CGA Appraisal Methodology & Report Writing 2 — Questions and Answers
Question 1: Which appraisal approach is most commonly used for unique gemstone jewelry where no direct comparable sales exist?
- Sales comparison approach
- Income capitalization approach
- Cost approach
- Replacement value approach (Correct answer)
Correct answer: Replacement value approach
Replacement value approach estimates the cost to replace an item with one of similar kind and quality, making it practical for unique jewelry pieces.
Question 2: When appraising an estate piece for fair market value, the appraiser should consider:
- The original retail purchase price
- What a willing buyer would pay a willing seller with neither under compulsion (Correct answer)
- The insured replacement value
- The auction house reserve price
Correct answer: What a willing buyer would pay a willing seller with neither under compulsion
Fair market value is defined by IRS standards as the price agreed upon between a willing buyer and willing seller, both having reasonable knowledge and neither being compelled to transact.
Question 3: A CGA preparing a damage appraisal for a ring that was broken during repair should base value on:
- Retail replacement value before damage
- The cost of repair only
- The difference in value before and after the damage (Correct answer)
- Insurance policy limits
Correct answer: The difference in value before and after the damage
Damage appraisals measure diminution in value — the difference between the item's value in its undamaged state versus its damaged state.
Question 4: Which statement about retrospective appraisals is CORRECT?
- They use current market data regardless of the valuation date
- They establish value as of a date in the past using market data from that time period (Correct answer)
- They are prohibited under USPAP for personal property
- They must be performed within 30 days of the effective date
Correct answer: They establish value as of a date in the past using market data from that time period
Retrospective appraisals establish value as of a past effective date using market conditions and data relevant to that historical period.
Question 5: In an insurance appraisal report, the term 'scheduling' refers to:
- The timeline for completing the appraisal
- Listing specific items on an insurance policy with individual coverage limits (Correct answer)
- The order in which gemstones are graded
- The appraiser's fee schedule
Correct answer: Listing specific items on an insurance policy with individual coverage limits
Scheduling means individually listing and insuring specific items on a policy, providing coverage up to the stated appraised value for each scheduled piece.
Question 6: The 'work file' requirement under USPAP requires an appraiser to retain:
- Only the signed copy of the appraisal report
- All data, information, and documentation necessary to support the appraiser's opinions and conclusions (Correct answer)
- Only photographs of the appraised items
- Financial records related to the appraisal fee
Correct answer: All data, information, and documentation necessary to support the appraiser's opinions and conclusions
USPAP requires appraisers to maintain a work file containing all data and documentation that supports the conclusions in the appraisal report.
Question 7: When an appraisal report contains a 'limiting condition' stating 'stones were not removed from mounting,' this means:
- The appraiser made an error
- The appraiser's conclusions may be limited because full examination was not possible (Correct answer)
- The client refused inspection
- The gemstones are not included in the appraisal
Correct answer: The appraiser's conclusions may be limited because full examination was not possible
Limiting conditions disclose circumstances that constrain the scope of work, and stones-in-mounting is a common limitation since mounted stones cannot be fully examined.
CGA Appraisal Methodology & Report Writing 2
Which appraisal approach is most commonly used for unique gemstone jewelry where no direct comparable sales exist?