In my efforts to better understand the concept of diminished value appraisal, I walked into a very popular appraisal firm in San Diego California in which I had an opportunity of chatting with one of the company’s most sought-after diminished value appraisal experts. In the process of sharing information regarding the issue, the professional gave me a very practical example as a way of simplifying the concept for easier understanding. She said that one day her two-year old car which is valued at 25,000 USD collided with another vehicle, resulting into damage worth 5,000 USD. Her auto repair firm, upon filing the insurance claim, paid for the repairs. As opposed to what she thought that her newly fixed vehicle was still valued at 25,000 USD, the appraiser informed her that the vehicle’s value had gone down by default. She immediately came to the realization that in as much as the car body repair outlet did a wonderful job on the car, making it appear just as good as it was prior to the collision, it had to become less desired by the potential buyers and as such its worth had to go down by some percentage.
In most cases it is not possible to sell a physically wrecked car or frame as a ‘certified second-hand car’. This will most likely affect the car’s worth by nearly forty percent. This is the point at which diminished value comes in. any insurance service provider will not hesitate to write a car owner a check to cover the repair expenses. However some car owners do not usually realize that they have the right to be awarded another check to cater for a diminished value claim. In one lists their car in the newspaper classifieds for sale at 25,000 USD for example, the potential buyers will have a very direct first question, “Has the car been involved in a road accident at any moment?” it would be very difficult to conceal the accident information since the potential buyer will most likely use various available tools to determine the car’s accident history. The moment the buyer detects that the car had been involved in a road accident, irrespective of the magnitude of the collision, they will not have the will of paying the stated 25,000 USD anymore; instead, they are highly likely to offer 18,000 USD. In such an instance, the diminished value will be 7,000 USD.