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How Appraisals Work


#1

I just sold an anniversary ring to someone who helped me out so of
course i gave him a great deal on it. He took the ring and had it
appraised the appraiser said 2,850.00 wich is still more than i
charged so hes not upset at all. But the sug. retail was 4,905 and i
am wondering how appraisals work because i do not want to sell a
piece of jewelry and have customers thinking that there getting
ripped off when it appraises for less. Any will be
useful.

Nicholas R. Horvath
Genuine Brilliance
954-618-8685
GenuineBrilliance.com
10806 nw 43rd ct
Sunrise FL. 33351


#2
    But the sug. retail was 4,905 and i am wondering how appraisals
work because i do not want to sell a piece of jewelry and have
customers thinking that there getting ripped off when it appraises
for less. Any will be useful. 

Nicholas, there are many different kinds of appraisals - divorce,
fair market value (FMV), average retail value (ARV), etc. On a new
piece of jewelry where the customer needs an appraisal for insurance
purposes, they will be needing an average retail value (ARV) for
insurance replacement which is the cost to replace the item. If the
suggested retail price you mentioned in your post is an actual
published SRP from the manufacturer, you should supply your
customers with proof of that SRP and advise them to bring that proof
to the appraiser, who must then use it as the actual replacement
value.

If, on the other hand, the ring in question is a one-off, custom
designed, hand-assembled or otherwise has no significant provenance,
it must be appraised on the basis of its’ constituent parts. Stones
must be measured for weight estimation and graded for such
characteristics as color, clarity, proportions, fluorescence, match,
etc. The item is weighed and valued at market price of the metal of
which it is made, and value is added for the design and execution of
the piece. All of this is done at wholesale, then doubled for an ARV
appraisal, or possibly halved for a divorce appraisal. Divorce
appraisals (and others) are halved because divorce attorneys often
return with their clients’ appraised goods to liquidate (read sell)
them, and jewelers are only interested in buying estate pieces at
one-half wholesale or less, if possible.

Here’s an example: If I saw (or stamp) out a heart-shaped pendant
from sterling silver and engrave (or stamp) my name on it, the cost
of materials along with my time and effort would drive the value up
to somewhere around…oh, say $10.00 US Now, take the same basic,
stamped heart-shaped pendant in an estate that has a Tiffany & Co.
stamp and, voila! It’s suddenly worth $150 or more. Why? Because
that’s what Tiffany & Co. gets for them in their retail stores.
Experienced appraisers are familiar with high-end designers and have
references we use to identify their hallmarks, but can only value
unidentified typical pieces at their constituent values.

Now, here’s where problems can happen for the retailer. Just because
a manufacturer’s published retail price is at a certain level, that
doesn’t mean the piece is worth that price. Many manufacturers’
lines use low clarity stones with poor color and, without
accompanying proof that the piece retails for a certain price, an
appraiser can only judge it based on the sum of its’ parts.

A good practice for retailers is to establish a relationship with an
appraiser in their area. Most will provide appraisals on new pieces
to retailers in the trade for far less than a walk-in customer,
simply because the suggested retail price is already established and
there isn’t much more work to do other than photographing the piece,
checking to see if the description matches and typing & printing the
report. Also because the repeat business is worth a volume discount,
so to speak.

Nicholas, you have Broward County’s only Master Gemologist (who
bears the same last name as you) right there in Ft. Lauderdale. I
don’t plug my store or my personal web site on Orchid because I feel
like that would be taking advantage, but this time I do want to
offer our appraisal capabilities. Contact me off-list if you’d like
to establish a business relationship with us.

James S. Duncan, G.G.
James in SoFl
@docktor


#3

Appraising jewelry is almost as much of an artform as making jewelry
but there are definite ethical and scientific principles that have
to be applied. Generally speaking the place where most jewelers go
wrong is that they assume that since they are selling a piece for say
$2000 then that should be the appraised price. In reality an
appraiser has to look at what a similar piece is selling for in the
entire marketplace. While the jeweler may be selling something for
$2000, it may in fact be available down the street for $1700 and on
line for $1200. All other things being equal, then what is the actual
value? It generally works out to being an average of these price
ranges, or something closer to the lowest value, as, if the piece
were stolen the next day the customer could go and replace it for the
lower price by going to the least expensive source. This of course
presumes that it is not a custom design, one off, or branded item in
which case the price paid is pretty much the appraised price as it
could only be purchased again from the original source. Many jewelers
used to think that by overvaluing a piece on an “appraisal” the
customer would a) feel better about the purchase and b) get more from
the insurance company if something happened. In fact not only is this
action unethical but it also only ends up costing the customer more
money for the insurance when most of the time the insurance company
isn’t going to pay anywhere near retail for the replacement piece
(in other words the insurance company makes a lot of money off the
deal). As for a suggested retail price, that in fact is just what it
says: a “suggested” price. It can in fact have no basis in reality
as some people need to get a 10% markup, others need 100% and some
need 300%. It usually simply is a way for a manufacturer to price
their work without showing the actual wholesale price (especially
those who encourage jewelers to use their catalogs to sell stuff
from).

Properly explaining principles of appraising takes far more space
and time than Orchid would permit so if you really want to
understand it better you should look into any number of the courses
available from various institutions, including (but not limited to)
the GIA and the JVC.

Daniel R. Spirer, G.G.
Daniel R. Spirer Jewelers, LLC
1780 Massachusetts Ave.
Cambridge, MA 02140
@Daniel_R_Spirer
www.spirerjewelers.com


#4

Continue from:
https://orchid.ganoksin.com/t/how-appraisals-work

James,

A few years ago I took some advise Eli Rosen gave with regard to
appraisals and would appreciate your opinion. We have two types of
document. “Appraisals” and "Statements of Retail Replacement Cost"
We use the former for items that we have not sold that we are asked
to value. The second is used for items that we either made or sold
and reflects the actual price paid except in extraordinary
circunstances when we actually discount (we rarely do) and also
states our interest, i.e. that we sold the item. The two are
identical except for that we weigh, measure, use gia and agl
terminology and so forth.

On the subject of Insurance companies: my belief is that the
insurance industry could wipe out sleezy apparaisal practices in a
heartbeat simply by issuing uniform guidelines regarding who can do
an appraisal and what that form should contain. They don’t do it
because they make a fortune on overinsured items.


#5
    and i am wondering how appraisals work because i do not want
to sell a piece of jewelry and have customers thinking that there
getting ripped off when it appraises for less. Any will
be useful. 

Nicholas,

Appraisal is in the end only a matter of opinion without commitment.
No offence directed at appraisers.

The best and realistic way to establish the ‘correct’ price is to
ask the customer to show the item to a few jewellers or jewellery
shops and request them to quote their price for supplying/making a
similar item. In such instances a realistic appraisal takes place
as the jeweller who quotes is committed to supplying at that price.

Yath Iqbal
Ceylon Sapphires International and
Intergem Exports.
Sri Lanka


#6
   The best and realistic way to establish the 'correct' price is
to ask the customer to show the item  to a few jewellers or
jewellery shops and request them to quote their price for
supplying/making a similar item. In such instances a realistic
appraisal takes place as the jeweller who quotes is committed to
supplying at that price. 

The jewelry business in Sri lanka must be much different than in the
U.S… Few if any retail jewelers would spend the time to work up such
for a non-paying, non-customer, as it would take just as
long to do it right as a paying appraisal, without the pay! Most of
the people who walk into our family run jewelry store who request
such things are either looking for a free appraisal instead of paying
for one, or are trying to decide the price to sell the piece for on
eBay. Neither is something that I feel is worth the effort to give a
correct price. If we were to provide such a free service, I would
have to spend 8 hours every day providing this free service, with no
time to actually serve real customers.

Lee Cornelius
Vegas jewelers
Amherst, Ohio, USA


#7

A jeweler contacted us from LA. His clientele are Hollywood actors,
professional athletes, well known musicians etc. He asked us to
appraise his jewelry line.

His jewelry is custom signed, but the brand is very recent (less than
10 yrs). We gave the maximum markup we could justify (3x and 4x.) We
appraised the first few pieces at $50,000 - $200,000. Yet, his sale
price was still double and more what we appraised.

Now what criteria could we use to justify appraising the pieces at
this value? Keeping in mind, the stones were not rare collector Burma
ruby or Kashmir sapphire, but all white diamond goods.

Regards,
Ed Cleveland
303-882-8855
www.kashmirblue.com


#8
    We have two types of document. "Appraisals" and "Statements of
Retail Replacement Cost" We use the former for items that we have
not sold that we are asked to value. The second is used for items
that we either made or sold and reflects the actual price
paid...The two are identical except for that we weigh, measure, use
gia and agl terminology and so forth. 

Richard,

Yes, that’s basically how our store operates as well with the same
situations. However, we also operate a gem testing lab (no, we don’t
do SIMS or other multimillion dollar equipment type testing, just
standard gemological instruments) that has no interest in customers’
goods when brought in for appraisal. Basically, the store will do a
valuation, or hypothetical retail replacement value just as you
describe on goods we sell, but the testing lab does much more.

The lab provides Disclosure and Limiting Conditions statements on
all valuations and appraisals, to include average retail value
(ARV), primarily for insurance replacement, fair market value (FMV),
primarily for divorce liquidation in addition to wholesale
valuations and gem identification and grading reports to the trade.

Typically, all of these documents list all components of every item
for appraisal or valuation, including gemstone measurements,
estimated weights, grades, etc. along with the complete description
of each article, accompanied by photos of the articles. They also
list the Disclosure and Limiting Conditions that describe the
purpose of the appraisal or valuation (FMV, ARV, etc.), and that the
appraiser has no interest in buying or selling the item(s). Also
included is the appraiser’s curriculum vitae, including education,
trade affiliations, eetc. The retail store does not get involved
with appraising its own merchandise, as that would be a conflict of
interest, nor does the gem lab buy or sell merchandise for the same
reason. So yes, I agree with Eli Rosen’s advice on the retail store
providing the two types of documents you mentioned for the two types
of goods.

     On the subject of Insurance companies: my belief is that the
insurance industry could wipe out sleezy apparaisal practices in a
heartbeat simply by issuing uniform guidelines regarding who can
do an appraisal and what that form should contain. They don't do it
because they make a fortune on overinsured items. 

I agree completely. And I’ll say it many more times in the years to
come: Jewelry customers, whether buying, selling or seeking
appraisal must find a reputable store, person or group. The
appraisal business isn’t the only one with sleazy practices, the gem
and jewelry business is loaded with them, too. Talk to every person
in every store you can. Ask how long they’ve been in the trade. How
long has their jeweler been in the trade? How long have you been
doing appraisals? What are your credentials? Can you give me
references? What are your trade affiliations? All of these
questions, answered honestly will protect everyone from dishonest
practitioners.

James S. Duncan, G.G.
James in SoFl


#9

Yath,

I don’t know what responsibility appraisers have in Sri Lanka, but
here in the States if you write an appraisal and sign your name to
it you have just signed a legal document. This is a far larger
commitment than someone who verbally quotes to someone else a price
to duplicate a piece. There are also accepted methodological ways of
establishing prices for appraisals in place in this country. (The
fact that so many jewelers fail to follow them is moot, as they can
be held legally responsible even if they don’t know what they are
doing.)

Showing a piece to another jeweler to get a price quote is 1)
absolutely useless if you need a document for insurance purposes as
insurers don’t care what some jeweler verbally tells anyone 2)
impractical for the general public to be expected to do 3) unreliable
as while one jeweler may look at a piece and say “well I can
duplicate that for $400 if I handbuild it” another will look it up in
a catalog and say “well I can get that from manufacturer A and sell
it to you for $200”, yet another will look at the same catalog and
say I can get it and sell it to you for $175" and another will say “I
have a used item just like that in the back and I can sell it for
$100” and then you can probably go on line and find yet another price
from some firm that has no real store to work out of. Beyond that you
have pieces in the marketplace that are branded and carry a premium
price if they came from the original source and it doesn’t matter
what anyone else says they can make a piece for. On top of that,
unless you are indicating some willingness to buy something it’s rare
that any of these people would give you something in writing, and
certainly nothing that the insurance company is going to accept

Daniel R. Spirer, G.G.
Daniel R. Spirer Jewelers, LLC
1780 Massachusetts Ave.
Cambridge, MA 02140
@Daniel_R_Spirer
www.spirerjewelers.com


#10
    We appraised the first few pieces at $50,000 - $200,000. Yet,
his sale price was still double and more what we appraised. 

Hi Ed;

Maybe he’s hoping to get robbed and collect on the insurance.
Either that or he’s trying to grow into his own ego, financially
speaking. You know, fake it till you make it, renting the Lexus,
putting on airs as an entrepreneurial strategy . . .

David L. Huffman


#11
    Now what criteria could we use to justify appraising the
pieces at this value? Keeping in mind, the stones were not rare
collector Burma ruby or Kashmir sapphire, but all white diamond
goods. 

If the jeweler’s clients are paying his sale price, that’s one form
of justification since he’s actually retailing the line at those
prices. An average retail replacement value appraisal would have to
be in those amounts if it actually costs that much to replace them.

As in all designer and high-end store lines, the end product can be
worth more than the sum of its’ parts. $5,000 worth of platinum and
diamonds can cost $10,000 or more at Van Cleef & Arpels or LV. In
those cases of provenance, value of the finished goods exceeds the
value of its components. This isn’t a sleazy appraisal practice,
it’s valuing the merchandise for what it would cost to replace it
from the retailer.

James S. Duncan, G.G.
James in SoFl


#12

Well, if this is a designer line, and the piece is only available
from that designer, then the appraised value should be what he
actually sells it for, since he IS the market for these goods. If
one of his customers loses a piece and it is insured, how much will
it cost the insurance company to buy an identical piece? Answer -
whatever the designer wants to charge!

Lee Cornelius
Vegas Jewelers
Amherst, Ohio


#13
Yet, his sale price was still double and more what we appraised

While I know nothing about appraisals, I would think this is
something that has to be taken somehow into consideration, and why
it would take years to become a good appraiser. There is an abstract
part of this that says the “value” has to include what someone will
pay for it. I try to be fair in my humble sterling prices, and I’m
usually fairly consistent in my markup. There are one or two styles
that sell very well, and I sell these at a higher markup than the
rest of the things I sell, because I know people will pay it. I’m
sure most of you have similar experiences. Perhaps it is just more
obvious in cases where you aren’t trying to figure in your time, etc.
(i.e. easier to price a piece you bought wholesale rather than making
it yourself.) A good appraiser has my deep respect, as do most of you
who are so far ahead of me in this game.

Kerry
CeltCraft Beads & Jewelry


#14

Hi Ed

It seems to me the point of an appraisal is to establish what the
piece of jewelry is: i.e what metals were used, id of any stones
used. Is it in fact what it was presented to be. Although I
understand from my experience the overwhelming question that people
have is “what’s it worth”.

My wife is a G.G. and I’ve done metalsmithing and lapidary for some
time. We sell retail at art fairs. I get quite a few walk ups who
want instant appraisals. I give a brief explanation of what I would
consider a proper appraisal consists. I also let them know that if
they want a appraisal they must pay for it. They usually just want to
know that they haven’t been “ripped-off”.

Beyond that it seems to me that it’s an auction market. A piece of
jewelry is worth what someone will pay for it. Diamonds are
exceptional in that so many are sold and there are well established
standards of grading that establishing a price is comparatively easy.

It seems to me that establishing the price (value) is extremely
difficult, especially custom or one offs. Your "maximum markup"
comment is confusing. What’s the base you’re marking up? Are you
weighing the piece and estimating the stone weight? Does the fact
that “the brand is very recent” have something to do with the value
of the piece. What value do you give the design? And since you
brought it up; how is it that this jeweler contacted you for
appraisals? And what do you suppose his intention is? It seems
more the common practice that the purchaser would be the one asking
for an appraisal. Do you think that the fact that his "clientele"
are actors, athletes, and well know muscians factor into the
appraisal?

And finally, IMHO you’re supposed to be “disinterested”; you’re
can’t “justify”. Your ethical obligation is to tell this person your
honest opinion, not what he’d llke to hear. One other point, do you
have training or expertise in this area?

It would be interesting to hear how others in the retail jewelry
side handle the “need to know how much this thing is worth?”

Kevin Kelly


#15

This is a hold lot that goes into an appraisal if it is done
properly, It’s not just weighting the metal and adding up the stone
weigh and adding a labor charge. Get Cos Atlobelli’s or Ralph
Joseph’s book on appraising, these will give you a good idea what is
behind it. Many or should I say most people that appraise have no
idea what they are doing, and that’s unfortunate. They think because
they sell jewelry and and have been doing it for a few years they
know how to evaluate it. They may even have taken a few GIA classes
or even became a GG through the GIA but all that does is makes them
an authenticator (one who can tell you what the stones are). Can they
tell or test the metals for karat, can they tell if it’s hand made,
cast or die struck, can they tell if it a mass produce item or is it
a one-of-a-kind, do they know the difference in qualities, have they
don’t market research on the item and do they know the proper
methodologies to follow so that a fair dollar value can be placed on
the item??? It’s a shame what goes on in appraising and that there
is no incensing required, check the credentials on the person that
did the report on your item, do they have any formal appraisal
training or are they just a want to be? Also you must consider the
opposite side, is your piece up to snuff or are you putting to high
of a value on your own work? Do you regularly sell similar items for
the value you think your item is worth? A lot to be considered here!
Good luck.

Best regards,
Jon
@Jon_DiNola