It's vital for appraisers to make sure they are following legal compliance for the appropriate jurisdiction. Here's what they should know about legal precedence and requirements.

Robert Smalls, a slave assigned to a Confederate military transport ship during the American Civil War, could see the north's blockade ships. One night while the officers were ashore, he brought the slave crew's families aboard to visit - not an unusual event. Instead of returning to shore, the families were hidden on the ship. Smalls high jacked the ship, and put on a captain's uniform and hat. As he sailed past the heavily armed Confederate battery of cannons, he gave the perfect signals to pass out of Charleston Harbor. Smalls turned the ship over to the U.S. Navy and was then assigned to a federal ship to fight against the Confederacy. Eventually Smalls was elected to the U.S. House of Representatives.¹ He basically was a hero who changed jurisdictions!

        Where Lodged?

With almost any appraisal assignment, a few questions are necessary, starting with, "After I complete the appraisal, what will you do with it?" Ask this question without adding any other information. The client may say, "I want to insure the item." But one may hear an answer such as, "I want to insure it, but if it is worth a lot, I may sell it." Now, the client has let it be known that they really want two appraisals. Explain that an appraisal for obtaining insurance is not the same as one that can be used for resale.

Next, depending on the appraisal assignment, one will need to know what legal precedence will apply. Almost all societies and other appraisal standards state that one must render the report in compliance with the law (though the laws are not often mentioned). Do not assume the report should follow the laws in the jurisdiction in which one's office is located. For example, a husband needs an appraisal for a diamond necklace involved in a dissolution of marriage. The divorce case might be lodged in another state. The appraiser's report must comply with that state's legal requirements. And legal compliance varies from jurisdiction to jurisdiction.

        Liability

If one renders reports in compliance with a particular set of standards, such as mandated by a society, and that society mandates that one must comply with the law, to adhere to the wrong state's law would be a breach. Close that liability gap by knowing what the correct jurisdiction requires.

        ACV?

Do not assume that only a few valuation assignments have jurisdictional requirements. The most common appraisal assignment is probably valuations for obtaining insurance. However, when a casualty loss occurs, jurisdiction becomes the deciding factor on how to define Actual Cash Value (ACV). Actual Cash Value can be defined as, "The fair or reasonable cash price for which the property could be sold in the market in the ordinary course of business, and not at forced sale."² Interestingly, this was expanded in a precedent-setting court case which stated, " . . . 'market value' definition harkens back to the 18th century and is not discussed as applying in an insurance context, whereas the former definition of 'actual cash value,' '[r]eplacement cost minus normal depreciation,' specifically applies to insurance and was first used in 1853."³

Yet, Actual Cash Value definitions vary according to jurisdiction. For example, some states use what is called a Broad Evidence Rule.⁴ This requires that several factors be reported: acquisition cost, (fair) market value, cost of replacement, reconstruction value, value to owner, condition of item, and value in use. Of course, only some of these can be determined by an appraiser. Twenty states embrace this approach to defining Actual Cash Value.⁵ And, if Actual Cash Value is not defined in the policy, then in three states the Broad Evidence Rule will also apply.⁶ Hold on - there are eight states that define Actual Cash Value as Fair Market Value!⁷ Thus, the remaining jurisdictions rely on the standard ACV definition, "Cost of replacing demanded or destroyed property with comparablenew property, minus depreciation and obsolescence."⁸

        Dissolution of Marriage

One may think that only a few appraisal assignments have such a variation on what compliance is, but almost any appraisal assignment has jurisdictional variations. Some courses, scholarly works, etc., fall short whenever they present only the federal requirements, if any requirements are presented at all. But that leaves out 51 jurisdictions!

Not only can the value definitions vary, but also the effective dates (dates of value). Three jurisdictions use the date of separation, five jurisdictions use the date of filing, five jurisdictions rely on the court to set the date (discretionary), 17 jurisdictions use the date of the trial for division of the marital property, and 22 jurisdictions use the date of decree as the effective date in a dissolution of marriage.

But wait, what about value definitions? One jurisdiction requires Value, six jurisdictions require Net Value, one jurisdiction requires Net Market Value, six jurisdictions require Market Value, two jurisdictions require Present Value, three jurisdictions require Fair Value, and lastly 32 jurisdictions require Fair Market Value.⁹

Figure - 1 - Gold-plated silver brooch attributed to M. M. Scognamiglio S.r.l. di Michele Scognamiglio, located in the city of Torre del Greco, in the province of Napoli, Italy and with their mark registered or filed for on June 15, 1985, with the probable date of manufacture from 1985 to present, owned by the author.

        Dueling Jurisdictions

Does one jurisdiction have precedence? There are situations in which two jurisdictions may have precedence at the same time. This usually occurs when there is a possible tax liability. For example, some jurisdictions may or may not have an estate tax. Yes, there exists a federal estate tax once a certain threshold in value is achieved; that threshold is not for a single item but for the entire estate. Thus, one may have appraised an item for a few thousand dollars, but if the decedent's estate includes 10 houses, then it may exceed the threshold and that mandates an estate tax. The appraisal must be rendered to comply with the federal value definition and one of three effective dates: date of transfer, date of death, or alternate valuation date. If the state of jurisdiction only requires the date of death, and an alternate federal date is being used that is not the date of death, the appraiser-gemologist must render the appraisal to comply with both jurisdictions' effective dates.

Nonetheless, some jurisdictions have estate taxes, and their definitions may vary somewhat from the federal definition. Add to that jurisdictions with inheritance tax.¹⁰ The appraisal must be rendered in compliance with all the variations within the jurisdiction or jurisdictions in effect.

        International Courses

Each country has a legal system, and they are not the same. In some countries, they have providences, states, etc., that can have variations in law. Basically, if the United States has 51 jurisdictions (not including territories and commonwealths) that are not in concert, how can an American course be valid for a foreign country?

        Conclusion

Another consideration is that an appraisal society may have developed a standard by consensus and not researched the legal requirements for a particular assignment. Does one render the appraisal report in compliance with the jurisdiction and an appraisal society with different value definitions or effective dates? After all, societies require that their members render appraisals in compliance with their rules and standards. And if one is a member of more than one appraisal society, and they require different methodologies, does one render the report to comply with the conflicting appraisal societies in addition to the jurisdictional require ments? In essence, scholarly efforts may be presenting and requiring compliance with different guide-lines, and that seriously complicates the task.

Lastly, do not assume that the laws in ones jurisdiction are to be used for all appraisal assignments rendered. There are numerous appraisal assignments, and each one has the potential to have a different value definition or effective date requirement, depending on jurisdiction.

Written by Bill Hoefer

<sup>1. History. House.Gov - Smalls, Robert.    Back to Text ↑ ↑ ↑
2. Black's Law Dictionary, Fifth Edition, pp. 33.    Back to Text ↑ ↑ ↑
3. 359 Wis.2d 179, 2014 WI App 125, 857 N.W.2d 896, footnote 7.    Back to Text ↑ ↑ ↑
4. 77 N.J.Super. 531, 187 A.2d 49.    Back to Text ↑ ↑ ↑
5. Appraisingdemystified.    Back to Text ↑ ↑ ↑
6. ibid.    Back to Text ↑ ↑ ↑
7. ibid.    Back to Text ↑ ↑ ↑
8. Barron's Dictionary of Insurance Terms, pp 5.    Back to Text ↑ ↑ ↑
9. District of Columbia is being counted herein.    Back to Text ↑ ↑ ↑
10. Inheritance tax is a tax paid by the recipient of the property, whereas estate tax is paid by the estate before distribution.    Back to Text ↑ ↑ ↑
11. Published in Gem Guide, July-August 2026, Volume 45, Issue 5, pages 21-22.
12. Article illustrations by Bill Hoefer.
13. Other illustrations - IStock.com.</sup>