DIAMOND APPRAISERS: Why you need one and what to expect.
The services of an independent appraiser are increasingly of importance in today's complex market environment. As consumers have grown in sophistication and education, diamonds have gotten more costly, and many previously unheard of treatments and ethical issues have arisen, as well. One used to fear that a diamond might be misrepresented as to color, clarity or weight. Now the list of reasonable questions is nearly endless:
- Has the stone had some temporary or permanent treatment applied?
- Is the stone a real diamond, a man-made diamond, a color altered diamond, loaded with filler, or totally phony?
- Will the dealer sell me one stone and deliver another?
- Is the information on the grading document accurate?
- Is the stone damaged?
- Are the grading documents genuine and unaltered?
- Does the diamond match the grading document?
- Is the stone really cut correctly and does the grading paper supply enough information to make an informed decision?
This just covers the major issues. You can see right away that there are many opportunities and reasons to use third party advisory services in these transactions that potentially will cost you thousands of dollars. The only other thing most folks ever buy that is similarly expensive that has no manufacturers "list price" like a new car, is a house. That is why so many appraisers are equally required and needed to confirm real estate transactions. Expert and blind markets require non-experts to hire qualified assistants in order to be secure
Gemology is the art and science of gemstones. Most appraisers have some training in grading of gems, especially diamonds, but this is not the same as an appraising and most appraisals involve more than a single unmounted gemstone. An appraisal involves two primary components. The first is to identify or authenticate the items and the second is to assign an appropriate value. The first part, gemology, is taught by GIA and a few other groups around the world and is a very scientific process. The 'G.G.' after most appraisers signature stands for Graduate Gemologist and is a diploma issued by GIA for expertise in gemology. The FGA from the Gemmological Association of Great Britain (Gem-A) is very comparable. Both teach a rigorous approach to grading involving a standardized environment, microscopic examination, comparison stones for color and a variety of tools for evaluating fluorescence, cutting, treatments and the like. Neither of these fine schools teaches appraising.
For decades, jewelry stores, auction houses, pawn shops and other business have been offering 'appraisals' to as a service to customers that was presumably based on their own experience in buying and selling things and issued them for purposes that range from securing insurance to offers to buy. Unfortunately, they also discovered that appraisals make terrific selling tools. They would take a description, either something they did themselves or using an outside lab, look up a price on a table like the Rapaport Diamond Report and multiply this by what they considered to be a reasonable markup to get a value. Depending on what they used for markup and depending on the grading accuracy and details that aren't included in the pricing grid, this would produce some extremely high value conclusions that could then be used as evidence that the asking price is a bargain.
Abuse of this system has led to the rise of independent appraisers. These are appraisers who don't sell gems or jewelry at all and who have no vested interest in the outcome of the appraisal. They get paid the same whatever the conclusions, whether you buy it or not and whatever you pay. Most have top gemological credentials as well as additional training and credentials in appraising and usually have significantly more experience than the store appraisers. Independents often do work for banks and estates and get involved in tax and customs matters as well as the usual insurance type documentation. They can also be very useful for shoppers. Many customers, especially for very expensive items find that an independent appraisal is an invaluable part of the shopping process both for evaluating stones as well as craftsmanship of the final piece. Most sellers will allow a return period of 7-30 days from your purchase to return for a full refund. This time can be used to get an inspection from an independent appraiser to both confirm what the dealer has told you as well as to provide more that may have been omitted. Often even the suggestion that a deal will be contingent on an opinion by an independent will help get the best possible merchandise for the best possible price.
Pricescope provides a list of independent appraisers.
Retail Replacement Value. Many, even most jewelry appraisals are prepared for retail replacement value or insurance replacement value. This is, or is supposed to be, an estimate of the appropriate funding for your insurer to replace the piece with another one like it in the case of a loss. These reports will often report a value that is significantly higher than an actual transaction cost and this is taken as evidence of a bargain. This may or may not be the case. Typically, appraisers will give something more akin to "high regional retail valuations". These somewhat inflated values are generally used as sales tools by many if not most retail sellers and they are notoriously difficult to interpret into a shopping decision. This is considered an abuse by some and a regular way of doing business by most others. Just knowing about it is sufficient to make a consumer skeptical enough to not believe everything they read, regardless of who wrote it or signed it.
Market Value and Fair Market Value. Fair market value is a legal concept that will vary from jurisdiction to jurisdiction and it doesn't generally mean what people think it does. In particular, it doesn't mean that it's 'fair'. Similarly, market value can mean different things in different circumstances ranging from 'what should I be paying for this?' to 'what can I get for it on resale?' When you hire an appraiser make sure that they understand what you are trying to accomplish. For shoppers, FMV doesn't help much and MV only applies if the market being described is appropriate for your situation. Discuss the 'definition of value' with your appraiser before you start. The correct answer to the wrong question won't do you much good after all.
"SALE" prices. When was the last time you went to the shopping mall and saw big signs that said "SALE"? Did you really believe the signs? Do you sometimes wonder if anything ever gets sold for the full retail price? Are you being fooled by phony sale signs or is it really a special priced event? The same reasonable approach needs to be made with jewelry on "sale" and that is presented with an appraisal that is far higher than what you are being asked to pay. You might be getting a great price, even a special one, but just because you are told this, does not mean it is true. A little doubt can be a very valuable bit of knowledge.
Many times the price tag on something is not a true indicator of what it generally sells for. It may be some multiple of the correct selling price or just a guide for a commissioned sales person who wants to get the most they can before getting to the bottom line and best figure. You have to be the judge and you have to have the right knowledge. Shopping and learning are keys to getting the right stone and the right price. If in doubt, consider hiring the services of an independent.
Choosing a diamond to buy online is quite tricky. Many consumers ask an appraiser for an opinion about a diamond they are considering for purchase; a diamond they cannot see. An independent appraiser can often say a lot about stones with GIA, AGS or comparable documentation but they can't give you the full story without a thorough inspection. Many have special tools, techniques and experience that allow them to tell you far more about your stone than what is included on the lab report. The truth is, a professional appraiser generally won't give any opinion on a diamond that has not be physically examined, in person because there are so many paths that lead to an incomplete or misleading conclusion.
There's been quite a bit of effort since 2005 to define the various ranges of fine and ideal cut stones. Most major labs now assign a cut grade to round brilliant cut stones and a few, like AGS and AGA include a grade on some other cuts as well. Research in this area continues at a rapid pace and an appraiser can help you apply the various grading scales to your particular stone.
Qualified appraisers charge fees related to the degree of difficulty, the time involved, and possibly the weight of the major stone or stones. Appraisers need to cover their liability by charging higher fees for work where more liability exists. Larger gems generally require longer examination than tiny ones. Discerning the finest colors takes more time than deciding a stone is M or N color, where few folks care either way and prices are closely related anyway. The detailed kind of person seeking out the finest cut stones almost always has a raft of questions that take time to answer properly. The fees for this will vary from city to city and the most experienced appraisers generally charge more than those who are new to the business. They should be happy to tell you up front what services you can expect and what you will be expected to pay.
Appraisers often work on behalf of retail stores, auction houses, diamond dealers and consumers. An honest, unbiased opinion has value to everyone in the chain of every sale. Those involved in legitimately selling diamonds and jewelry today are committed to giving all the facts to their customers.
Sometimes a seller will ship a stone to an independent appraiser for examination at the request of a consumer. The appraiser makes a verification of the identity of the stone and the accuracy of the grading, adds in the value side of the report, contacts the consumer, and if all's well, forward the stone to the consumer, back to the dealer or on to a 3rd party to be mounted. Many independent appraisers offer additional services and tests to answer questions that aren't included on the lab report and that can be very useful as shopping tools. Sellers can send diamonds to many independent appraises in confidence because many have long standing quality reputations which in this very traditional business serves to put diamond dealers at ease. Dealers must rely that appraisers know how to act within the framework and traditions of the diamond trade. Sometimes consumers can get a stone examined BEFORE they have to pay for it. In the end, everyone can be protected at a nominal cost.
For anyone interested, there is an appraisers listing right on Pricescope where many publish what they charge and what they can do for you. A professional appraiser's loyalty always extends to the end user of their reports. They strive for full disclosure and accuracy in grading. Unfortunately, not every appraiser or gem lab is identically qualified or knowledgeable. That's something a consumer must assess for themselves. People do report on how they have been treated within the Pricescope forums, so looking there for feedback is not a bad idea. Again, just because something is in a signed document, does not make it so. There is abuse at every level of business and you need to become aware of it.
One last thing of importance. The AGA Cut Class system primarily is based on Dave Atlas' many years of experience in looking at diamonds. It is not a scientific approach such as Garry Holloway's, or the one offered on a few shapes by AGS but we believe these systems have been shown to be reasonably compatible. All appraisers look forward to the advancements coming in grading light behavior and the components of diamond beauty. No doubt, some labs will be ahead of others. Some traditionalists will hesitate longer. Modern consumers will be left to pick and choose who can give them the best total package of advice.
Appraisal training is available from several different schools and each appraiser will have a different background. Some will come from retail environments, some will have been manufacturers and others will have a background in the auction or one of the related industries. In addition to the basic gemological credentials, many will have one or more credentials from the following:
- National Association of Jewelry
- American Society of Appraisers
- American Gem Society
- International Society of Appraisers
Appraising is an important part of the jewelry business. It can be useful as a shopping aid as well as for getting the most value out of your insurance policy. Like other professional services, it's necessary to shop carefully for your appraiser and to make certain that both you and they understand what is expected. They are not all the same. Appraise the appraiser.
David S. Atlas
GG(GIA) ASG(AGA) Sr. Mbr. NAJA
GG(GIA) ICGA(AGS) NAJA