What determine''s an appraiser''s status as "independent"?

[Richard Sherwood]

After confusion regarding the term between old hands in the business, I'm curious what consumers and the trade feel are essential requirements in order for an appraiser to call himself "independent".

 

[Karl_K]

In an ideal world the simple answer is:
A: works for himself or an agency whose only business is appraisals not sales
B: has no interest in the outcome of the sale
C: does no work at all for trade members

But the real world is never that simple.

Many appraisers could not earn a living without C.
The problem is disclosing who is a client is an invasion of the clients privacy but not disclosing a relationship is doing an even bigger disservice to the other client.
That gets very tricky very fast.

To me the worst thing an appraiser can do is have someone come in for an appraisal then turn it into an offer to buy or broker.
In the real world I don''t really care if an appraiser buys or sells but to mix the 2 is a serious breach in my view.
The reason being once that line is crossed it becomes and offer to buy which is by definition less reliable than an appraisal.
It always raises the question of how much influence the money that will be made from the sale affected the outcome of the appraisal.
It could be none but there is a very bad smell there.

 

[oldminer]

Universally defined as follows:

Free from the influence, guidance, or control of another or others; self-reliant: an independent mind.
Not determined or influenced by someone or something else; not contingent:
Affiliated with or loyal to no one political party or organization.
Not dependent on or affiliated with a larger or controlling entity:
Not relying on others for support, care, or funds; self-supporting.
Providing or being sufficient income to enable one to live without working: I especially like this last one

 

[John P]

Rich,

You participated in an interview series I conducted some time ago, related to this question.

Here's a similar Q with several answers, including your nicely stated position. I'd be curious to know if your opinion or others have changed since our visit back then.

Full Article here:
http://journal.pricescope.com/Articles/58/1/%E2%80%9CAppraise-the-Appraiser%E2%80%9D---Help-for-Consumers.aspx

*

III. Selecting An Appraiser: What is an “independent appraiser?”

Dave Atlas: A valuer who does not offer merchandise to his clients, but only offers advice which any fair examination would show to be unbiased. An independent does not recommend sources but does often give general buying advice.

Neil Beaty: There is no such thing. We in this business have relationships with one another, whether it’s vendors with each other, vendors with appraisers, labs-vendors-appraisers, etc. Since we interact with each other none of us is truly independent. I’ve stopped calling myself independent for this reason even though I’m far more independent than all but a couple in the country. I describe myself as a “professional” appraiser. The fundamental requirement for objectivity is someone who is not a participant in the transaction at hand. The next tier is someone who is not involved and who is not a competitor, supplier or customer of anyone in the transaction at hand. The next tier is someone who is not a participant in the jewelry industry at all. I just don’t think anyone is “above it all,” because if they were they are not involved enough in the trade to know what they need to know.

Patti Geolat: Someone that has no vested interest in the transaction.

Bill Lieberum (RIP): Someone who does not sell diamonds and jewelry and does not work for dealers. I do the reasonable person test: What would a person not being involved with the situation think of the position of the “independent appraiser” relative to the parties involved?

Anton-Nash: You don’t buy or sell jewelry. You don’t care who they bought it from and you don’t care what they are doing with it; anything illegal being the exception.

Richard Sherwood: An appraiser who does not buy or sell and is not connected with the principals involved in the transaction and is in a neutral position with the freedom to point out any positives or negatives. An “independent” appraiser needs to be fair to both parties involved no matter who hires him. No matter who pays the fee his conclusions should be the same.

*

Cheers,

 

[Richard Sherwood]

Damn you''re starting to get a lot of letters after your name, John.

I''m gonna have to start listening to you.

Heh heh heh...

I''d also be curious if anyone is aware of any major trade organizations, appraisal organizations or lab organizations that have a published description of what constitutes an "independent" appraiser. Maybe the likes of the GIA, AGS, AGA, ASA, NAJA, etc.

 

[denverappraiser]

Date: 5/6/2010 1:19:12 PM
Author: Richard Sherwood
Damn you're starting to get a lot of letters after your name, John.

I'm gonna have to start listening to you.

Heh heh heh...

I'd also be curious if anyone is aware of any major trade organizations, appraisal organizations or lab organizations that have a published description of what constitutes an 'independent' appraiser. Maybe the likes of the GIA, AGS, AGA, ASA, NAJA, etc.

GIA has no appraisal rules or definitions of any kind. They don’t even teach appraising. Similarly, AGA is not an appraisal organization.

AGS offers appraisal training and credentials and they have a title called ‘Independent Certified Gemologist Appraiser (ICGA). As far as I know, this is the only one of the organizations that addresses the issue at all. Here’s the description from their website:

This title is awarded to the individual member whose sole business is appraising. The ICGA does not engage in purchasing or selling gems or jewelry. In addition to the requirements for the CGA, the independent appraiser has completed an extensive course in personal property appraising and is responsible for submitting proof of continuing education every five years

http://www.americangemsociety.org/requirededucation.htm

NAJA has several different appraisal credentials and all their members, regardless of their titles, must subscribe to a code of ethics that includes issues about conflicts of interest and disclosure to clients. It doesn’t discuss the issue of ‘independent’ appraisers. Presence of a properly disclosed conflict of interest is not, of itself, a ethics violation (nor do I think it should be).

ASA has a similar code of ethics to NAJA's that relates to some of the abuses that are worried about in this area but they too don’t discuss who is and who is not 'independent'.

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

 

[John P]

Date: 5/6/2010 1:19:12 PM
Author: Richard Sherwood

Damn you're starting to get a lot of letters after your name, John.

I'm gonna have to start listening to you.

Heh heh heh...

I'd also be curious if anyone is aware of any major trade organizations, appraisal organizations or lab organizations that have a published description of what constitutes an 'independent' appraiser. Maybe the likes of the GIA, AGS, AGA, ASA, NAJA, etc.

Making up for lost hair Rich.

I still need stone ID for my GaGa. Been pushing them (and others) to move forward with a cut-specific curriculum: Historical overview w/ separate courses on reflectors/angularspec, proportions studies and ray-tracing. Easy to combine elements from Al's book, Okuda/Holloway/Gilbertson/Sasian and OctoNus. I might just develop it on my own.

On-topic: I wish appraisers had any continuing ed or update requirements to continue using XYZ credentials... Hairdressers and bartenders have a stricter code. Is it too much to ask for equal talent when I'm at the Haircut-Wine-Bar having my ring appraised?

 

[denverappraiser]

Date: 5/6/2010 1:41:13 PM
Author: John Pollard
On-topic: I wish appraisers had any continuing ed or update requirements to continue using XYZ credentials... Hairdressers and bartenders have a stricter code. Is it too much to ask for equal talent when I'm at the Haircut-Wine-Bar having my ring appraised?

John,

Appraisers with credentials from AGS,ASA, NAJA, ISA and I'm sure others do have continuing education requirements and in some cases it's a pretty significant chore to maintain these credentials. A GG is not an appraisal credential.

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

 

[John P]

You're right Neil. I should have just written GG instead of XYZ. Trying not to get myself whacked.

 

[Richard Sherwood]

Thanks Neil. That's great info.

Do you feel there's any value to the designation of "independent"?

For example, you're an AGS designated ICGA (Independent Certified Gemologist Appraiser). I know that wasn't an easy title to attain. Do you attach any value to the "independent" portion of that title?

 

[denverappraiser]

Rich,

I continue to maintain my AGS membership and my ICGA title because AGS is a source of referral clients to me and because I like to be associated with the organization. I think they are the premier jewelers organization in the United States and I’m proud to be a full member. As I’ve mentioned before, I rarely market myself as ‘independent’ anyway, even though I meet their requirements.

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

 

[Richard Sherwood]

Do you think that if AGS found out you were buying and selling (which I know you don''t, but for hypothetical sake), they would revoke your ICGA designation?

How ''bout if you were the principal in another company you started, in which you bought and sold jewelry? Do you think they would revoke your independent status?

 

[Modified Brilliant]

As a professional appraiser I make it part of my "personal" annual requirement to attend at least 2 conferences
or seminars sponsored by a gemological or appraisal organization.
It just makes sense to stay on top of new topics, treatments, etc. What professional wouldn''t want to do this?

Because I''m a sole proprietor it isn''t always easy to take time off but I attend when I can because it''s so important.
I''m in favor of continuing education requirements.

I''m looking forward to attending the next World of Gemstones conference in Chicago in October.

 

[Richard Sherwood]

Hi Jeff. If asked specifically, do you acknowledge being an "independent" appraiser?

What aspects do you feel designate an appraiser as being "independent"?

What aspects do you feel would keep an appraiser from being considered "independent"?

 

[denverappraiser]

Date: 5/6/2010 2:23:52 PM
Author: Richard Sherwood
Do you think that if AGS found out you were buying and selling (which I know you don't, but for hypothetical sake), they would revoke your ICGA designation?

How 'bout if you were the principal in another company you started, in which you bought and sold jewelry? Do you think they would revoke your independent status?

AGS has a code of ethics signed by all members and a grievance procedure to enforce it. If people feel that a member or member firm is not upholding their obligations and they can convince the grievance folks of this then yes, expulsion is an option. I’ve never actually seen how the procedure plays out but every year there are a few people that get kicked out. As far as I know, this has never happened to an ICGA but yes, the option is available.

There are no rules restricting a titleholder from investing in or working for other companies, including companies that buy and sell jewelry, although an AGS titleholder is forbidden to use their title in conjunction with a non-AGS firm. That is to say, a titleholder, employee or owner of a member firm can invest in or have a job working at a pawnshop, auction house, jeweler or whatever if they want, but they are not permitted to use their AGS title in conjunction with that other job (unless it's also an AGS member firm).

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

 

[Modified Brilliant]

Date: 5/6/2010 2:45:47 PM
Author: Richard Sherwood
Hi Jeff. If asked specifically, do you acknowledge being an ''independent'' appraiser?

What aspects do you feel designate an appraiser as being ''independent''?

What aspects do you feel would keep an appraiser from being considered ''independent''?

Hi Rich.
Yes, I do acknowledge being an "independent" appraiser as I only work for the client and have your best interests at heart.
My immediate thought (the short version) is that as a professional appraiser, I am called upon to
do a job, for example "appraise a ring for insurance purposes." I have no personal interest in where you purchased it
or what the quality is, whether I like or dislike the style, or how much you paid.
I will however provide you with an independent analysis prepared specifically for you.
I do not believe that an appraiser who also sells retail should be considered independent.
You can perform appraisals for "clients" of retailers and still be independent.
One should not be grading diamonds for retailers inventory as an independent appraiser.
But what if you are a "laboratory" and an "appraiser" who is asked to provide diamond grading for a retailer''s
inventory?
_________________________________________________________________

I am in agreement with Karl and I quote:

In an ideal world the simple answer is:
A: works for himself or an agency whose only business is appraisals not sales
B: has no interest in the outcome of the sale
C: does no work at all for trade members

But the real world is never that simple.

Many appraisers could not earn a living without C.

------------------------------------------------------------------------------------------------------------------

 

[Rhino]

An independant appraiser can be summarized in 3 simple words.

No vested interest.

 

[Rockdiamond]

John brought up a great point: qualifications.
IN a sense, I'd say appraisers are in a very tight position, as it relates to the issue of being independent..
On the one hand, if they buy and sell, it can be seen as an issue.
On the other hand, if they don't, they are bound to have far less of a grasp on market conditions.

An argument could be made that sellers have a far better ability to assign market value to items......

I believe it's quite a difficult task for consumers to find the right independent appraiser- especially on more unusual items- such as Fancy Colored Diamonds.

 

[CharmyPoo]

Of all the responses John posted above, I like Neil''s answer the best. It is the point I was trying to make in a separate post. No appraiser is truly independent. For me though, you are absolutely not independent if you are in the business of purchasing and re-selling jewelry regardless if it is to trade or individual consumers.

 

[zhuzhu]

If GIA and AGA do not provide trainings for appraisal, and AGS only provide certification (ICGA) that is not even required for anyone who wants to open an appraisal business. How in the world can we consumers be sure we are dealing with a competent AND ethical appraiser?

I am lucky that I already have one I trust locally, but if I don''t, I would be very troubled to learn how little training and professional adherence to rule/regulations there are for an appraiser.

 

[Modified Brilliant]

Date: 5/6/2010 5:22:23 PM
Author: Rockdiamond
John brought up a great point: qualifications.
IN a sense, I''d say appraisers are in a very tight position, as it relates to the issue of being independent..
On the one hand, if they buy and sell, it can be seen as an issue.
On the other hand, if they don''t, they are bound to have far less of a grasp on market conditions.

An argument could be made that sellers have a far better ability to assign market value to items......

I believe it''s quite a difficult task for consumers to find the right independent appraiser- especially on more unusual items- such as Fancy Colored Diamonds.

It''s not that uncommon that appraisers in other industries also own retail stores.
I have friends who are well respected in their fields and are excellent appraisers who really know the markets and belong to major appraisal organizations.
They specialize in oriental rugs, asian art, fine art, etc.

 

[Modified Brilliant]

Date: 5/6/2010 8:52:17 PM
Author: zhuzhu
If GIA and AGA do not provide trainings for appraisal, and AGS only provide certification (ICGA) that is not even required for anyone who wants to open an appraisal business. How in the world can we consumers be sure we are dealing with a competent AND ethical appraiser?

I am lucky that I already have one I trust locally, but if I don''t, I would be very troubled to learn how little training and professional adherence to rule/regulations there are for an appraiser.

Yes, it is troubling that anyone can hang a shingle out and call themselves an appraiser.
A consumer must practice due diligence when choosing an appraiser...just as one would choosing a diamond vendor.
I believe Ronald Reagan often said, "Trust but Verify."

 

[zhuzhu]

Trust but verify - verification can not be done without a well-respected organization holding its members accountable for their conducts. What is the organization that all professional appraisers report to? If there isn''t one there really should be one.

 

[Rockdiamond]

Date: 5/6/2010 8:57:37 PM
Author: Modified Brilliant

Date: 5/6/2010 5:22:23 PM
Author: Rockdiamond
John brought up a great point: qualifications.
IN a sense, I''d say appraisers are in a very tight position, as it relates to the issue of being independent..
On the one hand, if they buy and sell, it can be seen as an issue.
On the other hand, if they don''t, they are bound to have far less of a grasp on market conditions.

An argument could be made that sellers have a far better ability to assign market value to items......

I believe it''s quite a difficult task for consumers to find the right independent appraiser- especially on more unusual items- such as Fancy Colored Diamonds.

It''s not that uncommon that appraisers in other industries also own retail stores.
I have friends who are well respected in their fields and are excellent appraisers who really know the markets and belong to major appraisal organizations.
They specialize in oriental rugs, asian art, fine art, etc.

Jeff- this goes straight to the point- in favor of appraisers who own businesses.
It makes all the sense in the world, based on ethical principles that appraisers should be neutral- and making sure they don''t use preferential values for their own purposes is why you want them not buying and selling.
The reality for consumers is that many places offering Jewelry appraisal services are nowhere up to the standards of the appraisers posting here in terms of knowledge foremost, and also ethics.
If the sole purpose of the appraisal is assigning a replacement value, it''s likely that in a percentage of cases consumers can get more accurate info from sellers.
If a seller prepares the documents correctly, they will be acceptable to insurance companies.
But now we''re trusting the seller.... at some point you have to trust someone.

I don''t think there''s one single workable answer to this one.

ZhuZhu- your points are well taken. There are organizations governing the appraisal trade... but let''s face it, they''re not sending out "appraisal police"

 

[Cehrabehra]

Date: 5/6/2010 5:00:40 PM
Author: Rhino
An independant appraiser can be summarized in 3 simple words.


No vested interest.

I like that answer, Jon.

Do you think that an appraiser who works closely or is in partnership with someone who buys or sells crosses the line? Seems like they''re following the letter but not the spirit of the title. More of a technicality than a reality?

 

[arjunajane]

Date: 5/6/2010 1:19:12 PM
Author: Richard Sherwood



I''d also be curious if anyone is aware of any major trade organizations, appraisal organizations or lab organizations that have a published description of what constitutes an ''independent'' appraiser. Maybe the likes of the GIA, AGS, AGA, ASA, NAJA, etc.

Hey Rich,

I recently received an appraisal from LA IGL (Independent Gemological Laboratory) with purchase.
The third page has a "Certification of Appraisal Practice" which is signed by the GG.
It reads as following (I have excluded some points which don''t seem pertinent to your question)


""The reported analysis, opinions and conclusions are limited only by the reported assumptions and limiting conditions, and are my personal, unbiased, professional analysis, opinions and valuations.

I have no present or contemplated interest in the object which is the subject of the appraisal report which might tend to prevent making a fair and unbiased appraisal.

I received no separate, significant professional assistance.

This report has been made in conformity with the requirements of the code of professional ethics and standards of professional conduct of National Association of Jewelry Appraisers.

My compensation is not contingent on an action or event resulting from analysis, opinions on conclusion, or the use of, the report.

My compensation is based on an hourly rate or piece rate and is not dependent upon the amount of value determined at the conclusion of the work; neither as a fixed percentage of the value determination or as compensation connected to a predetermined scale relating to fee to value range.""


I''m not sure if this business counts as "major", but I did think it added an extra factor of professionalism to the report...even if it is a lot wordier than Rhino''s definition

 

[denverappraiser]

There are several ‘competing’ organizations that have codes of ethics that they hold their members to and who offer training, credentials etc. Clients can, and in my opinion should, look for these sorts of credentials before hiring an appraiser. In the US these include:

American Gem Society
National Association of Jewelry Appraisers
American Society of Appraisers
International Society of Appraisers
American Association of Auctioneers

There are no doubt others but all of the above have websites where you can look up the status of their members credentials and have a procedure for complaining if you feel they have treated you wrongly as a client. Credentials aren’t required by law and I don’t think they should be required by law. I do think clients should consider this sort of thing when shopping for an appraiser but, in the end, it’s up to each client to choose their expert advisor on whatever criteria they wish. A bit of advice that's often given here is to 'appraise your appraiser' and I think credentials play an important role in that process.

There is a set of rules called the ‘Uniform Standards for Professional Appraisal Practice’, aka USPAP that applies to most appraisals done for legal or tax type purposes and nearly all appraisals involving real estate. I rather like USPAP but I’m unusual in that and there are definitely some elements that are intended for other types of appraisal work that don’t really apply to jewelry. Some of the above societies (ASA, NAJA that I know of) require USPAP compliance from their members, others, like AGS do not.

Ajunajane, what you’ve got is a portion of a statement required for all USPAP compliant appraisals called the 'certification' although it specifically mentions the NAJA ethics rules as well. I suspect the things you omitted are also from the USPAP rules.

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

 

[arjunajane]

Date: 5/6/2010 11:56:37 PM
Author: denverappraiser



Ajunajane, what you’ve got is a portion of a statement required for all USPAP compliant appraisals called the ''certification'' although it specifically mentions the NAJA ethics rules as well. I suspect the things you omitted are also from the USPAP rules.


Neil Beaty

GG(GIA) ICGA(AGS) NAJA

Professional Appraisals in Denver

Right, got it thanks Neil for the info

 

[John P]

Date: 5/6/2010 11:56:37 PM
Author: denverappraiser

There are several ‘competing’ organizations that have codes of ethics that they hold their members to and who offer training, credentials etc. Clients can, and in my opinion should, look for these sorts of credentials before hiring an appraiser. In the US these include:

American Gem Society
National Association of Jewelry Appraisers
American Society of Appraisers
International Society of Appraisers
American Association of Auctioneers

There are no doubt others but all of the above have websites where you can look up the status of their members credentials and have a procedure for complaining if you feel they have treated you wrongly as a client. Credentials aren’t required by law and I don’t think they should be required by law. I do think clients should consider this sort of thing when shopping for an appraiser but, in the end, it’s up to each client to choose their expert advisor on whatever criteria they wish. A bit of advice that's often given here is to 'appraise your appraiser' and I think credentials play an important role in that process.

I don't know Neil. In a perfect world I'd agree, but entry-level consumers have no idea this is unregulated. They can go in blindly unaware of the potential for bad or scandalous service. Sure, this isn't the case for anyone with a PS education but in the real world people often assume a "professional appraiser" has been through some kind of vetting process, just as they do when they walk into a doctor or real estate agent's office (or hairdresser).

I'm pretty sure most PS vendors can relate to this experience: Sale finished ...Client overjoyed

...Client calls MAD

b/c an appraiser said she overpaid ...Who's the appraiser?

...He works at XYZ Jewelers... Oh, it's a competitor

...Client unsure what to believe

...No problem we want you to be happy, please get XYZ to put what he said in writing

(they will never, ever, ever do this) ...Client calls back, XYZ's skirt has officially been blown up, she 'gets' what happened and is overjoyed again ...Cue sunset.

Last year I was doing staff training for a dealer when a kid and his mom came into the showroom. They had a ring and wanted our dealer to make an offer on it. The accompanying appraisal was complete nonsense - the sales mgr gently told them this. It turns out the "appraiser" was the jeweler who sold it to them. By itself that may not have been a problem, but this character's main pitch was that they could turn around after purchase, walk into any store and be offered 50% more than they paid. He used the appraisal to "prove it" (about a 100% markup over retail). And of course - you knew it was coming - this guy's store was no longer in business. The good news is that they were not taken to the cleaners on the initial sale. But they were shocked to lean that this guy would not"lose his license" to be an appraiser for the act.

 

[denverappraiser]

I understand that there are quite a few idiot appraisers out there, including some with fairly impressive resumes as well as some with no appraisal credentials at all who do excellent work. It’s a tricky problem.

I think the model of real estate may be fairly instructive. After the collapse of the Savings and Loan industry back in the 80’s and the post mortem observations of the appraisal profession’s involvement in that debacle, every state in the union passed laws requiring RE appraisers to have a license. They passed laws limiting how banks could relate to appraisers, who could hire them and how, how they could be paid and by whom, who ‘owns’ the data, what sorts of methodology must be used, whats sorts of formats should be used in reporting etc. There are a ton or rules and schools all over the place teaching appraisers how to comply with those rules and how to pass the licensure exams. Here we are 20 years later with the federal government needing to take possession of ‘toxic assets’ where the ‘value’ boils down to what these licensed appraisers have said and done. The costs of appraisal services have gone way up, the reports are nearly indecipherable for those who aren’t familiar with the system and they’re laughably incomplete for those who are. Who has benefited by this? It raised the revenues for the appraisers (at least the dumb ones) and it adds plausible deniability for the appraisers, bankers and politicians but, in my opinion, consumers and even investors haven’t gained one whit by it. The licenses aren’t generally that difficult to get, producing compliant documents is generally done by software anyway, and it only indirectly has advanced the skills of the people doing the work. People are led to believe that all licensed appraisers are of equal merit and that they only step to choosing a good one is to check their license. In many cases they aren’t even PERMITTED to choose an appraiser on their individual merits. It downgrades the best and encourages the fools. In my opinion good appraising STILL boils down to the character and ethics of the person doing the work, it still boils down to the experience and willingness to work on the part of the appraiser, and it’s still a matter of good communication between the appraiser and their client. Even with licenses, some appraisers are going to be better than others and shopping for that difference will continue to be important for people that want to get the most useful services.

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