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Inflated appraisals


#1

Hello. First off, I will admit that I realize that most of you are
major league players, and I am Little League. (Stop it! Who said
T-ball?) I make jewelry with glass beads, gemstone beads, and I do
wire-work as well, but I do not have any formal lapidary or bench
training.

I occasionally participate as a bidder in an Ebay Live Auction. Last
year, I purchased an item from one of those auctions, and I am
pleased with that piece. (It was a lemon topaz faceted cab.) I
recently checked out one of their more current auctions, and was
high bidder on a few items. One of the auction lots I “won” was for
four beautiful, hand-carved, white coral rosebuds. I also bid and
won a cultured pearl, and a citrine cab.

I am pleased with all of my items–I feel I got them for a good
price, and I received my items quickly. Basically I have no real
complaint, and I really don’t want to make any waves.

However, something bothers me. These gemstones are “appraised” by an
appraiser who does not mention any type of certification; just that
he has been in the jewelry business for several years. You get this
appraisal sheet with each of the items that you buy. The problem is
that I think the appraisal price is so inflated, it is laughable.
I’m talking absurd! The 31 ct pear shaped lemon citrine is valued at
$1,300. The lot of four carved Italian coral flowers (each measuring
about 12x12) are appraised at: $1300 for the lot. (Over $400 per
little rose???) The 10mm South Sea Pearl is appraised at $800. And,
yes, this is in U.S. dollars.

I don’t know for certain, but I’m guessing that the stated values of
these gems are purposely inaccurate. (Perhaps to make the bidder
feel like he/she is getting a fabulous deal??) And I know Ebay isn’t
God, and cannot watch over every appraisal value from every vendor,
but this somewhat smacks as fraud. I don’t know whether or not to
inform Ebay; I’m not trying to force this particular live auctioneer
to close down. I do like their selection, but the fact that their
appraisals seem inflated leaves a bad taste in my mouth.

If anyone would like to see the photos of the items I bought, feel
free to email and I’ll send the link to the photos.

Your thoughts?

Thanks,
Donna S.


#2

Yes the appraisal is being inflated purposely to make you feel like
you got a good deal. You don’t say how much you paid but it sounds
like it was significantly less (I certainly hope so). So what you
can do? Not much really unless you want to pursue some legal venues.
First of all you should report the appraiser to the Jewelers
Vigilance Committee. They may be able to take some action on it.
Then, depending on how much you want to push this, you could inform
the seller that you are going to have your recently purchased items
appraised by another (legitimate) appraiser and that if the
appraisals don’t match that you are going to bring him to court and
sue for triple damages (which you are entitled to do) or that you
want him to in fact replace the pieces with something that actually
has the stated value. Of course all of this requires a bunch of time
and effort on your part so the question is how much time do you want
to spend on it? I would certainly report him to the JVC (I think you
can do it online so it’s relatively easy). Maybe a letter from them
would at least knock a little sense into them.

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


#3
to close down. I do like their selection, but the fact that their
appraisals seem inflated leaves a bad taste in my mouth. 

Send me $100 and I’ll redo those apparaisals on a nice form for
double that value. $150 and I’ll make it triple. Imagine, your
"bargain" can just grow and grow. Seriously (no, above is NOT),
anybody can type up an appraisal for any number they just snatch out
of the air. Now, here in Calif., in order to have an insurance
appraisal - the real thing - it must be done by a certified
appraiser. Otherwise it’s just T.P. and should be treated as such…

http://www.donivanandmaggiora.com


#4

It is not just the one “apraiser” that you refered to (and it is not
just EBAY). Jewelry items with apraisal certificates at every auction
site I have checked out seem to be valued at about 10 times the
actual selling price. There seem to be a few apraisal services that
routinely supply certificates with these highly inflated values. One
seller on one of the auction sites has this disclaimer:

  The Estimated Retail value is for insurance purposes only to
  obtain insurance and should not be used as a guide for what you
  pay. Please note that Retail & Replacement Certified value can
  be different from Market Value and are subject to change from
  store to store. <> is a partner company of <>Auctions. 

One other tactic used is to have an item with multiple stones with a
wide range of clarity. The description then refers to the pieces
clarity as being that of the cleanest stone. If you don’t read
everything closely, you can be fooled easily.


#5

Hi Donna,

Your instinct is correct. The ebay dealer you bought these items
from is one of many such dealers on ebay who grossly inflate the
"value" of the items in order to entice buyers into thinking they got
a fabulous deal. The real value of the items is somewhere in the
neighborhood of what they actually sell for. I guess the true value
of the “appraisal” you receive with these items is its usefulness as
a birdcage liner or something equally utilitarian. Unfortunately
this practice is not confined to ebay but has been used in the gem
and jewelry trade probably since the trade existed. Back in the 1980s
when the inflation rate was sky high and people were looking for
tangible assets as a hedge against it, there were companies selling
so called “investment” gems. These were natural gemstones as
advertised, and were of the advertised weights and so forth but
their “appraised value” was so far from reality as to be beyond
ridiculous. They came neatly packaged in sealed plastic cards and
carried the admonition that all guarantees were off if they were
removed from these little containers. Occasionally I have been
approached by someone who had purchased one of these hoping to cash
in on their “investment”. I am never happy to break the bad news to
them. I’m sure some of them have gone away still believing in the
inflated value and with the opinion that I was trying to steal the
item.

Oh, and by the way, you mentioned you had purchased a lemon topaz
faceted cabochon. If a stone is faceted it cannot be a cabochon since
a cab is defined as a stone which has been cut to a convex shape and
polished.

Jerry in Kodiak


#6

Donna,

You are bringing up a very good point about appraisals in general.
If you get a copy of GIA’s Loupe that was recently emailed, at the
conference a panel discussed appraisals. There is not regulation in
the industry nor is there any certification. The only test is if the
appraisal is used in a court of law, then someone who has no
credentials can get in trouble.

As to eBay that has irked me for years, the appraisals used as a
selling tool. It is wrong, it induces unfair competition in a sense
that an ethical seller would not do it, yet a consumer will be
influenced by the appraisal.

There needs to be some sort of policing on this, the industry is not
doing a good job in self-regulating.

Eva G.G., RMV, DC.


#7

To jump in on the Ebay discussion, there is also a “live” bidder who
doesn’t have any auction house. It is a seller who has decided that
they will do better in the “live” environment than on regular Ebay.
What is alarming, however, is that you are bidding against “floor
bidders” when there is no floor.

As with life, caveat emptor.


#8

I’m surprised that eBay hasn’t cracked down on these phony jewelry
appraisals like they cracked down on the autograph market and
several “experts” who were issuing certificates of authenticity. They
easily could if they wanted to, yet they let the practice continue.

Brian Corll
Vassar Jewelers


#9

Thanks to everyone who responded! I’ll address some of your
comments. Daniel (Sprirer) mentioned that he hopes that I paid much
less than the “appraised” value. I want to assure you–yes, I did.
Here’s a rundown: four carved Italian coral roses, total 32cts: paid
approx. $29 total for the lot; the appraised value was $1300. Lemon
Citrine faceted stone (sorry for my prior mistake in terminology,
Jerry in Kodiak, thanks for the correction!), paid about $40,
appraised value $1300. (That $1300 must be a lucky 13 for them…)
12.66 cts Lapis Lazuli (two pieces), paid $5.75, appraised at
$1,000. 10mm South Seas pearl, paid $11.50, appraised at $800.

Truly, I am pleased with the pieces. They are very pretty, and I’ll
use all of them. But, Daniel, if I can sue them to have them
replaced by stones that are more true to their appraised values,
maybe I should just buy up more from them–sue them—sell the
replacement jewels, and then pay off the mortgage of our house!

Eva G.G. said that “There is not regulation in the industry nor is
there any certification.”. Really? Is that true? A person has to be
"certified" in some way to give someone a manicure, but there is no
gem appraisal certification program? Why is that the case?

Stones said, “Jewelry items with apraisal certificates at every
auction site I have checked out seem to be valued at about 10 times
the actual selling price.” Well, looks like this guy has them beat!
Check out the Lapis Lazuli appraisal: over 150 times the actual
selling price.

Thanks, everyone, for your thoughts on this! Now I need to go play
with my sparkly retirement investments. Please pass the caviar.

Donna S.


#10

I agree with you folks 100% HOWEVER there has been a trend in the
last 5-6 years (I’d say) for jewelery appraisers to keep lowering
the appraisal values lower and lower. I want to give my client a
"real" appraisal but when the appraised value is sanctioned by NAJA
down to 1.5 keys I don’t see where that leaves any kind of margin for
the retail jeweler. There has to be a happy medium. I’d even settle
for key espacially when they have to guesstimate on the color,
clarity, and the carat weight because the diamond is set. No room for
error. An example would be a G color SI2 1.02 carat. It is very
feasable for it to come in as an approximately H-I color, approx. I1,
and approximately.99 carat. Considering that appraisers want to be on
the “safe” side for fear of being sued or spanked by NAJA, this
example is not that far out of the question. The above example would
probably generate a $1500-2000 difference in the value of a stone.
Considering that the "NAJA number " would be $5800 on the G/SI2, and
the mistaken safe number is $4000 (although most of this is rough but
with $400 probably). So here’s my problem with this pricing
methodology: If the 1.02 G/SI2 diamond cost lets say $3600, $150-200
to get it certed, plus 6-8 weeks of your time and money invested, a
14kt tiffany setting $100-$125, 1.64% to the VISA machine, not to
mention 2-3 hours of your time buying, selling, setting, etc. Where
does this leave the retailer? We all know that the diamond trade is
screwed up. NAJA and their appraisers don’t have to make it worse.
These are milestones that people buy to mark special times in their
lives we don’t need to fill their heads with worry and doubt.

Stanley Bright
A&M Jewelers
Baltimore, MD


#11
12.66 cts Lapis Lazuli (two pieces), paid $5.75, appraised at
$1,000. 

Not wanting to rain on your joy, Donna… So much of the Lapis out
there is dyed…

Get a bottle of rubbing alcohol (aka isopropyl) and a small glass
bowl… Plop them in and cover them with the alcohol and a bit
more…cover the bowl so the alcohol doesn’t evaporate…

Wait a day or two and see if the alcohol turns blue…

Only if you want to know…

Gary W. Bourbonais
A.J.P. (GIA)


#12

Jewelry appraisers have always had a bad habit of incompletely
answering the wrong question. This piece of the trend is hardly new
and NAJA is making it better, not worse. Appraisers are not supposed
to be setting prices, we are supposed to be reporting on them and
there is no such thing as an NAJA price.

To do an appraisal responsibly, it’s important to first define both
the product and the marketplace. Your complaint seems to be that the
appraisers in your neighborhood are missing on both counts but it’s
not NAJA methodology that’s causing you trouble. A 1.02 G/SI2, AGS
H&A ideal mounted in a fabricated platinum masterpiece is not the
same thing as a 0.98 I/I1 set crooked into a recycled Stuller
solitaire. The difference is significant. One of the first tasks of a
good appraisal to notice this difference and, when the is
limited, like when the stones are examined mounted, these limits must
be included in the report. If assumptions must be made, like that the
weight is over 1.00 and that this has a significant affect on the
value conclusion, this too must be clearly stated.

Similarly, the prices charged by boutique custom jewelers in Aspen
are wildly different from the prices paid by pawn shops in Texas.
Both can be called the ‘value’. Everyone knows this but they still
expect a straight answer to what something is worth in all
situations. ‘Worth’ must be put in the context of what it’s worth to
whom, when and under what circumstances or it’s completely
meaningless. Most new purchase appraisal clients ask for ‘insurance
replacement’ value, even though what they really want to know is if
the transaction price was appropriate. These are not the same
things. Clients (and dealers) then regularly deliberately conceal
important either because they want to test the
appraisers’ knowledge or because they are hoping for a better
description or higher value conclusion.

Insurance replacement value is supposed to be the necessary funding
to allow for an insurance company to replace with like kind and
quality in the customary marketplace. The marketplace being defined
is probably NOT your store, especially if the appraiser has no way of
knowing where it came from. Most insurance replacements are done by
retail jewelry stores where the insurance company has negotiated in
advance for a cost-plus type pricing structure. They drive a pretty
hard bargain and most appraisals are actually considerably above the
company’s actual cost for replacement.

What you want is paperwork that confirms you’ve given your clients
good value, right? Here’s how to do it:

  1. Hallmark your work. A designer piece should be valued at the
    current prices being charged by THAT DESIGNER if possible.

  2. Provide documentation yourself. Insurance companies don’t really
    require appraisals, what they require is sufficient paperwork so
    that they can set their rates and make replacement in the case of a
    loss. You’ve got better than anyone about what stones
    weights and grading details, who the designer was and similarly
    important details. Value it at what you would charge to replace,
    presumably something close to the transaction cost. In most cases,
    the insurance company will be thrilled to accept this to bind a
    policy. Customers are happy because they then don’t have to hire an
    appraiser at all unless they are doing it because they don’t trust
    you. By the way, this has the side benefit of putting you at the top
    of the list that the insurance company will call to buy the
    replacement.

  3. Talk to the appraisers. Due diligent research for appraising a
    designer piece from a living designer involves calling them up and
    asking about their rates. This is not about beating you up on your
    margins. If you refuse to talk to them, or you simply lie, they have
    to use other approaches.

  4. Don’t use appraisal values as selling tools. There’s a big
    industry in ‘appraisal’ that are really advertisements that contain
    completely erroneous and deliberately deceptive This is
    the real root of the problem, not NAJA.

Neil Beaty,
Proud to be an NAJA appraiser


#13
12.66 cts Lapis Lazuli (two pieces), paid $5.75, appraised at
$1,000. 

You can also look for pyrite flecks in the lapis. Dyed material is
unlikely to have them. And sodalite is sometimes substituted for
lapis.

Brian Corll
Vassar Jewelers


#14

Hi Neil

Thanks for your thoughtful reply. I understand the intent of NAJA,
and you have brought up some very good points regarding differences
in value. How is it then:

*That when I supplied an AGS certified ideal cut 1/2 carat diamond,
it wasn’t noted on the appraisal that it was ideal cut, nor did the
value reflect it. I must admit, I didn’t supply the cert in that case
since the transaction happened a year prior to the appraisal and the
client forgot it at home.However, it was easy to see that it was a
nice stone so further steps should have been taken to look at the cut
grade.

*That if appraisers only “report” on the selling prices and not set
them why is then that a ring purchased from the Big Z, won’t appraise
for the $1999 that the client paid ($2860 was the retail price) Seems
to me that if 2000 people bought that ring for the 1999 sale price
then THAT is the value of the ring not cost of materials times 1.7

*That I’m looking at my appraisers 20 year old digital scale and at
least a 10 year old cz master color set showing me that NAJA isn’t
all that concerned with quality identification as it is with the
retail value on the appraisals.

Maybe the appraisals should be named for what they aRe: -Absolute
lowest price on a barely acceptible replacement that your insurance
company would pay for Valuation

or

-I got shafted in the islands Valuation

or

-I just beat up the local jeweler and brought my gun to buy this
Valuation

Most of my clients would like to see an appraisal for slightly over
what they paid. They just want to have a small amount of wiggle room
for varying market conditions or if I move down to the islands by the
time they go to replace the item so that they can be sure that they
are completely covered in case something happens. Like I said before,
the Absolute lowest price on a barely acceptable replacement
appraisal does not instill confidence in the appraisal, jeweler, nor
the insurance company.

Stanley Bright
A&M Jewelers
Baltimore, MD


#15

Hi Stanley,

Obviously you’ve had some bad appraisal experience and you are
hardly unusual in this. I’m not defending lazy appraisal practices,
or even lazy appraisers who join NAJA but I do think you’re assigning
blame where it doesn’t belong. NAJA, ASA, AGS, ISA and similar
professional societies are working to make this mess of an industry
better. These are the good guys, not the culprits. I’ll try to answer
your specific questions:

That when I supplied an AGS certified ideal cut 1/2 carat diamond,
it wasn't noted on the appraisal that it was ideal cut, nor did
the value reflect it. I must admit, I didn't supply the cert in
that case since the transaction happened a year prior to the
appraisal and the client forgot it at home. However, it was easy to
see that it was a nice stone so further steps should have been
taken to look at the cut grade.

For an appraisal to be useful, it’s essential to correctly describe
the relevant attributes of item. Not noticing the cut of the stone is
either a serious error in the inspection or just sloppy gemology and
it will almost certainly lead to an inaccurate conclusion. Either
way, it was a bad job and it’s doing the client a disservice.
Incidentally, a diamond with AGS paperwork is worth more than the
exact same diamond without the paperwork so the appraiser should have
specifically asked for this report and included it in the appendix of
the appraisal. If the client (or you) refused to provide it or simply
insisted that it didn’t exist because they wanted to test the
appraiser or because they were hoping for and upgrade then they are
at least partially responsible for an inaccurate conclusion.

That if appraisers only "report" on the selling prices and not set
them why is then that a ring purchased from the Big Z, won't
appraise for the $1999 that the client paid ($2860 was the retail
price) Seems to me that if 2000 people bought that ring for the
1999 sale price then THAT is the value of the ring not cost of
materials times 1.7 

I agree. 2000 actual transactions clearly establishes a reasonable
basis for valuation. The price on the tag is irrelevant, as is the
cost of the materials.

That I'm looking at my appraisers 20 year old digital scale and at
least a 10 year old cz master color set showing me that NAJA isn't
all that concerned with quality identification as it is with the
retail value on the appraisals.

Again, this is just sloppy gemology and lazy appraising. It is
absolutely essential that an appraiser maintain both their tools and
their skills in order to be offering a useful service. Correct
identification of the value characteristics of the item is an
essential component of good appraisals. In the case of diamonds, this
includes color and for most jewelry and gemstones it includes the
weight.

Maybe the appraisals should be named for what they aRe:
-Absolute lowest price on a barely acceptable replacement that your
insurance company would pay for Valuation or -I got shafted in the
islands Valuation or -I just beat up the local jeweler and brought
my gun to buy this Valuation

I agree, they should, and appraisals that comply with the NAJA
appraisal standards do! Definition of value is an important element
to a professional appraisal. Without it, the report is useless.

Most of my clients would like to see an appraisal for slightly
over what they paid. They just want to have a small amount of
wiggle room for varying market conditions or if I move down to the
islands by the time they go to replace the item so that they can be
sure that they are completely covered in case something happens.
Like I said before, the Absolute lowest price on a barely
acceptable replacement appraisal does not instill confidence in the
appraisal, jeweler, nor the insurance company.

For most pre-loss insurance type appraisals, which is most jewelry
appraisals, the definition should not be for the absolute lowest
price on a barely acceptable replacement. The standard is generally
for the necessary funding to replace new with like kind and quality
in the case of a loss. Omitting important quality characteristics
like the known name of the artist who designed the piece or the
grading details of the diamond is clearly not being accurate and
perhaps wildly so. Second guessing what a craftsman ‘should’ be
charging is also clearly inappropriate. If an artist charges (and
gets) the big bucks for their work then it is reasonable to expect
that they will charge big bucks to make the replacement. Estimating
their cost of materials may be a useful step in estimating what they
will charge to make the replacement but it’s hardly the whole process
and the fact that other craftsmen may be willing to do superficially
similar work for less money is generally beside the point. It’s not a
Picasso unless Picasso painted it.

The possibility that you might move and raise your prices is NOT
something that should be considered in a typical appraisal. An
appraisal must have a valuation date and this date cannot be in the
future. The value should be based on a particular item, in a
particular marketplace, on a particular date using all available
Usually the valuation date is the date of inspection but
there are exceptions.

Neil


#16

I know that many people here already understand this, but I explain
it to my customers at times. Insurance appraisals are not the value
of the stone. It is a budget for the insurance company in case it
should need to be replaced. If your stone appraises at $10,000, and
they can find the stone for $6,000, that’s what they’ll do.

http://www.donivanandmaggiora.com


#17

Neil,

Thank you for that most excellent post on appraisal methodology.
Everyone here should read it three times and save it.

Thank you,
Wayne