how to value high end diamond

[shunter]

So I want to buy a high end diamond in the next 30-60 days. Looking for E-G color, VS1 or better, about 5-8ct, round brilliant, symmetry/polish excellent, and i see lots of big diamonds have fluorescence i think i want no flurescence...

I am really interested in a value play. I dont need to pay $xyz, i just want to pay a price where i feel great that i scored such a good deal. buy the diamond at the right price and who cares what you pay for it, right? i can always dump it wholesale to the right dealer and lose only 10% (i hope??) what are mark-ups on big diamonds? i assume they sit in inventory for years, so what are typical mark ups like? and how best to buy/sell them? is it best to shop anywhere and dump them at sothebys or should i hit up sothebys to buy these things too?

here is a diamond i am looking at for example on bluenile

http://www.bluenile.com/build-your-own-diamond-ring?pid=LD01201566&forceStep=DIAMONDS_STEP

so what is "wrong" with the diamond and what is it worth? i have no idea except this seems to be the best value i can find scanning bluenile and other websites. this is about the top end of my budget; i would prefer to pay half of this, but again i dont see as much value for half this money just shopping around

 

[Dreamer_D]

I really don''t think this is a good plan. Diamonds are rpiced according to what the market can bear, so there are no real "sweet deals" to be found out there. Intenet vendors like BN only mark up diamond about 5-10% above the price they paid and make their money on volume and little overhead (they are a drop shipper). Also, the market for large diamonds is small and I am not sure how much of a secondary market there actually is, since many people with that kind of money to spend are not going to screw around with a second hand rock.

If you try to sell your diamond on the secondary market you will be lucky to get 30% to 50% of what you spend.

Do a search on resale value, lots of people come around here with such plans and so there are many threads about this issue.

 

[purrfectpear]

Actually if you move away from retail and find a nice estate diamond at auction, you should be able to recover most of the value less the 17% buyer''s premium that you pay, and then another 17% seller''s premium when you list at auction to sell. If a possible 34% loss is acceptable to you then auction is probably the way to go. You get to enjoy wearing the diamond for a few years and then you can sell when you are ready. On the other hand if you are thinking of diamonds as an "investment", think again.

 

[Dancing Fire]

be sure to post some hand shots!!

 

[denverappraiser]

Buying diamonds is fairly easy. Selling diamonds is hard. Be prepared for your ‘dump it wholesale’ step to take years and involve significant costs in terms of advertising, security, shipping , sales commissions and the like in addition to the loss associated with buying retail and selling wholesale. Keep your money if you're thinking of this as an investment. There are plenty of good reasons to buy a big diamond if you've got the budget to support it but this isn't one of them. There is basically zero chance that your plan will make money or even lose as little as 10% like you suggest. The only possibility is if you both can buy from a private seller who doesn’t know what they’re doing and can resell to another private party. Good luck doing that at this price point.

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

 

[shunter]

Ok Thanks for the advice. now I am a little concerned, i didnt know it was so difficult.. but i guess it makes sense. BN makes 5-10%, and when I go to sell, the wholesaler wants to take 10% below BN and since it costs 400k they want maybe 15-20% because of the huge carrying costs.

my situation: buy the engagement ring, get it insured, and i hope she wears it for the next 50 years every single day. but even though I have no intention (today) of ever selling it, what if I do want to sell it? i want to minimize 'getting screwed' from the initial purchase. sentimental purchases are great and you cant put a price on them but if i can buy something for 250 that is worth 400 then that is what i want to do. if i must pay 400 and thats all i will ever pay, then tell me and whats what i will do too.

The problem is I know these diamonds dont move fast and the economy today is terrible. even this purchase is not something i want to make from a investment standpoint but it is something i very much want to do because i value giving this ring as a gift more than having a few extra bucks in the bank. so my heart says to buy and my mind says 'get the best deal especially for such a high dollar purchase'. so you guys are the experts, where does someone like me go around and buy a diamond like this for the best price? somewhere there must be a diamond dealer or two who purchased a 400k diamond from a customer for 250k and now that dealer needs to free up the cash because the 400k diamonds are tough to sell.. so he would be happy for me to come along and pay 275k. right?? or wrong ?? how do i do this ?

i guess my question is (to sum it up). i am a business man and i dont mind people making money -- making $1k here, $5k there, fantastic, we all run businesses, but i want to buy as close to wholesale as possible and avoid middlemen making 50k here and 50k there on such a large purchase. is this possible ?

 

[neatfreak]

Date: 12/26/2009 2:48:02 PM
Author: shunter
if i can buy something for 250 that is worth 400 then that is what i want to do. if i must pay 400 and thats all i will ever pay, then tell me and whats what i will do too.

Yeah you aren't going to get any kind of screaming deal buying diamonds unfortunately. The market is pretty regulated.

And as for the resale market it isn't great-so be prepared that it won't be as easy to "dump it" if you need to for financial reasons. You likely won't get nearly all your $ back-and would be lucky to get 50% back if you buy even at cheap retail (i.e., bluenile).

Best way for bang for your buck is to buy secondhand. But to find someone selling what you are looking for secondhand would not be easy.

I think you are pretty out of your league here-diamonds don't work the way you are thinking they do. Dealers won't just buy a $250k diamond from someone for their "inventory". And diamonds of the size, color, and clarity you are looking for are also rare so it doesn't sit in "inventory" for years like you are thinking.

Most diamond dealers don't even own the diamonds they sell-they are owned by a 3rd "virtual" party.

 

[Dancing Fire]

Date: 12/26/2009 3:25:02 PM
Author: neatfreak

Date: 12/26/2009 2:48:02 PM
Author: shunter
if i can buy something for 250 that is worth 400 then that is what i want to do. if i must pay 400 and thats all i will ever pay, then tell me and whats what i will do too.

Best way for bang for your buck is to buy secondhand. But to find someone selling what you are looking for secondhand would not be easy.

check out the pawn shops in Beverly Hills.

 

[Hest88]

check out the pawn shops in Beverly Hills.

That's actually a really good idea. What's that really famous pawn shop in BH?

 

[denverappraiser]

With the exception of a few old money types, nearly everyone in this price point are business people and EVERYONE wants to get good value for their money. Your concerns are pretty typical. The general rules of the game are simple:

1) Go into this deal expecting never to see your money again and budget accordingly, rather like nearly everything else you buy. That’s not entirely true with diamonds, of course, but it’s a good mindset to get into and it makes it far easier to get over the hurdle that this is a consumptive purchase, not an investment.

2) Choose your dealer FIRST instead of trying to choose the diamond first and then the dealer as an afterthought. Nearly every jeweler/broker out there is interested in forming a long term relationship with clients who are interested in this sort of thing and that includes assisting clients with resales and upgrades. They are not all the same. Ask these questions as part of your process of shopping for a dealer. This is a fantastically competitive business and you’ve got tons to choose from. Take advantage of it.

3) Most of the stones you’ll find for sale are owned by a 3rd party and are being sold through the dealer on a consignment basis known in the trade as ‘memorandum’. Among other effects of this are that there’s a pretty good chance that whatever dealer you decide to work with can get most of the stones you see advertised no matter who the advertiser is. Ask ‘em. No jeweler with sense is going to stock much in the way of stones in this price point so think of it in terms of hiring them to help you on the hunt to find the one that’s right for you rather than a hunt for the one who has the best selection in their showroom or on their website.

Yes, there are occasionally distressed sellers but they’re damnably hard to find and nearly impossible to work with without professional assistance. For some reason, sellers want to get as much as possible for their things and most private parties are under some serious misconceptions about what their things are ‘worth’. There are some serious potential pitfalls and, in my opinion, you can gain quite a bit by making good use of professional help (this is true of most big dollar purchases by the way). Hanging out in bars, auctions or watching Craigslist and the like will occasionally turn something up but you've got to be prepared to kiss a lot of frogs before you find a prince.

At this price point I disagree with the advice of shopping with the pawnshops as a bargain strategy. Pawnbrokers are some savvy folks and they're not going to put out an underpriced $400,000 stone when they can sell through the jewelry channels and make more money. Anyone with this kind of goods knows full well what they have and the reason to sell it to the public through their showroom is to get MORE for it, not to unload it at a discount.

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

 

[Diamond Explorer]

Interesting thread,

I think Neil''s advice is quite good. It is not easy to sell diamonds, especially one like you are looking for. They cost a real lot of money, and there really are not that many cash buyers for goods like that. Not too many businesses have a spare 300k lying around to buy up your diamond, and those who do would probably want to low-ball you pretty bad.

But, having said that, diamonds are almost always a value play if you buy smart. Sure there is a premium on top of the commodity value to cover costs for providing them, but a well cut diamond''s value usually remains stable, and often grows with time. It would not be crazy to think that you might be able to get back what you paid for it in ten years or less if diamond prices rise.

Buy a diamond because you will enjoy it as a gift of love. They are not usually investments in the strict sense of the word, but they do have value that endures over time.

Good Luck!

 

[bgray]

I cantsay exactly why, but this post really bothers me. I find the poster so dispassionate and "clinical"(even while being very very wrong)that I dont know why he would even want to buy a diamond (ring ) anyway. If you have this much money to spend then surely you can locate a jeweler who will work with you to make sure you dont pay him or her a cent more in profit than you feel comfortable with.

 

[yssie]

Date: 12/26/2009 3:44:35 PM
Author: denverappraiser
With the exception of a few old money types, nearly everyone in this price point are business people and EVERYONE wants to get good value for their money. Your concerns are pretty typical. The general rules of the game are simple:

1) Go into this deal expecting never to see your money again and budget accordingly, rather like nearly everything else you buy. That’s not entirely true with diamonds, of course, but it’s a good mindset to get into and it makes it far easier to get over the hurdle that this is a consumptive purchase, not an investment.

2) Choose your dealer FIRST instead of trying to choose the diamond first and then the dealer as an afterthought. Nearly every jeweler/broker out there is interested in forming a long term relationship with clients who are interested in this sort of thing and that includes assisting clients with resales and upgrades. They are not all the same. Ask these questions as part of your process of shopping for a dealer. This is a fantastically competitive business and you’ve got tons to choose from. Take advantage of it.

3) Most of the stones you’ll find for sale are owned by a 3rd party and are being sold through the dealer on a consignment basis known in the trade as ‘memorandum’. Among other effects of this are that there’s a pretty good chance that whatever dealer you decide to work with can get most of the stones you see advertised no matter who the advertiser is. Ask ‘em. No jeweler with sense is going to stock much in the way of stones in this price point so think of it in terms of hiring them to help you on the hunt to find the one that’s right for you rather than a hunt for the one who has the best selection in their showroom or on their website.

Yes, there are occasionally distressed sellers but they’re damnably hard to find and nearly impossible to work with without professional assistance. For some reason, sellers want to get as much as possible for their things and most private parties are under some serious misconceptions about what their things are ‘worth’. There are some serious potential pitfalls and, in my opinion, you can gain quite a bit by making good use of professional help (this is true of most big dollar purchases by the way). Hanging out in bars, auctions or watching Craigslist and the like will occasionally turn something up but you've got to be prepared to kiss a lot of frogs before you find a prince.

At this price point I disagree with the advice of shopping with the pawnshops as a bargain strategy. Pawnbrokers are some savvy folks and they're not going to put out an underpriced $400,000 stone when they can sell through the jewelry channels and make more money. Anyone with this kind of goods knows full well what they have and the reason to sell it to the public through their showroom is to get MORE for it, not to unload it at a discount.

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

Love everything Neil said, most especially this bit. After having a less-than-stellar experience with a local vendor, working with WF has been an absolute dream, and that's so important for big-ticket purchases.


Good luck with your hunt!

 

[Lynn B]

I have nothing of any substance to add, except to say that I''ll marry you!!!

DANG, I''d LOVELOVELOVE to wear that stone!!! *swooning!*

 

[Richard Sherwood]

I think you''re best bet is to buy through a reputable high end auction house, like Sotheby''s or Christies.

There will be plenty of dealers in attendance, bidding. If you''re there in person, you can spot them. Bid as high as they do, and a little higher. You''ll get a good deal.