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Setting prices for resale


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Pricing for resale.

 

Many people find themselves in the position of owning a piece of jewelry that they would like to sell and who are finding the process of getting maximum money to be difficult. Hopefully this article can help. The first step is to be sure you understand what you have. There’s a tendency of sellers to want to believe the best and to ignore the rest because they want to maximize their money. Not surprisingly, buyers tend to be less optimistic. This strategy is going into the deal blind and it almost certainly will end up badly because you either don't charge enough or you don't get the sale at all because you're charging too much. Put another way, you may not want to include everything you know in your advertisement, but YOU should figure out the facts to the best of your ability. Otherwise, how will you know your best deal when you find it?

 

Reading an appraisal.

There’s a pretty good chance that you’ve got a document titled appraisal that was either given to you by the seller when you bought the piece or that you hired someone to prepare (or both). This is a good place to start and it may have some very useful information – or not. Jewelry appraising is a completely unlicensed profession in the United States. This is both a benefit and a problem but it underlies one of the key issues about appraisals. It’s no more or less than the opinion of the appraiser who signed the report. With any opinion, the first thing to read is the signature, not the price. Is it even signed at all? If so, by whom? What are their qualifications? Who was their employer and who was their client? What tests did they do? How did they research their values? What was the question they were answering? Why should you care what they think? A properly done appraisal will have all of this information right in the report. If the appraiser can’t cross this hurdle, ignore their report in it’s entirety.

 

If you decide that the opinions of a particular appraiser are worth reading, now what? Read the description. It may seem counterintuitive but this is the most important part of an appraisal, not the price. The reason is simple. If you don’t know what it is, how can you know what it’s worth? The appraisal should describe what it is about the piece that makes it valuable. This might be the details about the gemstones, it might be information about the craftsmanship or the designer, it might be the history of ownership but is each case it should be explained in the report. The reader of a jewelry appraisal, or any appraisal for that matter, should be left with an understanding of what it is about that item that makes it worth buying. With most diamond jewelry being sold by individuals, the biggest topics will be the details of the gem(s) and often it boils down to the details on a single major diamond. How did they come by the grade presented? Was it examined loose or mounted? Who graded it and using what criteria? Often the appraiser will be referencing a 3rd party like a lab or a prior appraisal. This is ok and maybe even good, but the opinion is only as good as the grader who provided it and they should be held to this same standard of convincing you that their opinions have merit. Anyone who wants to cal call themselves a lab and they can rank things however they wish. This doesn’t make it useful. Read the lab report critically and pay attention to the scales used to make claims about cutting quality, clarity, color as well as special attributes like astrological properties. Ask the same questions about the lab that you've asked about the appraiser. Why should you care what they have to say? Not all labs are accurate and not all labs provide information that’s useful to either you or your potential customer. Just because someone wrote it down on an official looking document and laminated it doesn't make it true.

 

If you don’t have a valid appraisal and/or lab report to use as a basis for deciding exactly what you have, consider getting one. When you shop for your appraiser or lab, use the same use the same sorts of criteria as discussed above to find someone whose opinion will be useful to you. Interview them. Shop the same way you shop for any other professional service. They are not all the same.

 

Prices.

If you’ve read this far, you’ll notice that I haven’t discussed the bottom line price found on the appraisal. That’s because it usually doesn’t apply. Almost everyone would like a simple conversion chart from ‘appraisal values’ to something they can reasonably expect to realize in a sale or at least something they should expect to pay. Unfortunately, it just doesn’t work that way. The vast majority of jewelry appraisals are an opinion of the appraiser about the maximum funding required for your insurance company to replace the item with a similar new one, at retail and in the local marketplace. If you don’t happen to operate an expensive retail jewelry store selling new merchandise, this isn’t you. The appraiser may also be describing something that was valuable to their clients situation, like designer or astrological properties, that may be irrelevant to your own or your customers. Even at that, jewelers will regularly issue ‘appraisals’ for 2-10 times what they would sell the item for. If the appraisal wasn’t specifically written for your situation, and you weren’t personally the client, the value on the report isn’t very useful and it quite simply can't be translated by a simple formula to something that is.

 

So what do you do? Go shopping. To set your prices you first need 2 numbers. The price that your intended customer is expecting to pay at your competition and the price that you could get for it in alternative markets. Your toughest competition is likely to be the Internet diamond dealers and, assuming we’re talking about ‘certified’ diamonds, they’re pretty good about publishing their prices so that part is pretty easy. Use the ‘find online jeweler’ button at the top of the page and enter specs similar to yours. Pay attention to the lab that did the grading and notice that there’s a pretty big range of prices for superficially similar items. Usually it's at least double from the cheapest to the most expensive. The difference mostly has to do with the accuracy of grading, the additional features provided by the dealer like trade-in programs and guarantees, and the details beyond what’s described on the lab report – mostly the cutting. Choose the cheapest one that meets your specs and use this as the top of your range of selling prices.

Your alternative resale price will vary depending on where you are. Most cities have professional buyers that advertise in the phone book and elsewhere. This includes pawn shops, auction houses, resale jewelers and quite a few others. Call them up, pay them a visit and ask them for a bid. Most are happy to provide this for free. A warning about professional buyers. Don’t let them damage your piece. It’s common to test the metal by filing a notch in it somewhere and, if they don’t end up buying it, you are left with a notched piece. They also sometimes want to do a scratch or other distructive test on gemstones. Don’t let them do it. If they won’t give you a bid without using destructive tests, find someone else. It’s ok for them to say something like “assuming this passes our metal or gem test I’ll pay $$$” and, if you decide to go through with the deal, THEN let them do the test. If it passes it’s now their problem and, if it fails, you didn’t do your homework to know what you had. Get bids from a couple of these and and use the top one as the bottom number for your sales price.

 

These two numbers are likely to be quite different. Often by more than double. Where you end up between these will depend on what market you sell to, how skilled you are at selling and how lucky you are at finding customers. From here it’s hard to give you advice because it varies so much from situation to situation and from piece to piece. Some things are a lot easier to sell than others. Halfway often seems like a good compromise in person to person type deals. Private deals between strangers on ebay tend to be near the bottom and consignment deals at jewelers tend to be near the top.

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  • 2 weeks later...

What about ‘certificates’?

 

Many diamonds are accompanied by documents that declare some of the grading details that are popularly known as ‘certificates’. This is sometimes even the title of the document. There's a decent chance you already have one of these. This term is terribly misleading and the major labs refuse to use it. The problem is that nothing is being certified. Like an appraisal, it’s no more or less than the opinion of the grader (s) and their employer.

 

The usefulness of these reports can vary considerably depending on what you want but users fall into two general categories: Buyers and sellers. Much has been written about how useful they are (or not) as a shopping tool for buyers but it’s sellers that are of interest today. As a seller, there are 3 general uses for lab grading reports:

 

1) They sometimes help you to know what you have. As with the discussion of appraisals above, knowing what you have is an important first step to maximizing your sales. For this you need to apply the same rigor that your toughest buyers will. Not all labs are the same. They don’t all use the same scales and they don’t apply them equally. It’s not the paperwork that makes a beautiful diamond beautiful or that makes a VS1 a VS1 and just because some lab says it is, doesn’t make it so. As with the appraisals, the first thing to read is the masthead and the signature. Why should you care what they think? Look into the reputation of the lab for providing accurate and useful grades. If they aren’t reliable, don’t rely on them. This is a huge problem area for private sellers. They bought a stone that was ‘certified’ and were led by the salesperson to believe that this was carved in stone by God doing business as some lab and that this was the key to holding your resale value. How dare I say that your VS1 might be SI1? It’s CERTIFIED! I’ll discuss this more in the next section on advertising but one of the basic rules of business is that one of the roads to failure is when you start believing your own press releases. YOU are the seller and YOU are the one making a representation about the grading by presenting this report. You don’t have to tell anybody that you’ve done your homework and that you know more than you’re letting on but it never hurts to be a little smarter.

 

2) Advertising. The primary purpose of buying a lab grading report is to serve as advertising for sellers. This is why people buy them and this is why these labs have grown into huge businesses. It was used as an ad by the person you bought it from and you intend to use it as an ad when you sell it. In many markets, especially ebay, writing a good advertisement is the number one key to making a sale. If you’ve got a cert, and your conscience will allow you to use it in your advertising, either because you’ve decided to believe it or because you don’t mind lying, scan it and include it in your adverting. It adds the credibility of the lab to your own in the eyes of potential buyers so people tend to see ‘GIA certified’ as a good thing and ‘XYZ certified’ as marginal at best. Be careful about fuzzing the boundaries. ‘Graded by a GIA Gemologist’, is not the same thing as ‘Graded by GIA’ and if you’re ad suggests that you don’t know the difference then you are either a liar or a fool. Either way, they won’t want to buy.

 

3) Avoiding arguments. One of the big benefits of using certs in your advertising is that it avoids, or at least reduces, arguments about what you have. You say it’s a F, the buyer say’s it’s an H – who’s right? In the end, the buyer gets to make the call since it’s their money but it’s a lot easier to have this discussion if you’ve got something to point too when you make your grading call. This is especially true if you aren’t personally an expert but, even then, it’s helpful to have a 3rd party involved in the grading.

 

Deciding what to do if you have a ‘cert’ that you know to be inaccurate or if you don’t have one at all is a common concern. For very expensive items, say items where you are expecting to realize more than $10k, it’s probably worth your trouble to get a new report and it will definitely be worth your trouble to consult with a qualified appraiser about your strategy. The same is true if you have a due diligence type of concern where you are an estate manager or attorney working on behalf of a separate owner. For inexpensive items, say less than $1000, it’s almost never worth the cost for private sellers to do this although dealers will do it regularly. The decision will have to do with your market selection and the appropriate style of advertising for that particular market.

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