How accurate is an appraisal value?

[Rockdiamond]

I think this is an important subject- considering how many times we get calls and emails from people wanting to sell their ring.
A common statement is: "My ring appraised for "X" dollars"
That means less than zero to me, as a buyer.

The only way the value stated could mean anything to me was if I spoke with the appraiser.
They could be basing the value on what the stone could cost to replace in a high end store on Fifth Avenue- or the value could be based on what a pawn shop would charge ( far less likely)
I''d bet that if we''re talking about a common item- say a 1.00ct GIA Graded G/SI1 RBC set into a ring with .25ct in small round diamonds- there can be as much as 50% difference ( or more) between a legally defensible high and low appraisal price. Hopefully Neil or Dave Atlas can give us their perspective.

My suggestion to buyers is to ask the person preparing the appraisal the basis of their evaluation.
The one value that is known is what the item actually sold for.
However it''s rare that the appraisal value will match the sale price.

A further suggestion: NEVER base your opinion of the value of an item you are considering for purchase on an appraisal you did not commission yourself.
That''s another heinous sales technique.
"We''re selling this ring for $5000, but it appraised at $60 million." ( by my uncle Louie who is sight impaired, but he has a good feel for this)

 

[denverappraiser]

Any properly written appraisal should say, right there in the body of the report, what value definition they’re using and what the market assumptions are. There are quite a few choices and it makes a huge difference. Any report that doesn’t contain this information should be ignored forthwith, even if it some happens to be correct in some narrow set of circumstances.

Most jewelry appraisals are written for insurance replacement purposes and the assumptions go something like this. “value is based on an estimation of what it would be expected to cost to custom manufacture a replacement item today with a new one of like kind and quality at retail in a specialty jewelry store and in the local marketplace.” Even if the appraise correctly answers this questions, this may or may not be relevant to your situation. Most people shopping here on pricescope, for example, aren’t generally buying custom in high end local specialty jewelry stores so the cost to have one manufactured locally is, at best, an academic question. It decidedly is NOT evidence a bargain somewhere else and it may be seriously misleading, even if it’s correct.

Here’s a quick easy set of rules to decide if you should consider relying on an appraisal:

1) If it doesn’t include the intended use, a date, a definition of value and a description of the marketplace, don’t.

2) If the items in #1 above are included but don’t apply to your situation, don’t.

3) If the item description doesn’t include ALL of the details that you know to be relevant in coming to an appropriate conclusions, don’t.

4) If it’s not signed and if it doesn’t contain at least the contact information and qualifications of the appraiser, don’t.

5) Here’s a biggie. If you weren’t the client, don’t.

There are others. Just because the appraiser signed it and attached their resume, for example, doesn’t mean that they know anything, that they did the work, or that they are accurately reporting what they know. Actually, it’s a pretty big list. The burden of proof is on the appraiser to convince you that their opinions are useful and the default answer is ‘NO’.

There are some smart folks out there who have put some real thought into how appraisers do things. We get blamed for a remarkable list of things ranging from the Savings and Loan fiasco to the saving of public television so it’s not surprising that there is disagreement about how it should be done and what is (and isn’t) to be learned from reading our reports or talking to us but it's not a complete guess either.

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