40 replies to this topic

[barry]

I refer you to my previous answer. A self-administered appraisal is a conflict of interest, IMO, and has nothing to do with ability to write an accurate appraisal.

[diamondsbylauren]

Barry that would seem to overlook that there's two reasons for an appraisal. One reason would be to reaffirm one's purchase. If one had doubt in the seller. In that case, a third-party appraisal is absolutely essential. But as I've already mentioned, I believe buyers in that position will not proceed. If there is doubt in the seller, why send money?

The second reason would be for insurance replacement. I'm suggesting that a properly detailed bill of sale will contain everything that is on a detailed appraisal, short of the retail replacement value.
I would also suggest that a competent, trusted seller, like yourself is capable of preparing an appraisal.
Therefore it would seem that if there is no doubt in the seller, he possesses all the information to prepare a properly detailed appraisal-for the purposes of insurance.



Speaking of which, question for Neil: when a professional appraiser is doing an appraisal, is it a proper practice to discuss the basis for the retail replacement value with the client?
In other words, the appraiser could use a high value, like a walk in carriage trade price. Or they could base it on a lower Internet type of price. I would think that would be important when a person is insuring their diamonds

[denverappraiser]

diamondsbylauren, on Sunday, Feb 17 2008, 09:01 PM, said:

Speaking of which, question for Neil: when a professional appraiser is doing an appraisal, is it a proper practice to discuss the basis for the retail replacement value with the client?
In other words, the appraiser could use a high value, like a walk in carriage trade price. Or they could base it on a lower Internet type of price. I would think that would be important when a person is insuring their diamonds

David,

It’s ESSENTIAL that any appraiser of anything discuss their basis for value or their opinion has no merit whatever. Any statement of value must contain a discussion of what it’s worth to whom, when and under what circumstances or it’s completely useless. This is one of the fundamental principals of appraisal theory (an area that, unfortunately, many jewelry appraisers are sadly uninformed)

Neil

[denverappraiser]

My preference is for sellers to title their documents something other than ‘appraisal’ because it avoids the confusion. Most jewelry shoppers are interested in insurance immediately afterwards and the agents are trained to ask for an appraisal as a condition of binding the policy. Jewelers would like to make this followup step go as easily as possible for obvious reasons and they are not being unreasonable in trying to give their customers the documentation that they know will be required. The problem is that agents aren’t using this word precisely and don’t really know what they want while the jewelers have a strong incentive to engage in a bit of creative writing. I’ve never seen an insurance company that won’t happily accept an alternative nomenclature, especially if the paperwork is otherwise thorough. ‘Sales documentation’ is good if it’s a new production type item that will be relatively easy to replace and the objective is to include more detail than would appear on a typical receipt. For stores that have many copies of the same item in inventory this is a good solution. ‘Estimate for replacement’ or ‘Insurance replacement estimate’ or just ‘Insurance Documentation’ are good titles for items where you can reasonably expect that it will be unlikely that the item can be replaced for the current transaction price. A disclosure of the recent transaction and an explanation of WHY that price is different are mandatory or it’s setting the client up for trouble at claims time. This gets into a touchy area and I agree with Barry that if the purpose of soliciting the inspection is to demonstrate a bargain (or not), or if this difference between replacement value and transaction value is more than nominal then the selling jeweler or someone who is working on their behalf is obviously not an appropriate source. The fact that they may be well aware of facts doesn't change their eligibility to author the appraisal.

Neil

[barry]

Thanks Neil for adding body and perspective to my response.

[DiamondMaven]

David,

You asked me:

I can certainly see your point Judah, of course in many cases, inflated appraisals are used for purposes of deception.

Would you not agree that an ethical seller could provide an appraisal, which would be very useful for the client?
I mean, they should know what they are selling, correct?

My answer is; of course the seller should know exactly what he is selling and should even be mandated to articulate as much in his paid invoice receipt. However, for a seller to label his own provided document as an "appraisal" has nothing to do with how useful such a document might be to the buyer. We routinely include a detailed paid invoice with our merchandise. This invoice outlines every single aspect of the purchase, including diamond information etc. For the purpose of being useful, I am positive that many insurance companies would accept this document in lieu of an appraisal.

Still, we would never under any circumstances, call this an "Appraisal". It is not and should not be used as such. It is identical in every respect to your suggestion of an appraisal to the consumer by an ethical seller. The difference (IMO) is that the minute you call it an "appraisal" and you actually sold the merchandise, it doesn't matter how qualified you are, it is still innapropriate because of the clear conflict of interest, period.

It is for this reason that I (almost) beg all of our customers to use their inspection period to get their merchandise independently appraised.

I specifically ask them NOT to use and rely on our detailed invoice in lieu of an appropriate appraisal and of course I explain why.


Do I know the details and quality of my merchandise just as well as any Independent appraiser? Of course!
Do our paid invoice documents give our customers a detailed and accurate description of what they purchased? Sure!
Should this be labeled "an appraisal" by us, or considered as such by the consumer? Absolutely not!

Kind Regards,

Edited by DiamondMaven, 18 February 2008 - 10:54 AM.

[diamondsbylauren]

Yes, this is a very interesting and invigorating conversation.

We all agree that there are sellers who use inflated "appraisals" to try to deceive customers. We also all agree that there are some non-competent appraisers out there who might not know what things are worth.

Let's put these shysters and non-competants aside, and focus on qualified sellers with integrity. I don't believe we should throw the baby out with the bathwater. My contention is, that simply because some people use appraisals for deceptive purposes, does not mean that an honest person with integrity could not provide an appraisal as a seller.

It seems like we're splitting hairs over the term "appraisal". This is a document use to obtain insurance subsequent to a purchase. If the client is well informed as to the reason for this document, does it makes such a big difference if it's called an insurance replacement estimate, or an appraisal?





Neil, what are the qualifications to become an appraiser? Are there any laws or regulations governing who can call themselves an appraiser?

My suggestion, is that Judah or Barry (or many qualified knowledgeable sellers with integrity), may be competent as an appraiser. By virtue of their experience in the business, both on the buying and selling end.



I don't suggest that people take things they purchase from us to third parties, nor do I ever discourage them from doing so. That is completely up to the buyer. I would suggest that many people that buy from Excell diamond do so because they're comfortable with the company- therefore negating the need for third-party opinions. It would seem that by suggesting your buyers do this, you're instilling doubt in their minds. They have already decided to trust you.



Again, I never discourage it, but suggesting a buyer get an appraisal carries its own liability. If the seller themselves recommends an appraiser, the appraiser is suspect, by virtue of the fact he may be associated with the seller. If the buyer does not know a qualified appraiser, and just picks any old appraiser, there's too much of a chance that the appraiser they pick might not know what they're looking at- or be qualified themselves. That could lead to a false appraisal, either a non-informed approval or a non-informed warning not to buy.

Furthermore, I believe that it's doing a disservice by not providing appraisals to clients. Again, why split hairs with the word appraisal? If insurance companies are going to accept this document for insurance purposes( as thousands of our appraisals have been accepted), why not let the clients know that it's suitable for such a purpose?

If the document is correctly prepared, and the client correctly informed, why is it not an appraisal?



I started this discussion because I see a lot of sellers that charge for appraisals on items they are selling. And I do feel that that's out of line.

[DiamondMaven]

David,

You make some really good points.
I appreciate your perspective.
I appreciate mine too

Kind Regards,

[denverappraiser]

According to the Uniform Standards of Professional Appraisal Practice, the set of rules laid down by congress relating to appraising, here are the definitions provided (The comments are part of the definitions, not something I've added):

---------------------------------------------------------------------
APPRAISAL: (noun) the act or process of developing an opinion of value; an opinion of value. (adjective) of or pertaining to appraising and related functions such as appraisal practice or appraisal services.
Comment: An appraisal must be numerically expressed as a specific amount, as a range of numbers, or as a relationship (e.g., not more than, not less than) to a previous value opinion or numerical benchmark (e.g., assessed value, collateral value).

APPRAISER: one who is expected to perform valuation services competently and in a manner that is independent, impartial, and objective.
Comment: Such expectation occurs when individuals, either by choice or by requirement placed upon them or upon the service they provide by law, regulation, or agreement with the client or intended users, represent that they comply.
----------------------------------------------------------------------------------

A seller (or a buyer) examining merchandise where he/she is a party to the transaction fails to qualify this basic requirement of eligibility.

Note: The full text of USPAP is available here:
http://commerce.appraisalfoundation.org/ht...20USPAP/toc.htm

Note 2: Compliance with USPAP isn’t required by any insurance company that I’m aware of but compliance is required as part of the membership and code of ethics for all of the major appraisal societies like ISA, ASA and NAJA. It's also required for all appraisals submitted for government purposes like charitable contributions, divorce, estate taxes etc. It’s the closest thing we have to a governing set of rules for the profession. The only appraisers who have licensing requirements are real estate appraisers and USPAP compliance is part of the requirements in every state.

Neil

[diamondsbylauren]

Judah- I very much appreciate your opinion, and respect it! You're a gentleman, and it makes for a very invigorating conversation.

denverappraiser, on Monday, Feb 18 2008, 03:44 PM, said:

APPRAISER: one who is expected to perform valuation services competently and in a manner that is independent, impartial, and objective.
Comment: Such expectation occurs when individuals, either by choice or by requirement placed upon them or upon the service they provide by law, regulation, or agreement with the client or intended users, represent that they comply.
----------------------------------------------------------------------------------

A seller (or a buyer) examining merchandise where he/she is a party to the transaction fails to qualify this basic requirement of eligibility.

I disagree Neil. If the seller feels bound to issue an independent, impartial, and objective appraisal, it could certainly fit within the definition you provided.
The term "independent" could be viewed to mean a document that is separate from a bill of sale. An "independent" document.


Again, this is not to try to defend those who are using jaded appraisals for bad reasons.
Rather, it is my opinion that sellers should provide this information in the manner prescribed, and free of charge.

[denverappraiser]

I guess we have to agree to disagree.

The expectations involved are those of the client and the 'intended users'. A seller is, by definition, an interested party and therefore not independent under USPAP. Good intentions don't change this.

Neil

[barry]

David;

I have to agree with Neil.

The seller is not "independent" in the sense that he wants to offer a satisfying appraisal so as to increase the likelihood that his Customer will return to make a future purchase.

Impartial? Hardly.

I believe that the suggestion Neil made earlier in this thread that the seller call his write-up anything but an Appraisal is good advice.

[diamondsbylauren]

There's nothing wrong with agreeing to disagree.....

By that definition Neil, any person who sells diamonds could not be an appraiser. In other words, if a person sells diamonds, and another person is asking them for their opinion on a Diamond they are not selling, what's to stop the appraiser/seller from trying to use this to help them make a sale. Therefore I think the intentions of the appraiser are very important.

[diamondsbylauren]

denverappraiser, on Wednesday, Feb 13 2008, 09:39 AM, said:

Most appraisers work for or even own jewelry stores, auction houses, pawn shops and similar businesses that are primarily in the business of selling stuff. Neil

Wouldn't using the term "interested" in the manner you suggest would disqualify all of these people?

[denverappraiser]

diamondsbylauren, on Monday, Feb 18 2008, 06:23 PM, said:

denverappraiser, on Wednesday, Feb 13 2008, 09:39 AM, said:

Most appraisers work for or even own jewelry stores, auction houses, pawn shops and similar businesses that are primarily in the business of selling stuff. Neil

Wouldn't using the term "interested" in the manner you suggest would disqualify all of these people?

If they are the seller of the merchandise, yes. 'Interested' does not mean that they find the subject interesting. An interested party is someone who is involved in the transaction. This would include both the buyer and seller, their employees and attorneys, the manufacturer, any brokers who are involved and anyone else who has a vested interest in the outcome.

I absolutely agree that a competitive seller who stands to gain by spiking a deal through a disparaging appraisal is an interested party. This is a huge problem in the appraisal business. For new purchase type appraisals it's far better to use an appraiser who is not in the business of selling things other than their expertise.

Neil

[diamondsbylauren]

Then it would seem to me that the definition of appraiser that you provided does not specifically exclude a seller-IF that seller could actually provide a realistic description and appraisal.

[denverappraiser]

Again, I think we simply disagree. The seller is, by definition an interested party and is therefore ineligible to author an appraisal under the USPAP standards regardless of their knowledge of the relevant facts. You are, of course, under no legal requirement to comply with USPAP and can write whatever you want. As mentioned above, every member of ASA, ISA and NAJA is required by the respective codes of ethics to write every appraisal in compliance. To me the codes of ethics and particularly this rule are a reason for clients to patronize members of those organizations for appraisal services but for others it's a reason not to be a member (or to simply ignore the rules and hope they don't get caught).

Neil

Edited by denverappraiser, 18 February 2008 - 03:15 PM.

[diamondsbylauren]

Yes we'll agree to disagree. But in fact, it is your definition of "independant", as it is not spelled out specifically in the definition you posted.

[diamondsbylauren]

Hi everyone!
The bottom line for me, is that I feel a seller needs to be capable of providing the type of information necessary in the purchase of this magnitude.
In terms of the exact wording, whether we call it an appraisal, or an insurance replacement document- or any other terminology that anyone finds acceptable, I feel that it is the responsibility of the seller to provide this detailed information.

Clearly, if a client wants a dealer to send a stone to GIA at their own request, they should be responsible. But that opens up a different can of worms, because dealers generally already have gia reports for the diamonds that need them....

As we've seen here many times, it would seem that people want to buy a diamond that has a lesser report, than have the dealer sent it off to GIA to magically have it become worth more. In these cases, I suppose the client is responsible for the costs of the gia report, however misguided that attempt is.

But short of that, I feel it is totally over-the-top for a dealer to charge for a document describing and item that they're selling. I never meant to insult or confront anyone, but this is my point.

[denverappraiser]

David,

No insult taken. This is a valid problem and it’s been a productive discussion. The different people have very different objectives and it can lead to serious confusion.

Consumers want to buy good stuff for low prices. They want an insurance contract that will protect them fully in the case of a loss. They want to feel like a successful shopper and that didn’t get cheated because of their ignorance and they want assurance that they’ve succeeded. They don’t want to spend any more time and money on things like appraisals, lab exams, shipping and learning minutia about the topic than is absolutely necessary to accomplish all of this.

Dealers want customers to buy their things for prices that they can make a living off of and not return them because some ‘appraiser’ stuffed the deal over their own hidden agenda. They want their clients to be happy, to tell their friends about it and to come back again and again to buy more things in the future.

Insurance companies want to be assured that the items they are insuring actually exist, that they are actually in the possession of their clients and should the need require it, to have sufficient information to replace them in a way that restores the insured to their pre-loss condition without cheating either the public or the stockholders. They need to understand their risks and they want to charge a premium that’s appropriate for the coverage they are offering.

Agents want the whole process to go as quickly and painlessly as possible requiring as little special effort on their part as possible and with no hitches that cause unhappiness for either their company or their clients. Jewelry policies are NOT a major product for most insurance agents but trouble with one can cause cancellations of homeowners, cars, life and other policies that are the lifeblood of the agency.

And lastly appraisers want to be paid for their time, investments and skills.

There is usually a path that meets all of these objectives but it’s not going to be the same for every customer and for every deal. Some deals require an appraisal and some don’t. Most don’t. I agree that an addon of an appraisal to a sale is a bad practice but the ‘free’ ones are often just as bad or worse. Dealers appraising their own merchandise encourages deceptive information, sloppy appraisal practices and problems during claims. The sort of documents you're discussing routinely fails to meet ANY of the above objectives except that of allowing the ‘appraiser’, meaning the dealer, to be paid. The fact that some dealers charge extra for them just adds insult to injury.

Neil