We have more than 100 years of combined experience in appraising all items of value. We buy, sell, trade, and appraise antiquities, coins and bullion, jewelry, memorabilia, watches, and more. We offer special wholesale prices to dealers and investors across the globe!