Deceptive Appraisal Prices
A truly independent appraisal doesnt serve as a sales tool so customers feel they got a good deal
Like many appraisers, we make our bimonthly trip to the mall to check the local discount chains and nab fistfulls of their 30%-50%-off fliers to use in our research. On our last trip, we collected some hard-core facts on some of the appraisals offered by many of these stores appraisals touted as independent. The following scenario was typical of the three stores we visited.
A store asked $5,499 for a 1-ct. round brilliant diamond, on sale from $6,999. The store was willing to let us have the diamond for $4,759. The diamond had an independent appraisal for $7,380 that stated the diamonds color as I and clarity as I1. There was no mention of cut. But using the measurements listed on the appraisal, we calculated the total depth of the stone at 64.1%. We visually estimated the girdle as very thick, the table was tilted and off-center to the unaided eye and the diamond also managed to have a nasty fisheye effect. The appraised value of $7,380 was about 55% higher than the $4,759 actual selling price and represented a $2,621 difference. We returned to our office and plugged the diamonds grading, including cut, into our appraisal system and estimated a retail replacement value of about $4,675.
Try as we might, we couldnt find these diamonds being sold for the values on the independent appraisals that accompanied them. We asked a salesperson why the appraisals were independent. Because they were not done by the store, she said. Who pays for them, we asked. We took her blank stare to mean the store paid for them. We doubt the same store would be willing to pay for our independent appraisal that was very close to their actual selling price.
So why are these independent appraisals out there? The stores told us they are a great benefit to the client. However, we believe they exist as selling tools to give consumers a false sense of having gotten a great deal.
Our next step was to have an insurance agent calculate coverage on the actual selling price, which is very close to our appraised value, and on the independent appraisals value. If the consumer used the independent appraisal to secure insurance coverage on our example stone, he would pay $81.98 per year. If he used the price paid, he would pay $52.82 per year, or $29.16 less, than using the independent opinion. That doesnt sound like a lot, but over a period of years and assuming ownership of several pieces of similar jewelry, the money becomes sizable.
Remember, a truly independent appraisal is not likely to be paid for by the retailer. If the retailer does pay an ethical independent appraiser to appraise items it sells, the values and selling prices will likely be very similar. The truly independent appraisal doesnt serve as a sales tool to make a client feel she or he got a great deal. It documents condition, identity and grading and enables the customer to negotiate a fair insurance premium. The appraised value is realistic also and takes into account not only color and clarity, but also cut, condition and workmanship, all of which affect value.
by Julie Nash, G.J.G., A.M. and Arthur Skuratowicz, G.J.G., N.J.A.
Julie Nash, G.J.G., A.M., and Arthur Skuratowicz, G.J.G., N.J.A., operate Anton Nash LLC, Independent Jewelry Appraisers and Consultants, Colorado Springs, CO.