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Appraisal Value


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#1 Bobtheelf

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Posted 08 January 2007 - 07:32 AM

Happy New Year everyone!

Well, I did it - I proposed, and she said yes! Yay! See my post in Purchase Experience for details of the buy.

After I got the ring, and before I gave it to my fiancee, I went and got it appraised - just like I learned here.

So I got the results of the appraisal back in the mail, and it appraised at $2,000 higher than I paid for it. My question is, how'd I do? How do appraisals typically compare to the price paid for online purchases? Furthermore, the diamond I purchased is an AGS000 - how does that weigh into the appraisal? Is it more difficult to appraise "Cut?"

Both I and my gal are exceedingly happy with the ring, so I'm not second-guessing the purchase at all; I just have some follow-up curiousity.

Thanks again everyone!

-BTE

#2 WebGal

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Posted 08 January 2007 - 07:47 AM

Congratulations.

Neil should post answers to your questions shortly. I like the fact that they did not overinflate the appraisal. If you buy insurance it's based on that appraisal price. The higher the appraised price, the higher the premium. But I am not qualified to say if it's well done and on target. Neil is the expert on that one.

Maybe a link to your other post with details on price and other numbers would facilitate his helping you on this.
http://diamondsbylauren.com - Fancy colored diamonds and colorless diamonds.

#3 Bobtheelf

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Posted 08 January 2007 - 07:54 AM

Here's a copy of the DQD that I got from JamesAllen.com. I paid $4,500 for the diamond, and it appraised at $6,500.

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  • 0006999510.jpg


#4 denverappraiser

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Posted 08 January 2007 - 08:33 AM

That looks pretty reasonable. Insurance replacement appraisals are usually designed to describe the estimated retail replacement value in your local marketplace.

Yes, AGS-OOO affects both the cost and the replacement value.

Yes, grading cut can be a pain but that's part of the reason for going with AGS graded stones. The appraiser isn't really doing the cut grading, AGS did.

Neil
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#5 Bobtheelf

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Posted 08 January 2007 - 01:42 PM

As always, thanks for your insight!

-BTE

#6 diamondsbylauren

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Posted 08 January 2007 - 02:58 PM

HI Everybody!
Congrats on your diamond Bob!

A few imprtant points:
Getting an appraisal at 50% more than the price paid might make one feel good- but such appraisals can cost consumers money.
Say we can selll a diamond for $4500- and someone gets an apprasal from a third party for $7000.
In most cases if it's a stone we recently sold for $4500, we could sell a comperable diamond again for $4500.
The inflated appraisal could cost you higher insurance premiums.
If there's a loss, the insurance company won't simply pay the appraised value- they'll replace it for the same $4500 you could pay.
Today, due to the internet, one's "local marketplace" is quite a bit wider than the local jewelry store.

As far as grading cut: That's really part and parcel of appraising the diamond. I'm quite sure Neil has a great eye for cut.

I agree that an appraiser needs to use the AGS cut grade- even on princess cuts.
Yet, I don't neccesarily agreee with AGS cut grading. I feel there's quite a few combinations of princess cuts that AGS would not put in their top category that are just as nice as ones that are.
The same happened whith round diamonds.
AGS "Ideal" can certainly be beautiful- yet other diamonds AGS did not grade "Ideal" are just as nice. According to GIA.
I'll bet that Neil would have appraised a perfectly cut 60/60 just as well cut as an "Ideal" cut diamond even before GIA came out with a cut grade.

#7 denverappraiser

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Posted 08 January 2007 - 05:19 PM

HI Everybody!
Congrats on your diamond Bob!

A few imprtant points:
Getting an appraisal at 50% more than the price paid might make one feel good- but such appraisals can cost consumers money.
Say we can selll a diamond for $4500- and someone gets an apprasal from a third party for $7000.
In most cases if it's a stone we recently sold for $4500, we could sell a comperable diamond again for $4500.
The inflated appraisal could cost you higher insurance premiums.
If there's a loss, the insurance company won't simply pay the appraised value- they'll replace it for the same $4500 you could pay.
Today, due to the internet, one's "local marketplace" is quite a bit wider than the local jewelry store.

As far as grading cut: That's really part and parcel of appraising the diamond. I'm quite sure Neil has a great eye for cut.

I agree that an appraiser needs to use the AGS cut grade- even on princess cuts.
Yet, I don't neccesarily agreee with AGS cut grading. I feel there's quite a few combinations of princess cuts that AGS would not put in their top category that are just as nice as ones that are.
The same happened whith round diamonds.
AGS "Ideal" can certainly be beautiful- yet other diamonds AGS did not grade "Ideal" are just as nice. According to GIA.
I'll bet that Neil would have appraised a perfectly cut 60/60 just as well cut as an "Ideal" cut diamond even before GIA came out with a cut grade.


Insurance replacement currently is still mostly done at the local level. I agree that margins are dropping and a 50% premium is a tad steep when compared to the national discount dealers, but it’s really not completely out of line. In insurance claims, it is usually not an acceptable procedure for an adjuster to tell a client that their new diamond will arrive by fedex from an out-of-state or even out-of-country supplier even in cases where that is exactly how the customer got the item in the first place. What customers expect, and what insurance companies normally do, is send them to a local jeweler who will arrange to replace the lost or damaged item. They will beat up the jeweler on price but they must still pay a premium for the retail service and handholding that is required for this sort of sale. The jeweler will generally discount their usual prices because of the repeat business that the insurance company brings but they won’t be able to get to the rock bottom, no-service kind of pricing that Internet shoppers have become accustomed to. It’s an interesting shift that the insurance companies now regularly finding themselves paying more for replacement than the consumers pay in their usual order of business.

As far as appraising AGS-000 goes, it’s a simple matter of accurate descriptions. Customers pay extra for this feature and it’s only fair that the insurance company replacement should include this attribute in the case of a loss. It’s no longer a matter of making a judgment call about which stones are ‘better’ (although I do rather like them). The appraisers job in pre-loss insurance work is to document what it is and to lay out a definition of what would be an appropriate replacement in the case of a loss. What is, is an AGS graded natural diamond with a 0 cut grade according to the AGS definition.

Neil
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#8 diamondsbylauren

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Posted 11 January 2007 - 05:43 PM

On this one we'll have to agree to disagree.
If there is a lower priced source for the product available to the consumer, why should they overpay for insurance?
Especially if the consumer themself knows how to replace the item at the lower cost.
I guess I feel that appraisers should incorporate this information into their work.

Of course I'd also disagree thyat the best internet ssellers offer "no service" sales.

The internet has really changed the map in the sales of a lot of items- diamonds included.

#9 denverappraiser

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Posted 12 January 2007 - 06:20 AM

I agree that it’s a touchy problem and it’s been the subject of tremendous abuse by jewelers and appraisers. Theoretically, the valuation should be at the exact cost of replacement, on the exact date of replacement, in whatever market the replacement will actually occur.

It is possible, and even sensible, for the appraiser to define the replacement marketplace down to the exact store and model number of the item in question. This works ok as long as that design isn’t discontinued, that store remains in business, prices don’t change between the date of valuation and the date of loss and the store is actually able to match the lost piece with another like it (which can be difficult on very unusual sorts of items as I’m sure you know).

Obviously this leaves some margin for error since we are only guessing at the marketplace of replacement and we are guessing on the date of replacement. Complicate this with the fact that most clients want to withhold critical information necessary to do that �#8220; namely the identity of the store, the transaction price and often details of the description like the name of the designer, the weights of stones, etc. That’s because they want the appraisal for two decidedly different purposes. One is to confirm that they got a ‘deal’ and that nothing was omitted or misrepresented by the dealer. The other is to provide a roadmap for the replacement so that they are made whole by their insurer in case of a loss. Although there is some overlap, these are decidedly not the same task.

The best Internet sellers are not no-service, but the ones who quote the lowest prices generally are.

Neil

Edited by denverappraiser, 12 January 2007 - 09:44 AM.

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#10 diamondsbylauren

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Posted 12 January 2007 - 10:03 AM

Hi Neil,
Yes, it would be great if appraisers had crystal balls so they could assign the exact replacement cost...hehehe

You bring up a very good point about the two uses for appraisals-
1) To insure the item
2) to verify that one has received what they were promised by a seller
I agree-these are apples and oranges- different tasks.

I imagine it must be tough when a client walks in, and makes the appraiser "work blind"
Don't tell them anything about the item and see if their description matches the seller's.

Buyers can see value in this because it gives them a totally "unbiased" opinion.
If the appraiser is familiar with the item, it makes great sense. If not.......

Since we sell a lot of unusual diamonds, this presents a unique problem at times. If the appraiser is not familiar with Y-Z light Yellows ( for example) how can they assign any accurate price?

We had a "funny" situation where a client asked us to go to an appraiser on 47th street with the ring they were considering- a Vivid Yellow diamond of about 2 carats.

The appraiser looked at the ring, and the GIA report.
He goes back into his office for a few moments.
Comes out with a number...... $35,000.

What?

Yes he says- he looked online and saw where a Fancy Intense Yellow had sold for $35k, and Vivid is about the same as intense, right?

NOT. Vivid can be DOUBLE!
Moral of that story- make sure your appraiser is familiar with the type of item you want them to appraise!

I think sellers that provide detailed descriptions are assisting everyone.
If the buyer went to an appraiser with a seller's detailed description, the appraiser could verify if it was the truth.
If the appraisal is not completely familiar with the article, the seller's description would be quite useful.



We do provide such descriptions with every item.
We also discuss the replacement value with the buyer.
Sometimes they want an inflated value- but that's rare.
Most folks ask us to write our appraisals at a value which would replace the item- not 50% more.


Neil: Would you say an appraiser should have such a conversation? Should the client have some say into what the replacement value should read on the appraisal?

#11 denverappraiser

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Posted 12 January 2007 - 11:54 AM

I have this conversation with pretty much every client.

People often confuse appraising with gemology. These are not the same, and in many cases they aren’t even overlapping. Take origin of color in fancy diamonds for example. It’s a big deal and most appraisers don’t have the equipment and/or the skills to test it (including me). So what do we do? We use 3rd party labs for this service. If it comes with a GIA report, the gemological portion of my job becomes confirming that the stone is the one described on the report, that the report is a genuine GIA work product and that it hasn’t been altered since the date on the report. Half of this is a gemological chore but the other half is an authentication of a different nature. Both become necessary. If I am the GIA client, meaning I sent the stone in personally, neither of these would be necessary so it becomes strictly an appraisal exercise.

Appraising is a matter of defining a product, defining a marketplace and describing a relationship between these two under a clearly defined set of circumstances (like a date, compulsion to buy or sell, payment terms, etc.). This has nothing to do with gemology. This, by the way, is the reason that GG’s are often crappy appraisers. They don’t understand the question so how could they possibly give an accurate answer? GIA teaches gemology, not appraising.

Even defining the product may not be entirely a gemological task. Designers, tradeup programs and warranties, branded grading reports, ownership history and many other things can become important elements that are not gemological properties.

Seller descriptions are extremely useful, even if the appraiser decide not to look at them until after they’ve had an opportunity to grade the stones ‘blind’. For starters, clients regularly misunderstood what the seller told them because they are unfamiliar with the lingo that we all use. VVS1 and VS1 sound about the same to people who are not tuned into the difference. He said ‘vivid’ or ‘intense’ or something like that. Next, that’s an express warranty by the seller that the items are as described. Every client should insist on it. In addition, if there is a concern that the appraiser and the seller disagree about some fundamental fact and the question becomes a decision of who is right, a written statement by the seller provides an easy thing to point at and say THIS is what I am taking exception to and this is the reason. Presumably this too will be put in writing and it provides both clarity to the client about what the issue is and it gives them sensible tools to go back to the seller to discuss something more meaningful than that it didn’t ‘appraise right’ and then leave it up to guesswork to decide what the problem was.

Neil
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#12 denverappraiser

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Posted 12 January 2007 - 02:25 PM

Issues like this are the reason that shoppers should never take at face value an appraisal provided by a seller as evidence of a good deal. The value conclusion may be simply describing a wholly inappropriate market for your situation. The cost to custom make a particular piece in Aspen may be interesting but it’s only relevant if that’s what you are expecting to do. There is no reasonable translation from that to how much you would expect it to sell it for at a pawnshop in Amarillo.

Neil
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#13 diamondsbylauren

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Posted 12 January 2007 - 03:50 PM

Absolutely Neil- an appraisal is NEVER proof of a good deal- in fact, sellers using this tactic are probably less likely to be dealing in the most forthright manner.

I believe that it's possible for a responsible seller to add value to the product by providing an accurate, thorough appraisal tailored to the clients needs with purchase.
Of course this is not the case in many places.

Edited by diamondsbylauren, 12 January 2007 - 03:51 PM.


#14 denverappraiser

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Posted 12 January 2007 - 06:09 PM

- an appraisal is NEVER proof of a good deal-


A report provided by the seller is not good evidence of a deal, even if it's titled 'appraisal', and even if it was written by an otherwise credible appraiser although some of them do contain useful information. On the other hand, an appraisal by a trained, equipped, experienced and unbiased professional who is hired by a consumer can be an extremely useful shopping tool, including as part of recognizing a good deal. I do it every day.

Neil

Edited by denverappraiser, 14 January 2007 - 06:46 PM.

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#15 diamondsbylauren

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Posted 15 January 2007 - 11:27 AM

an appraisal by a trained, equipped, experienced and unbiased professional who is hired by a consumer can be an extremely useful shopping tool, including as part of recognizing a good deal.

Can be is a very important word here Neil.
If the appraiser is a good one, yes, they can assist.
But there are many appraisers, like some sellers- that are not really qualified, yet offer assesments anyway. Some may encourage buyers to move ahead when it's a bad deal- others may say a good price is too high.


In terms of what sellers provide: I believe it's crucial for sellers to provide a detailed description ( be it called it an "appraisal", or "identification document")

Checking with a knowledgablew appraiser is a great thing to do. Still, I strongly believe that if someone has a lot of doubts about a seller, they shold trust their gut and move on till they find a seller they are comforatable with.

#16 denverappraiser

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Posted 15 January 2007 - 12:46 PM

David,

You're the guy who put NEVER in all caps. I agree that there are some outrageous abuses of the appraisal profession but it's no more appropriate to paint all appraisers with one brush than it is to say that ALL diamond dealers are crooks.

Neil
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#17 diamondsbylauren

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Posted 16 January 2007 - 12:35 PM

Apologies Neil,
I guess we brushed up against an "outrageous abuser" this week.
Having someone who knows nothing about something offering incorrectect assesments can get a guy pretty angry sometimes.......
In this case, the appraiser said a ring we sold for $19k was worth $18750 retail replacement value.
In fact, a store would have to charge at least $25k for the ring. We know this because we buy and sell yellow diamonds every day.
The new owner was able to verify that the price was well below a walk in retail price, but the half assed apprasier went a long way towards dulling the enjoyment of the new ring.

Of course we've had thousands of rings checked by appraisers with no problems at all.
I never meant to imply apprasiers in general were not providing a valuable service.

#18 denverappraiser

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Posted 17 January 2007 - 06:29 AM

‘Walk in retail price’ isn’t really a valid concept. The problem is that this is all over the map. For example, some stores will put very high prices on the tags in order that they can discount them at frequent sales. Does this make the ‘retail’ price the one on the tag or what they actually expect to sell it for? What if their expectations are unreasonable? Hoping to get $40k for a stone isn’t the same as getting it after all, even if it has a price tag that says much more. Some stores couldn’t sell a $19k yellow diamond if their lives depended on it, even if they offered it for $15k while others may quite reasonably be able to hold out for $30k as part of the right deal. That’s why it’s so important to define the marketplace in addition to defining the product. It’s also the reason that appraisers need training in appraising, not just gemology.

Earlier in this thread you protested that an appraiser somewhere gave a value that was 50% higher than the transaction price and in your last post you are protesting that an appraiser gave a value that was nearly identical to the transaction price when you felt it should have been ‘at least’ 32% over what YOU sold it for. Maybe so, but you are applyinig a double standard.

Neil
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#19 diamondsbylauren

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Posted 17 January 2007 - 04:29 PM

Great points Neil- we agree about most things.

About the "walk in retail value" of a ring.
I feel that establishing such a value is a valid concept. You touch on this when you say that appraisers need to "define the marketplace"- that's exactly what I mean.
What type of
Sure, there are sellers that tag merchandise at 5 times what they are selling it for- still, they are selling it for a certain price.
I feel that fact in itself tells a lot about the seller- that being, they probably don't have the best quality in merchandise.
Put another way: It seems to me that the best sellers- those carrying the finest stones and settings- are pretty much straight shooters.
Go into Tiffany's and you'll have an easy time finding a price.
Places that sell $1995 one carat diamonds often tag them $5995


I don't feel I have a double standard Neil- I think over appraising is bad, and I think under appraising is bad.



You identified another situation- where a seller unfamiliar with Fancy Colors could not sell the nicest one at half it's value. It stems from these sellers being unfamiliar with the article.

Another problem is some of these same sellers write appraisals......

Our conversation here is totally academic, because you are a model of how appraisers should conduct business.
I know for a fact you'd consult with others to determine the price of something you did not see often.

respect!