Odds of a "Layman" buying diamonds below their value?

[RedSpinel]

I've been into colored gems for about 15 years or so, and I've read a lot, seen countless colored gems, talked to many people about them, bought quite a few, etc. But I have only ever purchased 3 little canary yellow diamonds.

Its not that I dont like diamonds, as I'd like to own a nice 1/2-3/4 ct white relatively soon, as a loose stone to be put into my collection of colored gems. But I have some issues with the diamond market, and those issues are "multi-faceted".....

First, I pretty much hate the De beers company for their corruption, greed, carelessness, and total lack of sympathy for humans for the most part. I also hate them for their constant manipulation of the diamond industry, and their total monopoly on control of the market. Now I know there are "newer" players in the diamond market, but if we are to be honest, those players simply play along to De beer's tune!

We always heard how the Russians were going to get into the diamond game and bring prices down, but De beers manipulated that too! When new Kimberlite pipes were located in Canada, people were probably thinking that finally De beers would lose their stranglehold, but in reality, these new companies have just played along with De beers, allowing diamond prices to be kept artificially high.

Another problem I have is the blood thats been spilled over diamonds in Africa, but that another thread.

Anyway, one of the other main reasons I havent gotten more into diamonds earlier, was that I was told long ago that you CANNOT buy a diamond and ever get your money back for it. In other words, you WILL pay 2-3 times the true value of a diamond, so if you go to sell it the next day, you'll be lucky to get 1/2 what you paid for it! Its not at all that way in the colored gem market, because there isnt a huge, monstrous blob that controls everything!

There are these big diamond "wholesalers" as they are called, and they promise you the stone you buy from them will appraise for at least double what its worth! Now's probably a good time to point out that the appraisal business is a bit of a scam too! They will ALWAYS tell you your stone is worth way more than it really is! Jewelers and appraisers have a "symbiotic" relationship with one another.

So... aside from traveling to war-torn regions of Africa and buying rough from a warlord, is there really any way for a semi-knowledgeable buyer to pick up a diamond or two for it's real value, or even less? (also aside from becoming a pawn broker!)

 

[diamondseeker2006]

Sure, you can get some deals if you watch the pre-loved forum here. People will from time to time sell a diamond or diamond ring second hand and you usually get the benefit of a discounted price and there are well cut stones there sometimes. Some of the vendors offer a buy-back of 75% like Good Old Gold, should you decide you no longer want your stone and want to turn it into quick cash. So no, with vendors here, you will not pay double what the stones are worth.

I will agree with you that typical jewelry insurance "appraisals" are ridiculous!

 

[Dreamer_D]

Buying from another PSer is the easiest way to get a deal for a "layman".

If you want to spend a few years learning about diamonds you can also find very good deals on ebay, but I do not at all recommend that unless you are very very knowledgable about diamonds, and have guidance from other expert deal hunters.

 

[denverappraiser]

There’re are quite a few statements in your post that I disagree with rather strongly but I’ll try to stay on point since I think it's an important question.

How do you buy a diamond for less than it’s ‘true’ value?

Let’s start by defining the term. 'Value' has lots of different definitions that vary dramatically and yours seems to be based on how much something costs vs. how much you can sell it for. You correctly observe that most individuals are hard pressed to sell a diamond for as much as a dealer. A corollary to this is that most individuals PREFER to buy from a dealer for a variety of reasons, some of them pretty good, and are willing to pay the premium that that entails. You’re looking for price to the exclusion of nearly everything else, and the price you’re looking for is something lower or at least the same as what YOU can sell it for. This bit of semantics is important and it is possible. I know people who do it all the time. They’re called jewelers, diamond dealers, the ‘wholesalers’ you reference, pawn brokers, auction houses, and several other theme merchants. People can and do make money at this and a few actually make a pretty good living at it. The problem is that it’s not easy and at LEAST as much of it has to do with your ability to sell as your ability to buy.

Since the definition is comparing the price you pay to the price you can get and you’re concentrating for now on the buy side, the first step is to insure that your seller is less skilled, or at least less lucky, than you. For the most part this means buying from an individual, not a dealer. I point this out because what we’re talking about here are not gemological properties. It’s about you and the seller. DeBeers, their partners and their competitors include fairly savvy folks and it's wise to chose other opponents if you're not prepared to dive into this in a big big way.

It’s tricky but it’s not impossible, and mostly it doesn’t involve hanging out in 3rd world countries. Actually, those are especially BAD places to be buying stones because the criminals there will take you for a ride and then dance on your grave. You’re looking for a private seller who happens to have what you want and who isn’t very good at the selling business. As you point out, there is a long history of pawn shops and others doing exactly this and how THEY get sellers is by advertising, by being open long hours in convenient locations, and by being ready to pay cash for just about anything that walks in the door (among other things). It’s a pretty competitive business that’s full of risks. Actually it’s a pretty big industry and, like the mining business, includes some very savvy people. They invest tens or hundreds of thousands of dollars and decades of advertising and promotion to build their brand presence. I assure you, if they could do it cheaper, faster and for less work, they would be all over that and they DO employ some smart people who think about this question. Maybe they’re missing something but I can’t think of what it is. Craigslist? Ebay? Hanging out in bars and near racetracks? Deals do occasionally come along that you can snag and if you're good at separating out the scams but I’m reminded of the saying that you have to kiss a lot of frogs before you find a prince. Not everyone has the same patience for this.

Realistically, the only option for reliably improving your buy/sell ratio is to improve your ability to SELL. Buying is easy. Selling is hard. If you’ve got experience with ‘investing’ in colored stones, you’ve got a giant leg up. They’re even harder to move at a profit than diamonds. Once again, that’s not a gemological property and it’s only indirectly related to what you thought the question was but it really is the answer. If you’re good at selling, the dealers will flood your doorstep with business opportunities and there will be money left on the table when the deal is done.