DIAMOND APPRAISERS: Why you need one and what to expect.

Why you need a diamond
appraiser.

The services of an independent appraiser are increasingly of importance in today’s complex market environment.
As consumers have grown in sophistication and education, diamonds have gotten
more costly, and many previously unheard of treatments and ethical issues have
arisen, as well. One used to fear that a diamond might be misrepresented as to
color, clarity or weight. Now the list of reasonable questions is nearly
endless:

  • Has the stone had some temporary or permanent treatment
    applied?
  • Is the stone a real diamond, a man-made diamond, a color
    altered diamond, loaded with filler, or totally phony?
  • Will the dealer sell me one stone and deliver another?
  • Is the information on the grading document accurate?
  • Is the stone damaged?
  • Are the grading documents genuine and unaltered?
  • Does the diamond match the grading document?
  • Is the stone really cut correctly and does the grading paper
    supply enough information to make an informed decision?

This just covers the major issues. You
can see right away that there are many opportunities and reasons to use third
party advisory services in these transactions that potentially will cost you
thousands of dollars. The only other thing most folks ever buy that is similarly
expensive that has no manufacturers “list price” like a new car, is a house.
That is why so many appraisers are equally required and needed to confirm real
estate transactions. Expert and blind markets require non-experts to hire
qualified assistants in order to be secure

Gemologists and
Appraisers

Gemology is the art and science of
gemstones. Most appraisers have some training in grading of gems, especially
diamonds, but this is not the same as an appraising and most appraisals involve
more than a single unmounted gemstone. An appraisal involves two primary
components. The first is to identify or authenticate the items and the second is
to assign an appropriate value. The first part, gemology, is taught by GIA and a
few other groups around the world and is a very scientific process. The ‘G.G.’
after most appraisers signature stands for Graduate Gemologist and is a diploma
issued by GIA for expertise in gemology. The FGA from the Gemmological
Association of Great Britain (Gem-A) is very comparable. Both teach a rigorous
approach to grading involving a standardized environment, microscopic
examination, comparison stones for color and a variety of tools for evaluating
fluorescence, cutting, treatments and the like. Neither of these fine schools
teaches appraising.

For decades, jewelry stores, auction
houses, pawn shops and other business have been offering ‘appraisals’ to as a
service to customers that was presumably based on their own experience in buying
and selling things and issued them for purposes that range from securing
insurance to offers to buy. Unfortunately, they also discovered that appraisals
make terrific selling tools. They would take a description, either something
they did themselves or using an outside lab, look up a price on a table like the
Rapaport Diamond Report and multiply this by what they considered to be a
reasonable markup to get a value. Depending on what they used for markup and
depending on the grading accuracy and details that aren’t included in the
pricing grid, this would produce some extremely high value conclusions that
could then be used as evidence that the asking price is a bargain.

Independent
appraisers

Abuse of this system has led to the
rise of independent appraisers. These are appraisers who don’t sell gems or
jewelry at all and who have no vested interest in the outcome of the appraisal.
They get paid the same whatever the conclusions, whether you buy it or not and
whatever you pay. Most have top gemological credentials as well as additional
training and credentials in appraising and usually have significantly more
experience than the store appraisers. Independents often do work for banks and
estates and get involved in tax and customs matters as well as the usual
insurance type documentation. They can also be very useful for shoppers. Many
customers, especially for very expensive items find that an independent
appraisal is an invaluable part of the shopping process both for evaluating
stones as well as craftsmanship of the final piece. Most sellers will allow a
return period of 7-30 days from your purchase to return for a full refund. This
time can be used to get an inspection from an independent appraiser to both
confirm what the dealer has told you as well as to provide more that may have
been omitted. Often even the suggestion that a deal will be contingent on an
opinion by an independent will help get the best possible merchandise for the
best possible price.

Pricescope provides a list of independent appraisers.

Some thoughts on the
value conclusion:

Retail Replacement Value. Many,
even most jewelry appraisals are prepared for retail replacement value or
insurance replacement value. This is, or is supposed to be, an estimate of the
appropriate funding for your insurer to replace the piece with another one like
it in the case of a loss. These reports will often report a value that is
significantly higher than an actual transaction cost and this is taken as
evidence of a bargain. This may or may not be the case. Typically, appraisers
will give something more akin to “high regional retail valuations”. These
somewhat inflated values are generally used as sales tools by many if not most
retail sellers and they are notoriously difficult to interpret into a shopping
decision. 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.

Market Value
and Fair Market Value.
Fair market value is a legal concept that will
vary from jurisdiction to jurisdiction and it doesn’t generally mean what people
think it does. In particular, it doesn’t mean that it’s ‘fair’. Similarly,
market value can mean different things in different circumstances ranging from
‘what should I be paying for this?’ to ‘what can I get for it on resale?’ When
you hire an appraiser make sure that they understand what you are trying to
accomplish. For shoppers, FMV doesn’t help much and MV only applies if the
market being described is appropriate for your situation. Discuss the
‘definition of value’ with your appraiser before you start. The correct answer
to the wrong question won’t do you much good after all.

“SALE” prices.
When was the last time you went to the shopping mall and saw big signs that said
“SALE”? Did you really believe the signs? Do you sometimes wonder if anything
ever gets sold for the full retail price? Are you being fooled by phony sale
signs or is it really a special priced event? The same reasonable approach needs
to be made with jewelry on “sale” and that is presented with an appraisal that
is far higher than what you are being asked to pay. You might be getting a great
price, even a special one, but just because you are told this, does not mean it
is true. A little doubt can be a very valuable bit of knowledge.

Many times the price tag on something
is not a true indicator of what it generally sells for. It may be some multiple
of the correct selling price or just a guide for a commissioned sales person who
wants to get the most they can before getting to the bottom line and best
figure. You have to be the judge and you have to have the right knowledge.
Shopping and learning are keys to getting the right stone and the right price.
If in doubt, consider hiring the services of an independent.

Evaluation

Choosing a diamond to buy online is
quite tricky. Many consumers ask an appraiser for an opinion about a diamond
they are considering for purchase; a diamond they cannot see. An independent
appraiser can often say a lot about stones with GIA, AGS or comparable
documentation but they can’t give you the full story without a thorough
inspection. Many have special tools, techniques and experience that allow them
to tell you far more about your stone than what is included on the lab report.
The truth is, a professional appraiser generally won’t give any opinion on a
diamond that has not be physically examined, in person because there are so many
paths that lead to an incomplete or misleading conclusion.

There’s been quite a bit of effort
since 2005 to define the various ranges of fine and ideal cut stones. Most major
labs now assign a cut grade to round brilliant cut stones and a few, like AGS
and AGA include a grade on some other cuts as well. Research in this area
continues at a rapid pace and an appraiser can help you apply the various
grading scales to your particular stone.

Services and
Fees

Qualified appraisers charge fees
related to the degree of difficulty, the time involved, and possibly the weight
of the major stone or stones. Appraisers need to cover their liability by
charging higher fees for work where more liability exists. Larger gems generally
require longer examination than tiny ones. Discerning the finest colors takes
more time than deciding a stone is M or N color, where few folks care either way
and prices are closely related anyway. The detailed kind of person seeking out
the finest cut stones almost always has a raft of questions that take time to
answer properly. The fees for this will vary from city to city and the most
experienced appraisers generally charge more than those who are new to the
business. They should be happy to tell you up front what services you can expect
and what you will be expected to pay.

Appraisers often work on behalf of
retail stores, auction houses, diamond dealers and consumers. An honest,
unbiased opinion has value to everyone in the chain of every sale. Those
involved in legitimately selling diamonds and jewelry today are committed to
giving all the facts to their customers.

Sometimes a seller will ship a stone
to an independent appraiser for examination at the request of a consumer. The
appraiser makes a verification of the identity of the stone and the accuracy of
the grading, adds in the value side of the report, contacts the consumer, and if
all’s well, forward the stone to the consumer, back to the dealer or on to a 3rd
party to be mounted. Many independent appraisers offer additional services and
tests to answer questions that aren’t included on the lab report and that can be
very useful as shopping tools. Sellers can send diamonds to many independent
appraises in confidence because many have long standing quality reputations
which in this very traditional business serves to put diamond dealers at ease.
Dealers must rely that appraisers know how to act within the framework and
traditions of the diamond trade. Sometimes consumers can get a stone examined
BEFORE they have to pay for it. In the end, everyone can be protected at a
nominal cost.

For anyone interested, there is an
appraisers listing right on Pricescope where many publish what they charge and
what they can do for you. A professional appraiser’s loyalty always extends to
the end user of their reports. They strive for full disclosure and accuracy in
grading. Unfortunately, not every appraiser or gem lab is identically qualified
or knowledgeable. That’s something a consumer must assess for themselves. People
do report on how they have been treated within the Pricescope forums, so looking
there for feedback is not a bad idea. Again, just because something is in a
signed document, does not make it so. There is abuse at every level of business
and you need to become aware of it.

One last thing of importance. The AGA
Cut Class system primarily is based on Dave Atlas’ many years of experience in
looking at diamonds. It is not a scientific approach such as Garry Holloway’s,
or the one offered on a few shapes by AGS but we believe these systems have been
shown to be reasonably compatible. All appraisers look forward to the
advancements coming in grading light behavior and the components of diamond
beauty. No doubt, some labs will be ahead of others. Some traditionalists will
hesitate longer. Modern consumers will be left to pick and choose who can give
them the best total package of advice.

Credentials

Appraisal training is available from
several different schools and each appraiser will have a different background.
Some will come from retail environments, some will have been manufacturers and
others will have a background in the auction or one of the related industries.
In addition to the basic gemological credentials, many will have one or more
credentials from the following:

Summary

Appraising is an important part of the
jewelry business. It can be useful as a shopping aid as well as for getting the
most value out of your insurance policy. Like other professional services, it’s
necessary to shop carefully for your appraiser and to make certain that both you
and they understand what is expected. They are not all the same. Appraise the
appraiser.


David S. Atlas
GG(GIA) ASG(AGA) Sr. Mbr. NAJA
[email protected]

Neil Beaty
GG(GIA)
ICGA(AGS) NAJA
[email protected]