Appraisal Question

[ACN]

I have a question regarding the market value and how stones are appraised by an independent appraiser. Here is the situation that I tried to get answered by the appraiser; but still am not sure of how it works. Say I buy the following stone (2.0 ct I VS2) at the following places:

Online: $20,000 (H&A pattern - branded)
B&M: $40,000 (HOF)
Tiffany: $35,000 (their round cut)

From my understanding, it shouldn''t matter where you buy the stone as a 2ct I VS2 from any of the following places should basically be the same exact stone (and appraise for the same amount). So given this situation, my stone was appraised for 50% more from my online purchase price, so $30,000. Would the same stone bought at Tiffany''s or the B&M store appraise for $30k (even though you paid $40k or $35k) or does the appraiser take into account the extreme mark-up at these places or the "Tiffany/Cartier" name and thus appraises it for a greater amount??

I figure that no matter where you bought this H&A stone, it should appraise for the same amount. If someone could please clarify this situation as I am completely confused.

 

[strmrdr]

It should be appraised for the market it is expected to be replaced in for insurance.
A tiff at tiff, An internet stone on the internet market or more often mid-range local retail, Hof at HOF store replacement.

Resale and fair market value are separate values and calculated differently.

 

[denverappraiser]

For any statement of value to be useful it must contain an element of what an item is worth, to whom, when and under what circumstances. This is a fundamental concept of valuation theory. A hot dog at the ball park is worth more than that a hot dog at the 7-11, even if they can be otherwise described as similar. It’s worth more when the home team is winning and it’s worth less to a fan who is a vegetarian. None of this is evidence that the vendor at the park is a ripoff or that the nice folks at the convenience store are offering a bargain.

This may seem like a silly example but it really does apply to diamonds. Few people shop at Tiffany’s under the belief that this is a cheap place to buy things, rather like diners at the park. What they are gaining are attributes that Tif’s offers that they can’t get elsewhere. This often get’s maligned as nothing more than buying a blue box by people who are too stupid to know better but this is not how Tiffany shoppers see it. They’re paying for a shopping experience. They’re paying for the confidence of shopping with a well established company that they know will treat them well. They’re paying for the status of having ‘genuine’ merchandise rather than a knockoff. Is it worth it? Apparently so. Lots of people shop there and, contrary to the naysayers, it's not because they're stupid. Again, nearly everyone who shops there is aware that there are alternatives available elsewhere for less and have decided in an arms length transaction that for what they want, they are best served by buying it at Tiffany. That’s a pretty good definition of 'value', at least to that person at that time and under those circumstances. Tiffany doesn’t sell HOF and the online dealers don’t sell either one so you're not comparing apples to apples.

Does this mean that something is ‘worth’ whatever a dealer is charging for it, or at least whatever they are actually able to get? To some extent, yes it does, but for most appraisal assignments this isn’t the question being asked. The ‘standard’ appraisal question is something like this: “What would be the appropriate funding required to replace this item with another new one of like kind and quality in a reasonable amount of time and in the usually and customary marketplace.” Read that sentence a few times and think about the words I used.

What’s the usual and customary marketplace for new Tiffany branded merchandise (Hint: there’s only one market where you can get them at all)? How about for a new HOF? For ‘generic’ H&A diamonds? What constitutes ‘like kind and quality’?

There are other definitions that may apply and changing the definition of value will usually change the value conclusion. Often by quite a bit. "What can I reasonably expect get for this within the next few days?" is an entirely valid question to be asking your appraiser but it's simply not the same one as the one described above and you will NOT get the same answer, even if it's discussing the same item. I know of at least a half a dozen definitions of value that will produce a different conclusion for the same item.

One of the reasons to hire your own appraiser rather than simply take a value from a document provided by the seller is the opportunity to nail down these questions. The answer to the wrong question is doing you no favors even if it turns out to be correct in some other context.

Neil Beaty
GG(GIA) ICGA(AGS) NAJA
Professional Appraisals in Denver

 

[ACN]

Thanks for the reply! So basically, if you go ahead and purchase a Tiffany or HOF 2ct, it will appraise for more then a 2ct from online as you are getting the "name" as an added value.

 

[Shopaholic]

As owner of a few Tiffany rings, I will let you know that the appraisal does take into account that it is a Tiffany piece. The main purpose of an appraisal is that should you ever need a replacement, it will be of comparable value, mark-up and all.

 

[denverappraiser]

Date: 8/2/2009 7:35:53 PM
Author: ACN
Thanks for the reply! So basically, if you go ahead and purchase a Tiffany or HOF 2ct, it will appraise for more then a 2ct from online as you are getting the 'name' as an added value.

If the purpose of the appraisal is documentation for insurance, which is often the case, yes a branded piece from HOF or Tiffanys is ‘worth’ more than an otherwise similar unbranded one.

Neil Beaty
GG(GIA) ICGA(AGS) NAJA
Professional Appraisals in Denver