CGA Appraisal Methodology & Report Writing 3 — Questions and Answers
Question 1: Which type of value is most appropriate for a divorce settlement appraisal?
- Replacement value
- Insurance value
- Fair market value (Correct answer)
- Liquidation value
Correct answer: Fair market value
Divorce settlements typically require fair market value because it represents what the asset would realistically fetch between informed, willing parties in the open market.
Question 2: A 'recourse appraisal' in the jewelry industry typically refers to:
- An appraisal used only for legal disputes
- An appraisal performed when a client disagrees with a prior appraisal
- An appraisal that provides a value above which the insurer can seek recovery (Correct answer)
- A second opinion on gemstone grading only
Correct answer: An appraisal that provides a value above which the insurer can seek recovery
A recourse appraisal sets a ceiling value for insurance purposes, above which the insurer may seek recovery from the jewelry dealer or manufacturer.
Question 3: The effective date of an appraisal report is best defined as:
- The date the report is signed by the appraiser
- The date the appraisal fee is paid
- The date to which the value opinion applies (Correct answer)
- The date the client receives the report
Correct answer: The date to which the value opinion applies
The effective date is the specific date to which the appraiser's value opinion applies, which may or may not coincide with the report date.
Question 4: When writing a jewelry appraisal report, the description of a diamond should include which of the following groups of characteristics?
- Color, clarity, carat weight, and cut grade (Correct answer)
- Price paid, age, origin, and treatment history
- Grading laboratory, certificate number, and retail price
- Brand, style number, and metal type only
Correct answer: Color, clarity, carat weight, and cut grade
The four Cs — color, clarity, carat weight, and cut — are the standard grading characteristics that must be documented for diamonds in an appraisal report.
Question 5: Under USPAP, which of the following is a required element of a complete appraisal report for personal property?
- The appraiser's social security number
- A statement of the purpose and intended use of the appraisal (Correct answer)
- The client's income information
- A comparison to online marketplace prices
Correct answer: A statement of the purpose and intended use of the appraisal
USPAP requires that every appraisal report clearly state the purpose of the appraisal and its intended use, as this defines the scope and type of value to be reported.
Question 6: Which market level should a CGA reference when determining replacement value for insurance on a retail client's diamond ring?
- Wholesale market
- Estate auction market
- Retail market (Correct answer)
- Pawnshop market
Correct answer: Retail market
Insurance replacement value reflects what the insured would pay at retail to replace the item, so the retail market is the appropriate reference level.
Question 7: A CGA appraiser discovers that a client's ruby has been heat-treated. The proper course of action is to:
- Omit the treatment from the report to avoid upsetting the client
- Disclose the treatment in the report as it significantly affects value (Correct answer)
- Return the item to the client without issuing a report
- Only mention treatment verbally, not in writing
Correct answer: Disclose the treatment in the report as it significantly affects value
Disclosure of treatments is mandatory in appraisal reports because heat treatment affects gemstone value and is material information the client and third parties need.
CGA Appraisal Methodology & Report Writing 3
Which type of value is most appropriate for a divorce settlement appraisal?