Question for the appraisers- what if the seller disagrees?

[Rockdiamond]

Hi All!
Recently, someone who''d purchased a diamond of ours on the second hand market, asked for some assistance as they knew we were the original seller.
The buyer had gone to an appraiser who assigned a value which seemed unrealistically low for a replacement value. This is based on our experience of the current market. It''s an unusual fancy colored diamond, so comparables are quite difficult to find.

This has only happened once before that I can remember, and I was sitting right there. The client asked us to go to the appraiser with them.
In that instance the appraised value seemed way to low.
I asked the appraiser how he''d assigned the value. He was appraising a Vivid Yellow, and since he could not find a comparable Vivid yellow, he simply used an Intense yellow for reference.
When I pointed out to him that a Vivid can go for double what an intense can, he immediately doubled the value.



I honeslty feel that most recent case, the appraiser is seriously undrvaluing the stone- which does not help the buyer..... even if she''s not our client, I''m tempted to call the appriaser and ask how he made his evaluation.
But I don''t want to cross a line I should not.

AS a general rule, what''s the proper course of action if a seller disagrees with an appraiser''s evaluation?

 

[Regular Guy]

Seems like we have a pattern here of discussion concerning...who can you talk to...and about what.

I guess I''d stick with your immediate client. Share your concerns, in writing if you prefer, encourage your client to share with their expert for a response (if I''m understanding this configuration correctly), and go from there.

 

[Dancing Fire]

Date: 2/24/2009 5:19:36 PM
Author:Rockdiamond
Hi All!
Recently, someone who''d purchased a diamond of ours on the second hand market, asked for some assistance as they knew we were the original seller.
The buyer had gone to an appraiser who assigned a value which seemed unrealistically low for a replacement value. This is based on our experience of the current market. It''s an unusual fancy colored diamond, so comparables are quite difficult to find.

This has only happened once before that I can remember, and I was sitting right there. The client asked us to go to the appraiser with them.
In that instance the appraised value seemed way to low.
I asked the appraiser how he''d assigned the value. He was appraising a Vivid Yellow, and since he could not find a comparable Vivid yellow, he simply used an Intense yellow for reference.
When I pointed out to him that a Vivid can go for double what an intense can, he immediately doubled the value.



I honeslty feel that most recent case, the appraiser is seriously undrvaluing the stone- which does not help the buyer..... even if she''s not our client, I''m tempted to call the appriaser and ask how he made his evaluation.
But I don''t want to cross a line I should not.

AS a general rule, what''s the proper course of action if a seller disagrees with an appraiser''s evaluation?

what GIA say on the color report ?

 

[diane5006]

Hi...

Even though you are the origanal seller...you sold it to Buyer A....

You are not the current seller...Buyer A sold the diamond to Buyer B

I understand your willingness to help...especially since Buyer B contacted you...

I personally don't feel that you should not call the appraiser...since you are now several steps back in the process...even though you once had the stone and are familiar with fancy colors...although I am sure you could do this diplomatically...

Since you have been contacted...you can share your thoughts with the buyer and refer her back to the appraiser...for further questioning...and any references you can provide

Recommend that they get a second opinion from an appraiser familiar with colored diamonds...

Or refer her back to Buyer A...

I am sure this can be worked out...I suspect Buyer B just want reassurance that they are getting what they paid for (as would anyone)

 

[arjunajane]

If vendors start contacting independent appraisers and asking them to change their asseessments, then we are all in serious trouble!
I would simply share your concerns and what you *think* it is worth with the buyer, and instruct them to go back to discuss with their appraiser.
If the appraiser cannot give good reasons for their conclusions, tell the buyer to find one that has more experience with fancies (assuming this current one doesn''t of course).

 

[denverappraiser]

When analyzing an appraisal and it’s merits or lack thereof, the first place to look is the value definition and purpose. In this case, the client seems to be looking for confirmation that they got an accurately described item for an appropriate price. This usually boils down to looking for comparable alternatives under the logic that if they didn’t buy that one, they could buy an equally suitable substitute elsewhere in the market and that the price should therefore be similar. Agreement on the ‘value characteristics’ of the item are essential for this to work. By this I mean that there are certain attributes, like size, clarity or color saturation that have a direct affect on price and there are certain attributes, like girdle thickness or date of mining that may be important to the client but that don’t generally drive the price. Understanding this difference is fundamental to choosing the correct comps and choosing the correct comps is fundamental to assigning an appropriate value. I bring this up because of the whole intense/vivid thing. Obviously it affects the price and it’s necessary to either find a vivid comp or to be able to defend the conversion of how much more a vivid would be expected cost than an otherwise comparable intense. I’ve not seen either the stone, the pedigree or the report and so I can’t begin to say who is ‘right’ here but hopefully I can shed some light onto addressing the difference.

Let’s assume that the appraiser is fundamentally wrong for whatever reason and you know it. What’s a diamond dealer to do? For starters, I point out that YOU are acting as an appraiser here (since you aren’t the seller). You have been solicited as an expert to give an opinion as to the value characteristics and to assign a value conclusion for a particular marketplace and for a particular date. That’s an appraisal. It makes no difference that you weren’t paid, that you didn’t put it in writing or even that you didn’t call it an ‘appraisal’ so were really talking about two appraisals that fundamentally disagree. From the appraisers end this makes it easy. What you do is tell the truth, the whole truth and nothing but the truth. If the client shows you the report from the other appraiser and asks you why it’s different, tell ‘em. Point out specifically where your approach is different and why you believe yours to be more valid. It’s then up to the client to go back to appraiser #1, discuss the discrepancies with them and get their explanation. Both appraisers have some legal liability issues here by the way.

What if you were the dealer? That is to say, what if you sell something, the client it gets appraised somewhere and the report contains info that is fundamentally wrong and that leads to a value conclusion that’s substantially different (and presumably less)? The process is basically the same. Point out the client specifically where the discrepancies are. In the example case it’s with the ‘premium’ of a vivid over an intense but it could just as easily be any manner of things ranging from an estimated weight to clarity grading or applying the correct markup for the marketplace at hand. As a dealer you are probably far better suited to read a report and identify the issues than an inexperienced consumer and as with the above it then becomes up to the client to go to the appraiser and get their explanation. If it can’t get worked out then they need to decide who to believe and act accordingly.

As an appraiser, I have a privacy policy that prevents me from discussing a client or their property with a 3rd party (like the selling dealer or another appraiser) without specific instructions from the client or a court order to do so. Most professional appraisers have similar policies. This is for obvious reasons and most clients appreciate it but it does preclude exactly the conversation you are wishing to have where you simply ring up the appraiser and argue some sense into them. I for one would not talk to you if you called me up and asked about an appraisal I did for some other client, not even to acknowledge that I’ve ever met the client or have seen the subject property. This entire issue should and must be directed by the client.

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

 

[Rockdiamond]

Thank you for that well thought out answer Neil!

It''s really notable how different the viewpoint of a true professional appraiser and seller can be.

I probably should not have used the first example at all.
The buyer invited me to go to the appraiser with them- basically asking me to evaluate the evaluation. If the appraiser overstated the value by a large margin, I would have also questioned how they came to the value.
Clearly, it''s also easier appraising certain items that are more easily comped. A two carat round G/SI1 must be easier to evaluate than a 2 carat Vivid Yellow


Neil, would you say that it''s common for a client to ask for an on the spot value, as opposed to leaving the item so that the work can be done without the pressure of having a client wait?
I''ll bet that''s one of the toughest positions an appraiser could be put in, having to make a snap judgment on value-

Neil, would some appraisers balk at even being put in such a position?
Probably also a bad example as I suspect that the best appraisers would have taken a more thorough approach and done more work before providing an evaluation- even with a client waiting.




The second example- let''s use it as a hypothetical - no need to discuss anyone or anything specific.

It''s clear that a buyer who gets an appraisal that causes them to return an item should never be questioned- unless they specifically request the seller to evaluate the appraisal.
I believe that refunds should be given without any pressure. Maybe it''s ok to simply ask why the refund is requested to see if it''s a situation that can be resolved. But if the buyer does not want to discuss why, they should never be forced to. IMO a money back guarantee with some sort of stipulation about grades being off is hardly better than no money back guarantee- they buyer should not need to provide any proof to receive a refund.

Also a great point that a seller has no right whatsoever to speak to an appraiser hired by the buyer unless permission is specifically given by the buyer.

For the purposes of conversation, let''s discuss a possible scenario where a buyer calls the seller to let them know an appraiser disagreed with the evaluation given by the seller.
If the buyer specifically requests it, is it "kosher" for the seller to call and discuss methods of evaluation with the appraiser?
Is that common Neil?

This has rarely come up in our business- maybe our stuff has appraised well, or if it didn''t a client never mentioned it.

 

[denverappraiser]

It’s unusual for a buyer to make such a request but yes, if they ask an appraiser (usually in writing) to discuss their methodology and conclusions with a 3rd party it’s fine for them to do so. This is avoided for several reasons: First, most professional appraisers charge by the hour and this would be a billable service. If it’s not something as simple as a typographical or math error, this sort of thing can get time consuming and it’s already a stressful situation for the client. Adding another bill just makes it worse. Most will just cut their losses and decided to believe either the appraiser or the seller and ignore the other. Second, the reason that they sought out an ‘independent’ appraiser in the first place is often largely to avoid exactly this sort of contact and it undermines their whole purpose in getting the appraisal done in the first place.

Clients routinely ask for minimally researched values. That doesn’t mean they get them. The appraiser always has the opportunity to decline. Often, their real concern is that they don’t want to leave the property out of their control and in most cases it’s possible for the appraiser to collect all the necessary data, take the photos etc., let the client keep the item(s) and do the research and write the report afterwords.

I again point out that, in your scenario, YOU are acting as an appraiser and so what we have is a situation where 2 appraisers are disagreeing over the facts, methodology and/or conclusions. This is a fairly common situation. It often boils down to the client needing to compare the two appraisers and to chose which, if either, they consider to be reliable.

‘Review’ appraisals, where a prior appraiser’s work is the subject of the analysis is a whole field of appraising by itself. I recommend you avoid getting into this business lightly or as some sort of favor. It can be a minefield of legal entanglements if you’re not extremely careful and the fact that you aren’t charging for the service does not change this.

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

 

[strmrdr]

One piece of information is missing.
Is it a disagreement on the grading or a disagreement on value for that grade?

If its a disagreement on grading then I would seek a 3rd opinion.
But the disagreement would have to be between a GIA/AGS report and what the appraiser said because in that case the seller has to much of a stake in it.

Disagreements on value I would do my own homework and go back to the appraiser and ask them to defend the value they assigned.

 

[Rockdiamond]

Thank again Neil- very illuminating conversation!

Taking into account the perspective of a professional appraiser, there are potentially many difficult situations that may crop up.
I can see that having to make an evaluation when the client is standing there must be very tough, especially if it''s a difficult to compare diamond- such as a Fancy Color

IN a case where we are asked to verify, or comment on an appraisal that is different than one we wrote- albeit for a different client- it seemed that we would be helping our original client- as well as the new buyer- but I can see, it could get sticky.


Karl- also great point.
I was specifically thinking about value....
But it would seem that if an apprasier disagress with a GIA or AGSL grade, that puts them in a little but of a tough spot- having to contradict AGS or GIA.....

 

[Richard Sherwood]

I don't mind being asked about how I arrived at a grade, or value, as long as the client gives me the okay to discuss it.

Whenever a client (or seller) disputes an analysis or assigned value I tell them I would be happy to reconsider my opinion if they produce any credible documentation or information which supports their argument. Invoices, certs, credible comps, etc.

It doesn't happen often, but there have been times when I've changed my opinion after being shown solid evidence to the contrary.

I must say that pricing a fancy vivid according to fancy intense prices is a pretty uninformed analysis. Somebody should point it out to him. It's better to pass on an appraisal which is out of your area of expertise rather than sign your name to a grossly incorrect document.

 

[oldminer]

Value is a difficult thing to pin down on the exotic end of the business. This part of the business includes the upper ranges of fancy color diamonds, the more exotic high end of emeralds, rubies, sapphires, chrysoberyl, black opals, and on and on. Few appraisers have a great way to handle on the spot value judgments on items they rarely see, but the tools for a careful, though less rapid assessment of value do exist to help appraisers.

The appraiser must be aware of their own limitations. This often does not happen.
The client must understand the nature of their exotic gemstone and not expect instant value assessment. The seller can warn the client not to expect an immediate value to be given.
The seller must otherwise keep out of the picture and cooperate with the process. If the seller feels the appraiser made an error, the client can be told and the appraiser should review their value decisions. However, if the valuation was done properly, the appraiser is likely going to stay where they are and the seller will not be a happy camper.... Sometimes a sale is lost due to such problems, but not many. If the appraiser finds an error or a way to alter the value, so be it, but the buyer really can't know if that is proper or not. It casts a degree of doubt on the objectivity and knowledge of the appraiser. Sellers want to make every sale and appraisers don't want to look like fools. There are times where no one is going to win.

A good appraiser will have an open mind to any pertinent information supplied to them. They may feel the information is invalid because of bias or lack of reliability, but they may feel it is good information to be used. No one but the appraiser can make that call.

I have had sellers come in with their customers for an appraisal. Sometimes they play fair and sometimes they want to interfere. I roll with the punches, but it is uncomfortable to be in the hot seat. Having words put into my mouth by a seller is really unwelcome. This is a situation which the seller simply can't hope to control and probably that ends up being for the better nearly all the time. Once in a while something unfortunate happens.

 

[Rockdiamond]

Thank you so much David, and Richard- as I mentioned, seeing this from the appraisers viewpoint is truly a great education.

I suppose one of the things that seems to be apparent is that simply walking into a place called "Appraiser" without due diligence could really bring unwelcome, or unreliable results.
It really does highlight the value of a site like PS- where people can get an informed recommendation of a competent appraiser.

Richard brings up part of the reason I had a question at all.

Date: 2/25/2009 2:59:29 PM
Author: Richard Sherwood
I must say that pricing a fancy vivid according to fancy intense prices is a pretty uninformed analysis. Somebody should point it out to him.

If , for example, we buy natural blue diamonds regularly, and the appraisal is undervaluing a blue diamond, part of me feels that discussing how the comparable was arrived at would assist both appraiser, and seller- which ultimately assists the buyer.
Maybe either party might have info that would be beneficial to the other.
But I can see how it could be seen as a conflict of interest.

Interesting quandary.....

 

[purrfectpear]

Are we operating under the assumption that the determination of whether the diamond was fancy yellow, intense fancy yellow, or vivid fancy yellow was done by GIA, or was it just the seller's opinion at time of the initial sale?

 

[Rockdiamond]

Purrfect- in the case I mentioned about the walk in guy from years ago, he was handed the diamond ( which was set into a ring) and the original GIA report. He knew it was graded Fancy Vivid Yellow by GIA- and there was really no doubt to any sort of trained observer, the stone was incredibly pure yellow.
There are borderline GIA Vivid Yellows- stones that might have gotten Fancy Intense Yellow on another day. Not the one in quesiton, it was a screamer.

It''s really a bad example, as his methods were clearly not up tp the standards of the appraisers here......

 

[Dancing Fire]

okay a stupid Q....does GIA use a master set of yellow stones for grading yellow diamonds?

 

[Rockdiamond]

I''d say that''s a very good question DF!
Maybe someone else knows, but GIA is already closed. If no one does know, I''ll give them a call tomorrow.

 

[Modified Brilliant]

Date: 2/25/2009 3:11:35 PM
Author: oldminer
Value is a difficult thing to pin down on the exotic end of the business. This part of the business includes the upper ranges of fancy color diamonds, the more exotic high end of emeralds, rubies, sapphires, chrysoberyl, black opals, and on and on. Few appraisers have a great way to handle on the spot value judgments on items they rarely see, but the tools for a careful, though less rapid assessment of value do exist to help appraisers.

The appraiser must be aware of their own limitations. This often does not happen.
The client must understand the nature of their exotic gemstone and not expect instant value assessment. The seller can warn the client not to expect an immediate value to be given.
The seller must otherwise keep out of the picture and cooperate with the process. If the seller feels the appraiser made an error, the client can be told and the appraiser should review their value decisions. However, if the valuation was done properly, the appraiser is likely going to stay where they are and the seller will not be a happy camper.... Sometimes a sale is lost due to such problems, but not many. If the appraiser finds an error or a way to alter the value, so be it, but the buyer really can''t know if that is proper or not. It casts a degree of doubt on the objectivity and knowledge of the appraiser. Sellers want to make every sale and appraisers don''t want to look like fools. There are times where no one is going to win.

A good appraiser will have an open mind to any pertinent information supplied to them. They may feel the information is invalid because of bias or lack of reliability, but they may feel it is good information to be used. No one but the appraiser can make that call.

I have had sellers come in with their customers for an appraisal. Sometimes they play fair and sometimes they want to interfere. I roll with the punches, but it is uncomfortable to be in the hot seat. Having words put into my mouth by a seller is really unwelcome. This is a situation which the seller simply can''t hope to control and probably that ends up being for the better nearly all the time. Once in a while something unfortunate happens.

Correct...mostly because ego gets in the way.

Most professional appraisers have a vast network of specialists to contact for just about any jewelry or gemstone related question.
If you don''t see fancy or vivid colored diamonds on a fairly regular basis...admit it..and get some guidance. A true professional knows how
to network and who to call for a second opinion.
It''s amazing that even though we think we''ve seen and appraised everything.... something completely new and different pops up.
It''s okay to say "I don''t know or I''m not 100% sure. Please allow me to research this further for the benefit of everyone."
It''s much worse to sign your name to something that you think may be incorrect.
Just my 2 cents.

www.metrojewelryappraisers.com

 

[shimmer]

Date: 2/25/2009 7:53:06 PM
Author: Dancing Fire
okay a stupid Q....does GIA use a master set of yellow stones for grading yellow diamonds?

According to my text, GIA uses a combination of comparison stones and printed standard color references for grading fancy colors.

 

[Rockdiamond]

Great point, and admirable business practice Jeff!
That''s part of the problem.
If people have visited a diamond forum, they are likely going to know the right type of questions to ask - or get a direct referral.
But for someone walking down the street, who happens to see a "appraiser" shingle, if they don''t know what to look for, it could be a problem. It''s understandable that there''s a lot of pressure.
The appraiser is working for a living, and appearing sure of what you''re doing might seem like the best way to go to some. Of course that''s a shame, if it happens.

Just as in any profession, you''ve got good ones and bad ones.....
Based on the ones that participate here, there''s some very good ones out there!