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IGI valuation - what does it mean?

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hlpkaixin3344

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Hello everyone!

I am new to pricescope and I have enjoyed reading all the postings and learning more about diamonds! In fact, so much so that I can''t stop reading pricescope even though we''ve just bought the ring!

My fiance and I just purchased my very first (and hopefully not last...) diamond ring and suffice it to say that it was a very stressful process to spend such a large amount of money on something for which prices vary so greatly and where its so easy to be duped! Prior to purchase, we had the ring appraised by the IGI and they provided a valuation (largely based on the stone''s GIA cert I think) of over 75% or $35,000 more than our purchase price. What does that mean? Does it mean that we got a good deal or is the IGI valuation (based on "retail replacement") more or less meaningless?

Thanks for your help! (I think I''ve gone from stressed purchaser to stressed owner!)
 

valeria101

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Date: 4/1/2005 2:48:38 AM
Author:Anonymous Wrote:

Does it mean that we got a good deal or is the IGI valuation (based on ''retail replacement'') more or less meaningless?
Second
7.gif
sorry to say that...
 

Rank Amateur

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You''d need to ask your insurance guy how it affects the coverage on your diamond. You might end up paying premiums on some meaningless (and I agree with this term) valuation yet not get the replacement you deserve if you have a loss.

A really poor appraisal can venture from the realm of meaningless into that of injurious.
 

oldminer

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I suggest you investigate the accuracy of the appraisal. I have seen some of these with astronomically high numbers. There is no limit on possible retail mark-up except that reality and competition prevent actual high selling prices far better than appraisers might want us to believe.

What you actually paid is a far better proof of "value" than a very high theoretical estimate from a company that does not sell at retail. A "pie in the sky" appraisal is a selling tool, but can prove to be very misleading.
 

denverappraiser

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That’s the theoretical price that would be on the tag at an un-named hypothetical store in an unspecified location for superficially similar merchandise. There is no expectation that this store will actually make any sales at this price but they should be willing to write this number on a price tag, at least briefly. Some people seem to find this information useful. I’m not sure why.


Neil Beaty
GG(GIA) ISA NAJA
Independent Appraisals in Denver
 

RockDoc

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Date: 4/1/2005 2:48:38 AM
Author:Anonymous Wrote:
Hello everyone!

I am new to pricescope and I have enjoyed reading all the postings and learning more about diamonds! In fact, so much so that I can''t stop reading pricescope even though we''ve just bought the ring!

My fiance and I just purchased my very first (and hopefully not last...) diamond ring and suffice it to say that it was a very stressful process to spend such a large amount of money on something for which prices vary so greatly and where its so easy to be duped! Prior to purchase, we had the ring appraised by the IGI and they provided a valuation (largely based on the stone''s GIA cert I think) of over 75% or $35,000 more than our purchase price. What does that mean? Does it mean that we got a good deal or is the IGI valuation (based on ''retail replacement'') more or less meaningless?

Thanks for your help! (I think I''ve gone from stressed purchaser to stressed owner!)
David''s being nice by saying "pie in the sky".

I''m not so nice.

Sounds to me like that appraiser was trained at the Alice in Wonderland School of Appraising. Does the signature on the appraisal report read "The Mad Hatter"?

If you as a consumer can purchase the diamond for 75% less, then why would anyone consider a value that is multiple times the purchase price..

Retail Replacement used here without narrative explanation of far more details is professionally negligent. I''ve seen IGI appraisals before and they are far from what a professional appraisal report is.

Where did you buy this stone? Internet, mall etc.?

How much did you actually pay, and how much is the valuation? What is the shape, carat weight clarity, color and cutting parameters of the stone?

I''ll try to answer your questions more completely once you post the answers.

Rockdoc
 

dimonbob

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All three of the above appraiser are correct. Let me paint a picture for you:

You buy a diamond ring that has a price of $10,000 on the tag but you pay $5,000 because "today only we have one half off"! In addition they give you an appraisal for the ring for $10,000. You send the appraisal to the insurance company and insure it for $10,000 and pay the premimes for that amount.
Later the ring is lost or stolen and you make a claim. The insurance company does not pay you $10,000 but gets you a replacement. The replacement costs the insurance company $3000. You end up with the same type ring...MAYBE...and go about your way. Who lost here? YOU!
You got it from the jewelry store and the insurance company.

I you had purchased the diamond from one of the internet ventors here on PS, you would have paid much less than the $5000 for the same grade diamond and been directed to a real appraiser.

If you say you "just purchased that ring" you might think about returning it and get a short education on diamonds and prices before you spend you hard earned money.

Good Luck.
 

RockDoc

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Date: 4/1/2005 6:54:59 PM
Author: dimonbob
All three of the above appraiser are correct. Let me paint a picture for you:

You buy a diamond ring that has a price of $10,000 on the tag but you pay $5,000 because ''today only we have one half off''! In addition they give you an appraisal for the ring for $10,000. You send the appraisal to the insurance company and insure it for $10,000 and pay the premimes for that amount.
Later the ring is lost or stolen and you make a claim. The insurance company does not pay you $10,000 but gets you a replacement. The replacement costs the insurance company $3000. You end up with the same type ring...MAYBE...and go about your way. Who lost here? YOU!
You got it from the jewelry store and the insurance company.

I you had purchased the diamond from one of the internet ventors here on PS, you would have paid much less than the $5000 for the same grade diamond and been directed to a real appraiser.

If you say you ''just purchased that ring'' you might think about returning it and get a short education on diamonds and prices before you spend you hard earned money.

Good Luck.

Hey Bob.... You''re so diplomatic! heheh

How about if the insurance company discovers that the astronomically high appraisal affected their material risk and wasn''t disclosed to the underwriter, and the insurance company vacates the claim???

Assuming the approximate appraisal value was about $ 50K, most claim departments would very carefullly scrutinize all the facts concerning the appraisal value. Once it was discovered the insured only paid 25% of the stated value, they might just get out with just returning the premiums and "waving" good bye to paying the claim.

Most policies make the insured responsible for disclosure of such important issues, up front. Now if the appraisal states both the value and the purchase price and WHY the appraiser issued such a value, and the underwriter accepts the policy, then they are stuck. But you know most consumers don''t do disclose what they paid if the appraisal and the purchase price are different, and made contemporaneously.



Regards

Rockdoc
 

Garry H (Cut Nut)

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This is a really difficult and vexed issue that we appraisers (Valuers) wrestle with in Oz too.

Pre-Rendered valuations are done with no knowledge of the place where the goods will be sold, or the person’s specific needs who will be using the appraisal. Personally I do not like pre-rendered appraisals. But I would like to present a n argument for those who use them and why they are used.

Firstly consider the Rapaport list. The list is “High asking prices”, that are said to be based on a value that all wholesale vendors are guaranteed to be attracted to sell their merchandise for, maybe even to their worst enemy J

Let me amble on with the high appraisal argument (although as I say – I do not agree with it).

Consider the situation that someone looses a mass produced ring that was bought at Walmart. They buy 10,000 of the same article, and they sell it on sale for 50% discount. A year or 2 later, this now much loved part of the family jewel collection is stolen, lost or destroyed. The consumer goes back to Walmart and pleads for a replacement. The ‘sale’ is long over and the ring is no-longer in stock. Walmart must re-order one article for this particular client and you may rest assured the replacement cost will not be the same as the previous ‘sale’ price or years ago.

So if the appraisal is done prior to purchase (pre-rendered) then the habit is that they be done on a one off replacement value. Of course this works wonders for the commercial interest of making the consumer feel like they have won a bargain, or it makes the consumer think we are a mob of shonks.

A decade or so back when ½ price first hit down-under, a retailer friend had a guy walk in and say “I saw that exact same chain down the street for $100 more at $1,000 – how come you are selling it so cheap?” Retailer: “that’s our regular pricing policy” Shopper “well they had it marked $2,000 reduced by 50% to $1,000 – so guess I will buy down the street and tell the wife I bought her a $2K chain”.

I guess IGI mainly works for the lower medium end of the market in the US. Maybe that is what that market wants – if that market was more mature, then IGI should be smart enough to change their policy and practice to meet the markets demand?

If the consumer knows the price paid, and is prepared to pay double the premium, well? You pay’s your money and you take’s your chances.


(On an aside issue - IGI were quite put out that we did not include them in the Lab Survey last year - we did not include them because there are fewer stones listed on-line - so it was not possible to include them in the market selling price part of that survey. They consider their grading,, consistency and the comparative pricing the market applies to the diamonds graded by IGI to be right in line - just as it was shown that EGL USA can often be better value than GIA and AGS graded diamonds.
IGI has this lower market sector perception in USA, but in the rest of the world, and Asia in particular, it takes a much higher profile in the pecking order. EGL outside USA gets the lower end reputation. IGI are CIBJO participats and have uptodate synthetic and HPHT detection technology.)
 

denverappraiser

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Garry,


There are quite a few possible questions that an appraiser might be answering and that can have vastly different answers. This is the reason that it’s so important to be clear in the document and why some documents do more harm than good for the buying public.


Sample question #1: “How much should I expect my insurance company to have pay to custom make a replacement for one of these earrings if one were lost or destroyed?”.
This is a reasonable enough question and it’s likely to produce a number that is bunches more expensive than what was originally paid. This is true of almost all manufactured products, not just jewelry. It’s perhaps academically interesting but for most people it’s irrelevant because it isn’t related to the likely the behavior of the insurance company in the case of a loss. If a customer loses a single manufactured earring and the company is unable to replace it with an identical manufactured piece, they will probably replace BOTH earrings with another manufactured pair that has similar attributes or cut a check for the price that they should expect to pay to do that. They will then take possession of the remaining undamaged earring. Dealers who present this sort of information as some kind of definition of ‘value’ are, IMO, engaging in a deceptive business practice. A watch is not worth more simply because it would be difficult to hire a local artisan to custom make one after that particular model has been discontinued, nor is a fillagree piece from the giftshop in Bali.

Sample question #2. “What does Tiffany & Co. charge for a ring that looks sort of like this one?” Again, perhaps interesting but probably irrelevant. This is simply not comparing apples to apples unless the issue is an appraisal of a new item from Tiff’s. A ring is no more or less valuable because Tiffany''s makes something that is superficially similar.


Sample question #3. :”How much would it cost to make a knockoff of this ring in your store?” See my answer to question #2.


Sample question #4.. “What is a fair and reasonable price to pay for this item in a particular marketplace.” Good question. This is what most new-purchase appraisals are trying to learn. This usually has little or nothing to do with those pre-rendered valuations.


Sample question #5. “What is appropriate funding for an insurance policy to replace this item with another of like kind and quality in the case of a loss?” This is another good question, and another pretty common one. A thoughtful answer will include variables for the materials used, the designer, the location where the replacement is expected to take place, the market selection, the condition and a fair number of other variables, all of wich will be mentioned in the report.. A less than thoughtful answer is less than useful.


Sample question #6. “How much should I reasonably expect to be able to sell this item for?” Yet another good question but definitely not the same as the above. A pre-rendered valuation may contain some useful information about this but the valuation supplied will probably not be a reasonable guideline either as a baseline number to use or as a component in some formula. The popular notion that an item is worth 50% of the valuation is simply not valid. I’ve seen people selling things for prices that range from 1% to 1000% f the ‘appraised’ value. The appraisal value might as well have been determined by rolling dice.

To the extent that these documents are listing something akin to ''Manufacturers Suggested Retail Price'' and customers find them interesting, I suppose I have no problem problem with them. Manufacturers are welcome suggest anything they wish. I would be tickled if people were willing to pay $1,000/item for my Sarin reports and I would be happy to suggest this if I thought it would do me any good. (95% discounts are available for pricescope customers
2.gif
) The problem is that people think that these ''appraisals'' are more than that. They are expecting some kind of benchmark that they can use to determine if they are getting a good value for their money. This is simply untrue and dealers who use them for this purpose know it''s not true.

Neil Beaty
GG(GIA) ISA NAJA
Independent Appraisals in Denver

 
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