questions for the appraisers

[RLG]

I got my appraisal on Friday and a couple of questions are just nagging at me. She appraised my engagement ring for $500 dollars more than we paid for it, but I felt like she had bias against the stone given it was bought on the internet. She mentioned that once she knew that we had bought the stone over the internet she had to keep that in mind when placing a value. Is it common to practice to factor in where the stone was bought in the appraisal price? Is a stone bought in a B&M appraised for more? I was not looking for an overly inflated appraisal price, but just wondering on the effect of the internet into the appraisal process. My second question is about another piece of jewelry that I had the appraiser look at. It is a cartier piece that I purchased from signed pieces, so it is gently used. Despite the fact that she mentioned to insure it for the price of a new piece, the bottom of her report that she puts in a statement that reads “At this time, similar Cartier Trinity ring sets are currently advertised in very good condition on selective internet sites in the $1,500 range although their authenticity has not been verified first hand by the appraiser.” Is this common practice? I would think that her job would be limited to looking at the pieces in brought into her and not commenting on other pieces in the market. Also do people commonly provide receipts when they have pieces appraised? So tell me do I have appraiser naivety or is this just odd? Thanks for reading through that long post.

 

[cheethoe]

I''m not an appraiser but when I got my diamonds appriased they were appraised for the demographic that I purchased them because different demographics mark up stones by different percentages. My demographic was the internet emographic.

 

[oldminer]

I have generally initially make replacement appraisals based on "average retail in my local market" before discussing any of the details with clients. This makes the appraisal unbiased. Of course, diamonds bought on thye Internet have a lower retail value than those bought in the regular B&M market. This is not an appraiser bias against the Internet, but reflects reality of the free market. Once the details are discussed, I can always adjust the replacement level and value estimate to one closer to the market the client prefers to be a buyer in. You must carry sufficient coverage to make a replacement and I don''t care where you prefer to buy.

A real esate appraiser in San Francisco appraises a small home there for a million dollars which would appraise in Philadelphia for two hundred thousand dollars. Again, this isn''t bias and it may serve as some sort of more recognizable example. It is not a perfect analogy, but I think it works to demonstrate a point I am trying to make. Real estate and gems are not totally alike.

You may have had services from an appraiser who had a bias, too. Was this appraisal performed in a retail jewelry store or in an office where nothing is retailed except appraisal services?

 

[denverappraiser]

The job of the appraiser is to provide you with accurate and useful information. The correct answer to the wrong question is doing you no good at all.

With most jewelry appraisals, the definition of value is something on the order of : The expected funding necessary to replace the item with another of like kind and quality in the defined marketplace and in a reasonable amount of time.

The definition is important and it should be included prominently in the body of the report. There are plenty of other choices. For example, how much you can get for it on forced resale, how much things like it have been selling for in a particular marketplace are both perfectly valid definitions of value that often produce wildly different answers. Again, the right answer to the wrong question is worthless so it’s important to understand what question is being answered.

For replacement type appraisals, what market is the appropriate one to use? Mall retail? Wholesale? In the appraiser’s store? Pawnshop? Internet? What you would get for it if you sold it in a hurry on Craigslist? What it would cost to order a custom made match for it in the gift shop at the Bellagio in Vegas? These are not the same questions even though they could all be described as what an item is ‘worth’. In the case of a replacement type appraisal, how are they expecting this replacement to be done? There’s no right answer these questions and the answers differ wildly. For this reason, the appraiser has to spell it out in the report. As I’m sure you know, the same item can cost different amounts in different places and at different times. A hot dog costs more at the ballpark than at the grocery but this doesn’t help if your real question is trying to decide which grocery is the best or if you just bought one and you’re trying to decide if you got a deal. That’s answering the wrong question. In most jewelry appraisal cases, the defined marketplace is the cost of new merchandise in a retail jewelry store in the local community and it should say this in the report. If we’re talking about a used Cartier piece, the asking price of a new one at a Cartier store may be entirely irrelevant. If we’re talking about a new purchase of a diamond from a discount Internet house, the expected cost at a retail store in Aspen may be equally irrelevant. That’s part of why a well crafted appraisal report takes more than one line of text with a number at the end.

The answer to your question lies in the fine print of the appraisal. What is the definition of value being used? What marketplace was chosen? How was the product defined (new/used, grading details, designer details, provenance, etc.). Are these details appropriate for the question at hand? If not, talk to your appraiser about it. For their answer to be useful answer, both you and they have to understand the question. The best time to have this discussion is right at the beginning, before they do the inspection and the market research and yes, it’s often helpful to have the prior paperwork issued by the seller and/or previous appraisers. Most good appraisers charge by the hour and changing the question in mid-stream or after the report has been written will result in an additional fee. They can write a report covering every contingency and all of the various options but most people won’t like the fee. Usually they have very specific informational objectives and don’t even understand the options. A surprising number of appraisers don’t even understand the options. There’s nothing wrong or unreasonable with this and it’s all part of the process but it can come as a real shock to people who aren’t expecting it. It’s not especially unusual, for example, for an estate client to need as many as 3 different appraisals for the same item valued on the same date (Fair Market Value for estate taxation purposes, Market value for equitable distribution purposes between the heirs or resale evaluation and insurance replacement value for the heir who receives the item).

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

 

[RLG]

Thank you both for taking the time to explain what I was trying ask. I very much understand the the house location analogy. I think there are signifiant amount of details in the report to replace the item with a similar ring should something happened to it. I guess I was just surprised with the admitted difference to the appraisal price from the internet vs if I had bought it out in town here.

 

[denverappraiser]

In appraisal theory there are three major components that come into play. The item, the marketplace and the date. A house in San Fransisco is simply not the same thing as similar a house in Kansas City and converting one into the other is impossible. This is why real estate people use the slogan ‘location location location’ to describe the 3 most important value characteristics of a piece of property. At the same time, the marketplace, meaning the way you go about buying or selling a house and the cost of realtors, inspectors, title insurance, etc. are remarkably similar no matter where you are. You’re going to pay between 5-10% for these things pretty much no matter where you do it.

With jewelry, and especially with diamonds, the opposite is true. Location is of very little concern and moving from one place to another is a simple matter of sending a few dollars to FedEx and a single day waiting. A stone in Kansas or Colorado is not significantly different from one in New York or Antwerp simply because of it’s location (there may be other differences). What changes is the marketplace. Some dealers charge a lot less than others. Some are far more forthcoming with accurate shopping information than others. Some include ‘free’ services like tradeup programs, setting services, warranties and convenient display while others have a more bare bones approach and aim for a lower price. This is why a diamond costs more in one store than the same diamond would cost elsewhere. Whether this is ‘worth’ it depends on what you want and what you consider valuable but for appraisal purposes it’s terribly important to be clear about what is and what is not involved.

The insurers, quite reasonably, want to make their clients whole again for the lowest cost possible and they hire some savvy shoppers for this purpose but many people would not consider it ‘fair’ for them to mail you a package from their own centralized vault even though this is obviously the least expensive way to do it and even though this may be exactly what you have done with your Internet purchase. People generally want to get it replaced at a jewelry store where they can speak with a real person and the people who own and work at the store expect to be paid for their service. The compromise is that the replacement usually happens at a more-or-less local jeweler that they have beat up in advance on the prices. In exchange for the insurance company’s referral of your business, the jeweler agrees to give their best prices up front without the need to wait for a sale to come along. The insurer sends the appraisal documents, the jeweler quotes a price to replace it based on the description and the company sends you directly to the jeweler to negotiate the final details and to pick out the right piece. At the end, the jeweler bills the insurance company and they work out the money behind the scenes. How much of a discount they get depends on the jeweler, the item and how much leverage the insurer can apply. Given a decent appraisal that contains sufficient information about what exactly was lost, this system works out well for both you and the insurer even though it costs them a little more than the rock bottom prices people are becoming accustomed to seeing on Internet searches.

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

 

[Ellen]

R, I haven''t weighed in, as I didn''t have her do a full appraisal, I felt what info I had was already enough. I really just felt, since it was my first internet purchase, and rather sizable, that it was prudent to make sure the stone matched the cert, and that I got a good price.


And I''m glad you got such thorough answers to you questions. This may very well help someone in the future.

 

[RLG]

Denver appraiser- Thank you again for the very thoughtful response.
Ellen- I also hope this thread will be helpful to someone else as well.

 

[strmrdr]

with the crazy price increases going on right now $500 isn''t enough overhead too last 3 years an anything but a small stone.
1ct vs has gone up that much in the last 6 months not too mention gold/plat prices.
I would have a word or 5 with the appraiser and get it quoted local market.

 

[risingsun]

Date: 4/6/2008 9:21:14 AM
Author: denverappraiser


For replacement type appraisals, what market is the appropriate one to use? Mall retail? Wholesale? In the appraiser’s store? Pawnshop? Internet? What you would get for it if you sold it in a hurry on Craigslist? What it would cost to order a custom made match for it in the gift shop at the Bellagio in Vegas? These are not the same questions even though they could all be described as what an item is ‘worth’. In the case of a replacement type appraisal, how are they expecting this replacement to be done? There’s no right answer these questions and the answers differ wildly. For this reason, the appraiser has to spell it out in the report. As I’m sure you know, the same item can cost different amounts in different places and at different times. A hot dog costs more at the ballpark than at the grocery but this doesn’t help if your real question is trying to decide which grocery is the best or if you just bought one and you’re trying to decide if you got a deal. That’s answering the wrong question. In most jewelry appraisal cases, the defined marketplace is the cost of new merchandise in a retail jewelry store in the local community and it should say this in the report. If we’re talking about a used Cartier piece, the asking price of a new one at a Cartier store may be entirely irrelevant. If we’re talking about a new purchase of a diamond from a discount Internet house, the expected cost at a retail store in Aspen may be equally irrelevant. That’s part of why a well crafted appraisal report takes more than one line of text with a number at the end.


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

I bought my diamond online, but asked for the retail appraisal. I want the flexibility to replace a diamond in the market I choose and am willing to pay the premium. I also have a Cartier Trinity ring. I insured it for the replacement value. I can''t replace it at the "it''s already been worn price."

 

[arjunajane]

oopS! wrong thread, sorry!