Appraiser making a commission off a sale?

[JDDN]

I recently had a diamond appraised and while I was there the appraiser took a look at a ring I'm considering selling. The ring is a GIA MRB solitaire. She gave me a name of a jeweler she has worked with and said he may be interested in buying it. The appraiser said she would take a 10% commission off the sale if I went through with it.

Not having sold a piece of jewelry before, is this customary? Opinions from trade members welcome . As well as anyone else who has something to add .

Thanks for reading.

 

[tyty333]

Hmm, never heard of them doing something like that. So she gets 10% for just getting you in touch with this buyer?

Maybe if the buyer gives you a decent price it could be worth it? Still seems a bit odd to me.

Edit - I dont have anything to add . I guess I'm just in a talkative mood!

 

[JDDN]

Lol, tyty!! Well you being talkative made me laugh so that's something, isn't it?

And yes, you have it right. She would make 10% off whatever he offers me just for putting me in touch with him. I agree it seemed strange to me, but like I said, I've never done this sort of transaction. And my thoughts exactly….if he offers me a great price, then it could be worth it….but I'm not sure.

 

[madelise]

No. I would refuse to pay an appraiser $! He/she already got paid for the appraising! Shit, I'd question his/her ethics.. And if it impacted the appraisal.

 

[diamondseeker2006]

Madelise, it was not the item being appraised, it was another ring the OP was thinking of selling.

I see nothing wrong with the person making the offer, but I would turn it down because 10% to the appraiser is going to mean you'll be offered a fraction of the value of the ring by the jeweler minus an additional 10%!

 

[ame]

That sets off so many unethical bells for me. Run away.

 

[Rockinruby]

This sounds very odd. I would pass on this.

 

[JDDN]

Tyty, Madelise, DS, Ame, and Rockinruby….thank you for your thoughts on this. It's pretty much what my gut told me. I too think it's odd and it would be not an insignificant amount so I am going to pass.

Thanks again everyone!

 

[Texas Leaguer]

Tyty, Madelise, DS, Ame, and Rockinruby….thank you for your thoughts on this. It's pretty much what my gut told me. I too think it's odd and it would be not an insignificant amount so I am going to pass.

Thanks again everyone!

Hi JDDN,
You should definitely trust your instincts when it comes to who you do business with. I can understand how the situation you describe would strike you as questionable. However, I will say that it is not unusual in the jewelry business for appraisers to also be buying and selling or collecting referral fees. Clearly that is a setup for ethical problems. The business is pretty much unregulated in terms of who can do jewelry appraisals, what competency and credentials they must have, whether they buy and sell, or disclose relationships with other members of the trade. So the best you can do in selecting an appraiser is check references and credentials and use your best judgement. There are some outstanding appraisers out there, including some very good ones who participate in this forum.

I have no idea about the credentials of the appraiser you used, but at least she was honest with you about the commission she would receive for referring you to a buyer should you make a transaction. I think the main ingredients you look for is someone who knows their stuff in terms of identification and evaluation, who is helpful to you in meeting your needs, and who is honest and transparent with you in their dealings.

 

[denverappraiser]

It is not unusual for appraisers to offer services other than appraising. This can include brokerage, escrow services, restoration services, managing lab and auction type work, quality control work, photography services, various sorts of consultation and so on. I do all of these things from time to time. These all fall outside of the realm of a traditional appraisal. In most cases I do it under the auspices of a completely different company in order to avoid the possibility of confusion.

This is one of the boundary lines of some of the various appraiser societies. For example, I’ m not a member of the Association of Independent Jewelery Valuers for this very reason. They don’t like brokers while the American Gem Society is ok with it, even within their Independent Certified Gemologist Appraiser designation. The appraisal practice needs to be clearly separate and distinct from other activities, and the client needs to clearly understand if the ‘appraisal hat’ is on but, within that boundary, it’s ok.

As best I can tell, that’s the case here. The appraiser offered a referral on a completely different item outside of the appraisal. Whether or not the referral is valuable is a different sort of issue but it’s entirely possible it is. A referral greases the wheels in a way that a cold call from a potential seller doesn’t. Grading and referral by a trusted local source is valuable to both sides and that existing-trust can easily raise the resultant bid to the client by more than 10%.

 

[Texas Leaguer]

It is not unusual for appraisers to offer services other than appraising. This can include brokerage, escrow services, restoration services, managing lab and auction type work, quality control work, photography services, various sorts of consultation and so on. I do all of these things from time to time. These all fall outside of the realm of a traditional appraisal. In most cases I do it under the auspices of a completely different company in order to avoid the possibility of confusion.

This is one of the boundary lines of some of the various appraiser societies. For example, I’ m not a member of the Association of Independent Jewelery Valuers for this very reason. They don’t like brokers while the American Gem Society is ok with it, even within their Independent Certified Gemologist Appraiser designation. The appraisal practice needs to be clearly separate and distinct from other activities, and the client needs to clearly understand if the ‘appraisal hat’ is on but, within that boundary, it’s ok.

As best I can tell, that’s the case here. The appraiser offered a referral on a completely different item outside of the appraisal. Whether or not the referral is valuable is a different sort of issue but it’s entirely possible it is. A referral greases the wheels in a way that a cold call from a potential seller doesn’t. Grading and referral by a trusted local source is valuable to both sides and that existing-trust can easily raise the resultant bid to the client by more than 10%.

I think the last point is important. In a sense you could look at it as a qualified consultant assisting you by facilitating the transaction. So if the offer price is not to your liking, the consultant can potentially leverage the existing relationship and credibility with the seller to help you negotiate a more attractive bid. And of course, there is nothing preventing you from also seeking additional bids through other channels as a double check and due diligence.

The appraiser, through their practice and networking may have valuable knowledge about the most reliable and straightforward buyers, what they are looking for, and what they are likely to offer. The buyer would also have incentive to treat you fairly in order to uphold the relationship with the appraiser and get more referrals. It can save you some anxiety of going it on your own and perhaps finding yourself dealing with someone seeking only to take advantage of a one shot deal. All of that can easily be worth 10% or more.

But again, don't leave your gut instincts at home. If it doesn't feel right, it's probably not right.

 

[junebug17]

NM

 

[Rockinruby]

Tyty, Madelise, DS, Ame, and Rockinruby….thank you for your thoughts on this. It's pretty much what my gut told me. I too think it's odd and it would be not an insignificant amount so I am going to pass.

Thanks again everyone!

Hi JDDN,
You should definitely trust your instincts when it comes to who you do business with. I can understand how the situation you describe would strike you as questionable. However, I will say that it is not unusual in the jewelry business for appraisers to also be buying and selling or collecting referral fees. Clearly that is a setup for ethical problems. The business is pretty much unregulated in terms of who can do jewelry appraisals, what competency and credentials they must have, whether they buy and sell, or disclose relationships with other members of the trade. So the best you can do in selecting an appraiser is check references and credentials and use your best judgement. There are some outstanding appraisers out there, including some very good ones who participate in this forum.

I have no idea about the credentials of the appraiser you used, but at least she was honest with you about the commission she would receive for referring you to a buyer should you make a transaction. I think the main ingredients you look for is someone who knows their stuff in terms of identification and evaluation, who is helpful to you in meeting your needs, and who is honest and transparent with you in their dealings.

Good info. Thank you.

 

[Rockinruby]

It is not unusual for appraisers to offer services other than appraising. This can include brokerage, escrow services, restoration services, managing lab and auction type work, quality control work, photography services, various sorts of consultation and so on. I do all of these things from time to time. These all fall outside of the realm of a traditional appraisal. In most cases I do it under the auspices of a completely different company in order to avoid the possibility of confusion.

This is one of the boundary lines of some of the various appraiser societies. For example, I’ m not a member of the Association of Independent Jewelery Valuers for this very reason. They don’t like brokers while the American Gem Society is ok with it, even within their Independent Certified Gemologist Appraiser designation. The appraisal practice needs to be clearly separate and distinct from other activities, and the client needs to clearly understand if the ‘appraisal hat’ is on but, within that boundary, it’s ok.

As best I can tell, that’s the case here. The appraiser offered a referral on a completely different item outside of the appraisal. Whether or not the referral is valuable is a different sort of issue but it’s entirely possible it is. A referral greases the wheels in a way that a cold call from a potential seller doesn’t. Grading and referral by a trusted local source is valuable to both sides and that existing-trust can easily raise the resultant bid to the client by more than 10%.

I think the last point is important. In a sense you could look at it as a qualified consultant assisting you by facilitating the transaction. So if the offer price is not to your liking, the consultant can potentially leverage the existing relationship and credibility with the seller to help you negotiate a more attractive bid. And of course, there is nothing preventing you from also seeking additional bids through other channels as a double check and due diligence.

The appraiser, through their practice and networking may have valuable knowledge about the most reliable and straightforward buyers, what they are looking for, and what they are likely to offer. The buyer would also have incentive to treat you fairly in order to uphold the relationship with the appraiser and get more referrals. It can save you some anxiety of going it on your own and perhaps finding yourself dealing with someone seeking only to take advantage of a one shot deal. All of that can easily be worth 10% or more.

But again, don't leave your gut instincts at home. If it doesn't feel right, it's probably not right.

Thank you for taking the time to explain. Great info from our trade members. Thank you!

 

[Rockinruby]

Tyty, Madelise, DS, Ame, and Rockinruby….thank you for your thoughts on this. It's pretty much what my gut told me. I too think it's odd and it would be not an insignificant amount so I am going to pass.

Thanks again everyone!

Good points. Sometimes it is all in the way someone approaches you, lack of clear explanation or the vibe you get. Follow your instincts.

 

[MollyMalone]

Thank you for taking the time to explain. Great info from our trade members. Thank you!

+1!

 

[JDDN]

Texas leaguer and Denverappraiser,

Thank you SO much for the insightful explanations and commentary regarding the scope of an appraiser and such dealings as referral fees, etc. You both raised some very helpful points that I was not aware of. As far as I can tell, the appraiser and jeweler have both been above board with me. In my case, I feel 10% is steep given the nature of the introduction as she isn't acting as a middle person or advocating for a more competitive sale price on my behalf. However, I'm still weighing all my options.

I have been learning so much on this forum and am thankful for those who are passionate about sharing their knowledge and expertise, and their enthusiasm.

 

[Texas Leaguer]

Texas leaguer and Denverappraiser,

Thank you SO much for the insightful explanations and commentary regarding the scope of an appraiser and such dealings as referral fees, etc. You both raised some very helpful points that I was not aware of. As far as I can tell, the appraiser and jeweler have both been above board with me. In my case, I feel 10% is steep given the nature of the introduction as she isn't acting as a middle person or advocating for a more competitive sale price on my behalf. However, I'm still weighing all my options.

I have been learning so much on this forum and am thankful for those who are passionate about sharing their knowledge and expertise, and their enthusiasm.

You are welcome JDDN. I think I can speak for Denver Appraiser in saying we enjoy the opportunity to share some of our experience with those who are interested. Things are not always as they might appear to the uninitiated. Sometimes not as bad as they might seem, and certainly not always as good as sellers make certain things out to be! So it is good to have a sounding board to bang on.

Question for you: How was the 10% referral fee to be paid? I would expect that would be between the seller and the appraiser, and therefore was told to you simply in the interest of full disclosure. If, on the other hand, the appraiser will be looking to you for the 10% after you sell, I am not nearly as comfortable with that arrangement.

 

[JDDN]

Texas leaguer and Denverappraiser,

Thank you SO much for the insightful explanations and commentary regarding the scope of an appraiser and such dealings as referral fees, etc. You both raised some very helpful points that I was not aware of. As far as I can tell, the appraiser and jeweler have both been above board with me. In my case, I feel 10% is steep given the nature of the introduction as she isn't acting as a middle person or advocating for a more competitive sale price on my behalf. However, I'm still weighing all my options.

I have been learning so much on this forum and am thankful for those who are passionate about sharing their knowledge and expertise, and their enthusiasm.

You are welcome JDDN. I think I can speak for Denver Appraiser in saying we enjoy the opportunity to share some of our experience with those who are interested. Things are not always as they might appear to the uninitiated. Sometimes not as bad as they might seem, and certainly not always as good as sellers make certain things out to be! So it is good to have a sounding board to bang on.

Question for you: How was the 10% referral fee to be paid? I would expect that would be between the seller and the appraiser, and therefore was told to you simply in the interest of full disclosure. If, on the other hand, the appraiser will be looking to you for the 10% after you sell, I am not nearly as comfortable with that arrangement.

Yes, you summed it up quite nicely. Thank goodness for PS as a sounding board and those passionate experts and enthusiasts.

To answer your question, I believe the 10% commission would be paid by the buyer (the jeweler in this instance) directly to the appraiser. I would get cut a check for the selling offer minus the 10%. So it sounds like it was noted to me in the interest of full disclosure. The jeweler did note that the 10% was slightly negotiable, but how would I know if he simply offered me a slightly lower buying price to make up for the decrease in commission? I suppose I could wait until he made me the offer and then negotiate the 10% commission down after that. Not sure if it's worth all the back and forth though.

 

[Texas Leaguer]

Texas leaguer and Denverappraiser,

Thank you SO much for the insightful explanations and commentary regarding the scope of an appraiser and such dealings as referral fees, etc. You both raised some very helpful points that I was not aware of. As far as I can tell, the appraiser and jeweler have both been above board with me. In my case, I feel 10% is steep given the nature of the introduction as she isn't acting as a middle person or advocating for a more competitive sale price on my behalf. However, I'm still weighing all my options.

I have been learning so much on this forum and am thankful for those who are passionate about sharing their knowledge and expertise, and their enthusiasm.

You are welcome JDDN. I think I can speak for Denver Appraiser in saying we enjoy the opportunity to share some of our experience with those who are interested. Things are not always as they might appear to the uninitiated. Sometimes not as bad as they might seem, and certainly not always as good as sellers make certain things out to be! So it is good to have a sounding board to bang on.

Question for you: How was the 10% referral fee to be paid? I would expect that would be between the seller and the appraiser, and therefore was told to you simply in the interest of full disclosure. If, on the other hand, the appraiser will be looking to you for the 10% after you sell, I am not nearly as comfortable with that arrangement.

Yes, you summed it up quite nicely. Thank goodness for PS as a sounding board and those passionate experts and enthusiasts.

To answer your question, I believe the 10% commission would be paid by the buyer (the jeweler in this instance) directly to the appraiser. I would get cut a check for the selling offer minus the 10%. So it sounds like it was noted to me in the interest of full disclosure. The jeweler did note that the 10% was slightly negotiable, but how would I know if he simply offered me a slightly lower buying price to make up for the decrease in commission? I suppose I could wait until he made me the offer and then negotiate the 10% commission down after that. Not sure if it's worth all the back and forth though.

It should not be that complicated on your end. If all the appraiser is doing is giving you a name of a prospective buyer, then whatever referral fee arrangement they have between them should be between them. You should simply get an offer on your piece, compared to other offers you may have, and decide to accept/reject or negotiate it. If you arrive at a price that is acceptable then the buyer cuts you a check for that amount and you are done. If in the negotiation process the buyer and appraiser decide to modify their referral agreement in order to increase the offer and facilitate the transaction, then that is between them and should not involve you. You should be able to focus solely on the offer price.

That is just my opinion. Again, the bottom line is the net you receive for your piece, no matter the mechanics of the transaction. But I view that referral fee like an advertising cost - a cost of doing business for the buyer. It should be already figured into the offer price and not come out at the end as a line item. It is, however, very important and good that you know the appraiser is receiving some sort of fee for their recommendation.

To me this particular scenario feels a little too much like a significant portion of your proceeds are being deducted for the appraiser giving you a name. What if the appraiser said, "you want to sell you piece? I'd recommend ABC jewelers, CBS jewelers, and BBC jewelers. If you end up selling to any of them come back and give me 10% of whatever they give you". Those might be the only three buyers in town!

Somehow, the amount going to the appraiser needs to be commensurate with the value they deliver or services they provide in facilitating the transaction.

 

[JDDN]

Texas leaguer and Denverappraiser,

Thank you SO much for the insightful explanations and commentary regarding the scope of an appraiser and such dealings as referral fees, etc. You both raised some very helpful points that I was not aware of. As far as I can tell, the appraiser and jeweler have both been above board with me. In my case, I feel 10% is steep given the nature of the introduction as she isn't acting as a middle person or advocating for a more competitive sale price on my behalf. However, I'm still weighing all my options.

I have been learning so much on this forum and am thankful for those who are passionate about sharing their knowledge and expertise, and their enthusiasm.

You are welcome JDDN. I think I can speak for Denver Appraiser in saying we enjoy the opportunity to share some of our experience with those who are interested. Things are not always as they might appear to the uninitiated. Sometimes not as bad as they might seem, and certainly not always as good as sellers make certain things out to be! So it is good to have a sounding board to bang on.

Question for you: How was the 10% referral fee to be paid? I would expect that would be between the seller and the appraiser, and therefore was told to you simply in the interest of full disclosure. If, on the other hand, the appraiser will be looking to you for the 10% after you sell, I am not nearly as comfortable with that arrangement.

Yes, you summed it up quite nicely. Thank goodness for PS as a sounding board and those passionate experts and enthusiasts.

To answer your question, I believe the 10% commission would be paid by the buyer (the jeweler in this instance) directly to the appraiser. I would get cut a check for the selling offer minus the 10%. So it sounds like it was noted to me in the interest of full disclosure. The jeweler did note that the 10% was slightly negotiable, but how would I know if he simply offered me a slightly lower buying price to make up for the decrease in commission? I suppose I could wait until he made me the offer and then negotiate the 10% commission down after that. Not sure if it's worth all the back and forth though.

It should not be that complicated on your end. If all the appraiser is doing is giving you a name of a prospective buyer, then whatever referral fee arrangement they have between them should be between them. You should simply get an offer on your piece, compared to other offers you may have, and decide to accept/reject or negotiate it. If you arrive at a price that is acceptable then the buyer cuts you a check for that amount and you are done. If in the negotiation process the buyer and appraiser decide to modify their referral agreement in order to increase the offer and facilitate the transaction, then that is between them and should not involve you. You should be able to focus solely on the offer price.

That is just my opinion. Again, the bottom line is the net you receive for your piece, no matter the mechanics of the transaction. But I view that referral fee like an advertising cost - a cost of doing business for the buyer. It should be already figured into the offer price and not come out at the end as a line item. It is, however, very important and good that you know the appraiser is receiving some sort of fee for their recommendation.

To me this particular scenario feels a little too much like a significant portion of your proceeds are being deducted for the appraiser giving you a name. What if the appraiser said, "you want to sell you piece? I'd recommend ABC jewelers, CBS jewelers, and BBC jewelers. If you end up selling to any of them come back and give me 10% of whatever they give you". Those might be the only three buyers in town!

Somehow, the amount going to the appraiser needs to be commensurate with the value they deliver or services they provide in facilitating the transaction.

Texas Leaguer, your points are sound and make a lot of sense. You're absolutely right, the transaction should be simple and straight forward. And actually reading what you've said has given me some food for thought. Thank you, again. Your advice is well regarded and immensely helpful.