Why do people get so excited when their stone appraise over what they paid...

[Dancing Fire]

some people think they hit the lotto or something when their stone appraise over what they paid. Isn''t it normal for a stone to appraise 50% - 70% more than the purchase price?

 

[researcher]

My B/F and I were actually bummed when my diamond was appraised for >50% because we don't want to pay the insurance on it. As far as I know the only perk of a higher appraisal value is you have more money to work with when trying to replace it should anything happen to it (knock on wood nothing will). Lots of appraisers will appraise stones for more because they get a cut of the final appraisal amount, but the appraisers you'll find through PS don't work that way (as far as I know). What am I talking about? Oh, yeah. Not all appraisers will appraise the stone for 50% or more than the purchase price (see below). Our appraiser just based the cost on the rap sheets, so our appraisal value was based on the average $/ct for our stone.

-----------
From Dave Atlas:

One frequently misleading area that we should cover here is that many transactions, actual purchases, of diamonds today are at relatively nominal mark-ups. Purchases in the thousands of dollars may have mark-ups near to 10% sometimes although a bit more might be realistically required or expected, especially where there are some overhead costs, such as in a nice store or anywhere service at a high level is provided.

Truly, Retail Replacement Value on appraisals does not need to be higher than regular transaction prices in the market where you, as a consumer, make your normal purchases. Typically, appraisers will give something more akin to "average regional retail valuations". These somewhat inflated values are generally used as sales tools by many if not most retail sellers. This is considered an abuse by some and a regular way of doing business by most others. Just knowing about it is sufficient to make a consumer skeptical enough to not believe everything they read, regardless of who wrote it or signed it.

 

[moremoremore]

You are so right...some appraisers (not our trusted ps appraisers!) just inflate....it's really so stupid...A guy I was talking to was bragging that the ring that's 12000 appraised for 34000....that's just so dumb and clearly inflated...

 

[Richard Sherwood]

-----------
Isn't it normal for a stone to appraise 50% - 70% more than the
purchase price?
-----------

No, it all depends. If you bought your diamond at a full blown retail price from a mall chain store, it's not likely to even appraise for what you paid for it, much less 50 to 70% more.

On the other hand, if you purchased it for a small percentage above wholesale from an internet vendor, then the chances are pretty good that it might appraise at 50 to 70% more.

Most appraisals are done at an average retail value, which is considerably more than the very, very low retail value you encounter here from Pricescope vendors.

Why? Because the majority of diamonds are purchased at an average retail value from bricks & mortar jewelry stores. That value is far more common than the internet value, consequently it is the value that is used on most appraisals.

If you ask your appraiser to appraise it for low retail, or internet retail, he will be happy to do so. I've taken to including a page on which I list low traditional retail and expected internet pricing so the client can compare where his purchase price fell on that scale.

 

[Richard Sherwood]

-----------
Lots of appraisers will appraise stones for more because they get a
cut of the final appraisal amount,
-----------

Because this practice is considered unethical by the majority of appraisers and appraisal organizations, it occurs very rarely now. It used to be fairly common 20 years ago, but has been largely eradicated.

 

[strmrdr]

inflated appraisals are just another part of the game.
Just tell the appraiser to set a value 30% over what you paid for it and figure you should be ok for 2-3 years of debeers price increases as far as the insurance goes.
Then check the market once in a while and get an adjusted appraisal as needed.

No matter how much its insured for no insurance company will pay over the current price they can get the stone for, over insuring is just plain stupid.

 

[researcher]

Rich ~
That's good to know. We came across two in our search for an appraiser who said their rate was based on the size of our stone (basically the appraisal cost IMO), and then one appraiser who tried telling us we needed to pay for a consultation on our stone in addition to the standard fee (even though we said we just wanted to see the stone before buying and didn't even need him to look it over). The worst thing is one of the appraisers is listed on PS!

 

[Jennifer5973]

All my appraisals are always about what I'd pay at full retail and not much more. My jeweler says it's assuming if something happened, I'be be able to go into a retail store and replace it. The fact I get a great discount from him is irrelevant to the appraisal. Makes me think of "replacement value" vs what you paid for it at the time.

 

[Richard Sherwood]

Also, most appraisers use a "sliding scale" evaluation as the value of the item increases.

[General figures used for example purposes only]:

$200 cost Possible appraised value 150% markup
$1000 cost Possible appraised value 100% markup
$3000 cost Possible appraised value 75% markup
$10000 cost Possible appraised value 50% markup
$20000 cost Possible appraised value 25% markup

The appraised figures reflect the fact that vendors sell at lower markups the higher the value of the item.

These figures can be influenced by other factors though. If you're appraising a diamond purchased at Tiffany's, you would use the appropriate Tiffany's market level for pricing.

If you're appraising an EightStar, you would use the market level appropriate for EightStars, as it has a definite market "niche".

Same with recognized designer pieces. You don't use a percentage markup, but rather the market level pricing which that designer's work has consistently attained.

One of a kind antique pieces are a whole entity unto themselves. Some are irreplaceable. Some have a quality of workmanship which has disappeared from the marketplace. All these factors would increase the markup assigned to that piece.

A good appraiser has to have an eye for quality, an instinct for value, a comprehensive knowledge of the markets and a large set of "stones", because every time he puts a value on a piece he's sticking his neck out. Everybody loves to take pot shots at the appraiser.

It's kind of like being a baseball umpire, or football referee. Sooner or later you're going to tick somebody off.

 

[niceice]

"Why do people get so excited when their stone appraises over what they paid...?"

For the same reason that people flock to "sales" to buy things that have been excessively marked up so that they could be marked down again... 'Cuz their st-u-pid

It's amazing to us that people can walk into a jewelry store and pay full blown retail for a diamond and then "think" that they've gotten a deal because the same jeweler handed them an appraisal for exactly twice the amount they just paid for the piece... If the item were "really" worth that amount of money, don't they think that the jeweler would have charged them that much for the piece? It stands to reason... However, people fall for this tactic every day by the thousands... It's called a "feel good appraisal" in the industry, you "feel good" until you experience a loss and your insurance company tells you what the item is really worth on their level of the playing field and then you're peeved because you've been paying twice the insurance premium that you needed to pay for X number of years

 

[Richard Sherwood]

-----------
We came across two in our search for an appraiser who said their rate
was based on the size of our stone
-----------

This is considered fair and acceptable. No appraiser is going to charge the same price for appraising a 1 carat as he would for appraising a 7 carat. Increased responsibility, increased risk, increased research, increased examination. The difference between one color grade on a high quality 7 carat can make a $1000 per carat difference!

-----------
and then one appraiser who tried telling us we needed to pay for a
consultation on our stone in addition to the standard fee (even though
we said we just wanted to see the stone before buying and didn't even
need him to look it over).
-----------

I can understand how you feel, but I also understand where this appraiser is coming from. It's all based on time. An appraiser has typically six hours in a day to make his quota of money. As soon as he stops working (for whatever reason), the money stops coming in. Many people will say they just want to "see the stone", when invariably they end up asking him his opinion and a multitude of questions, steadily subtracting from those precious six hours he has to make his "nut".

I find this common with internet clients who come to my office. They ask me all the questions which they would ordinarily have asked the salesman at a jewelry store. I find that by the time I've answered all the questions, a half an hour or an hour has gone by, yet the client doesn't want to pay any more than the "standard" appraisal rate, even when the time expended is far more than a "standard" appraisal encounter.

Consequently, many appraisers have gone to charging a "consultation" rate in addition to the standard appraisal rate, or have increased the amount charged for the appraisal package in those kind of situations.

 

[verticalhorizon]

When I had my Jubilee appraised, it was difficult for them to figure out what to price it at, since it's a brand new cut. They wound up appraising it at bit more than what I paid and when I say a bit more, that's exactly what I mean.

This was ok, though b/c I'm not wishing that it gets lost so I can start the process all over again. I know that you can't over insure a piece, just for the heck of it, nor would I really want to.

However, didn't someone say that Chubb takes inflation into account, when issuing replacement value for a claim? If that's the case, then it's over appraising shouldn't really be an issue.

 

[researcher]

Rich,
I'm a business consultant so I understand your perspective, but we were quoted a minimum of almost $200 for the consultation (his hourly rate). Interestingly, when we did choose an appraiser we were there for no more than 20 minutes and only had to pay $40. I just think that things like that should be taken into consideration. The man we chose was very professional and charged a flat rate. While I understand that there's possibly more responsibility with a larger stone it still seems a little unfair (I don't charge more when working with larger organizations--and trust me, there's a LOT of money on the line when dealing with mergers and acquisitions). I guess my point to all of this was that there is no one way that appraisers work, that some will charge more, others less, and that the amount they appraise your stone for will vary as well. If someone is not happy with the first amount their stone is appraised for they can try someone else.

I do appreciate all your advice though! There are so many interesting things to learn about the "behind the scenes" operations of appraisers.

 

[Richard Sherwood]

I see. Well, that puts it in a better perspective, Researcher. I see your point.