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Should A Seller Charge For An Appraisal?


diamondsbylauren
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Hi everybody!

I was just wondering what everyone's opinion is on this.

I know we have some very professional appraisers who post on this board, along with sellers.

 

 

 

My question: what is your opinion of a seller charging the buyer for an appraisal of the diamond, or piece of jewelry they are buying from that seller?

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David,

 

Great question.

 

It depends.

 

A significant fraction of the time, the paperwork provided by sellers titled 'appraisal' is of no value to either the customer or anyone and serves only to add confusion for the customer or their insurer and clutter in the landfills. In such cases, no, I don't think they should charge. I don't think they should do it at all. Unfortunately this includes most of the dealer supplied reports that I encounter.

 

At another other extreme, dealers can offer documentation that is, in effect, a fully detailed sales receipt. This can be extremely helpful and, at least to a moderate degree I think it's appropriate that consumers demand it. It adds legal liability to the dealer by making a signed written statement of exactly what they are selling and it provides a wonderful reference point for the customers to know what they bought as well as, when, from whom and for how much they made their purchase. I think sellers deserve to be paid for their time, skills and investment and this includes the time required to prepare appropriate sales documentation but it strikes me as reasonable to expect a certain amount of paperwork to be included 'free' with each purchase.

 

'Upgraded' type reports, where they include extra photos or various test results I suppose could be something worth paying for although I can't think of any dealer who does this (charges separately to do a premium type of report). Normally it's just part of the package for the dealers who offer it. Conceptually I have no problem with it.

 

Lastly, sometimes customers will have specific documentation requirements that they want that are offered by 3rd party appraisers or labs and the dealers will assist in getting it for them. Naturally the providers charge to do this and I see no particular problem with the dealer passing these costs along to the consumer, including a fee for themselves for putting the deal together.

 

Neil

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Great response Neil, I think it brings up many good points that diamond buyers need to consider.

 

A significant fraction of the time, the paperwork provided by sellers titled 'appraisal' is of no value to either the customer or anyone and serves only to add confusion for the customer or their insurer and clutter in the landfills. In such cases, no, I don't think they should charge. I don't think they should do it at all. Unfortunately this includes most of the dealer supplied reports that I encounter.

 

I agree. Furthermore, I find it reprehensible when sellers use "appraised values" to try and convince the buyer that they're selling them something at a fraction of its value. In many cases these inflated "appraisals" can end up costing the buyer money in insurance premiums needlessly paid.

 

At another other extreme, dealers can offer documentation that is, in effect, a fully detailed sales receipt. This can be extremely helpful and, at least to a moderate degree I think it's appropriate that consumers demand it. It adds legal liability to the dealer by making a signed written statement of exactly what they are selling and it provides a wonderful reference point for the customers to know what they bought as well as, when, from whom and for how much they made their purchase. I think sellers deserve to be paid for their time, skills and investment and this includes the time required to prepare appropriate sales documentation but it strikes me as reasonable to expect a certain amount of paperwork to be included 'free' with each purchase.

If we're talking about a diamond purchase of significance, I believe it is imperative that the buyer insist on full documentation.

I'm sure we both agree, preparing an appraisal for a diamond that has a gia report is a pleasure.

Lacking a GIA, or AGSL. report, I believe it is the seller's responsibility to provide:

*exact carat weight

*color

*clarity

*measurements

If the diamond is in a ring:

*karage of metal

*number of side stone

*weight of side stone

*color and clarity of side stones

 

We disagree, if only slightly, in that I feel the seller has a responsibility to to provide a detailed description, which could be used for an appraisal, therefore charging for it is excessive in my opinion.

 

I guess what I'm saying is, that the bill of sale should contain all the pertinent information which would also be on an appraisal.

 

 

'Upgraded' type reports, where they include extra photos or various test results I suppose could be something worth paying for although I can't think of any dealer who does this (charges separately to do a premium type of report). Normally it's just part of the package for the dealers who offer it. Conceptually I have no problem with it

 

I've never actually seen something like this, have you?

It just struck me that maybe some sellers will have additional testing equipment, like a Sarin machine... I would still think that charging the client for the use of one's Sarin machine on a diamond you're trying to sell them is... overcharging?

 

Lastly, sometimes customers will have specific documentation requirements that they want that are offered by 3rd party appraisers or labs and the dealers will assist in getting it for them. Naturally the providers charge to do this and I see no particular problem with the dealer passing these costs along to the consumer, including a fee for themselves for putting the deal together.

 

Here we agree, it is reasonable to expect the client to pay if they want a GIA report on a diamond, which does not currently have one.

Although the wisdom of a client paying to do this is questionable, as the dealer should really know which diamonds to send off the GIA.

 

Thank you for your response, Neil, it was well thought out. I would hope that some of the other professionals on the site would also put up their opinions, so we can all know what everyone thinks.

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I've never actually seen something like this, have you?

 

Yes. Brilliancescope, for example, has a fee from Gemex associated with it. I'm not a big fan of this test but some customers request it and some dealers provide it. Some will charge separately for it while others include it as part of the package deal. Either way Gemex gets their money. If the dealer is paying it, you can bet that it's made up for somewhere else in the deal.

 

You already mentioned the fees from GIA and similar issues apply with other labs and services, like an AGTA country of origin report on a sapphire. This costs the dealer and it's fair that the consumer should pay if they request it. Most wouldn't describe such things as an 'appraisal' but then I wouldn't describe ANYTHING provided by the selling jeweler that way.

 

I've never seen a dealer charge separately for a Sarin, ASET photo or other service where they have no direct costs other than time and equipment but, like I said, I don't really see a problem with it as long as it's disclosed up front and the customer is given the opportunity to decline if they don't want it.

 

I agree that the sales receipt should include a full and legally binding description of what is being bought and the dealer should not be charging extra for this.

 

Neil

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Excellent topic for discussion, David, Neil.

 

IMO, a seller issuing an "appraisal value" of the merchandise he has sold which of course will show a higher than the actual purchase price is a clear conflict of interest and does the Customer a disservice.

 

Detailing the characteristics of the diamond/setting should of course be included by the Vendor.

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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. This gives them a finger on the pulse of the market, at least their own market and this is definitely helpful in answering certain appraisal type questions. Some are highly skilled and I would definitely recommend them. Some are not. The problem is that the vast majority of jewelry store workers haven’t a clue how to do a proper appraisal, including the vast majority of people who write documents titled ‘appraisal’. They don't even know that they don't know what they're doing. There’s nothing wrong with a jewelry store offering appraisal services on things they didn’t sell but just because they call themselves a jeweler or even an appraiser doesn’t make them qualified and a crappy job can cost you quite a bit in the long run. Be careful if it's a new purchase and they are a competitor of the seller because of the conflict of interest here. Check the credentials of the appraiser and ask questions about how their appraisal service works. They are not all the same.

 

So, to answer your question, no you can't get a useful appraisal at any jewelry store but you can definitely get one at SOME jewelry stores. To bring this back to the question in the headline, it's clearly appropriate that they should charge for this. In fact, I would be extremely nervous if it were offered for 'free'.

 

Neil

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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. This gives them a finger on the pulse of the market, at least their own market and this is definitely helpful in answering certain appraisal type questions. Some are highly skilled and I would definitely recommend them.

 

Neil

 

 

 

This brings up a very interesting point. If an appraiser is to actually know about values, they would need to be involved in the trade.

However, doesn't that create a conflict of interest in many cases?

That is to say, if someone is either a buyer or seller, and they are appraising an item, they can easily use that to attempt to influence the outcome.

 

I did have a bad experience with the "appraiser" on 47th St.. The reason was precisely that the appraiser was not well aware of market conditions.

The circumstance was that a potential client wanted us to go with him to an appraiser and 47th St with a fancy vivid yellow he was considering buying.

We went to this appraiser with the ring, and the GIA report. Our price was extremely competitive by market standards.

I wish I could buy that ring today, for what I sold it to this guy for back in 2005...

anyway, the appraiser came back with a relatively low monetary value. When I asked him what he uses a comparable, he told me that he compared it to an intense yellow.

The difference in value between an intense yellow, and the vivid yellow can be as much as two to three times. Huge.

 

 

Once I mentioned this to him, he revised his appraised value upward about 40%.

Needless to say I wasn't thrilled with his performance.

However, the thought of walking into one of the sharks in the retail segment of 47th St seems much less attractive. If that's possible

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As an appraiser, I am far better connected to the marketplace than the jewelry store appraisers. For me, the fact that I don't buy or sell is a feature, not a problem. I spend thousands of dollars a year on subscriptions to things like Polygon and Rapnet, I talk to dozens of customers a week who have actual transactions to report from dealers at every market level both locally and from all over the country. Not just the sales activity at one particular store. I attend the major and even minor trade shows and, because I’m not a competitor, I get far better reception when I talk to dealers and designers about what they’re up to. I actually read the trade publications and attend those 8:00am classes at the conventions on arcane topics like the new ruby treatments going on in Thailand that only matter to 2% of the clients. I dare say I spend more time carefully inspecting things that have been actually sold (rather than some delusional ‘asking’ price) than ANY appraiser who is making their real living by buying and selling things. They just don’t have the time to do it right. I have the finest tools, the best credentials, the best education and I do my best to provide each and every one of my clients the finest service and best information available anywhere in the world.

 

As the jewelry business goes, Denver’s kind of a hick town and some folks have a hard time imagining that this is the best place in the world to go for such an arcane service but I have clients come to me from as far away as Singapore and Ireland because they want it done right rather than have some jeweler estimate what they would charge to knock off the piece in their store or get some advertisement straight from fantasyland. I realize that there are people who call themselves appraisers who don’t go through the trouble and expense to do the job right and who will work for half of my price but appraisers are NOT all the same any more than diamond dealers are all the same.

 

Neil

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Neil, I'm not surprised that people from all over the world use your services. I was never questioning your ethics or abilities. The problem I find, is that there's not a lot of appraisers out there like you. Although I know that you can reliably recommend other qualified appraisers, I would say it's difficult for a typical consumer to find someone of your qualifications.

And many of the people selling diamonds, and doing appraisals, don't process your ethics... it's a real problem for consumers I think

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IMO, a seller issuing an "appraisal value" of the merchandise he has sold which of course will show a higher than the actual purchase price is a clear conflict of interest and does the Customer a disservice.

 

Thank you, Barry.

I disagree with the above as a blanket statement, although in many cases, inflated appraisals do represent a problem.

The reason I wouldn't make such a general statement, has to do with the way diamonds are sold today.

For example, it is likely that a diamond that you would sell for $10,000, would be sold at a retail store for a higher price.

Therefore, if you appraised a hypothetical diamond you sold for $10,000, for let's say, $12,000 retail replacement value, it could be justified. Especially it was explained to the client.

 

Certainly, if a client came to you, a number of years after purchase, a revised appraisal would be in order. Let's face it, diamond prices have gone up quite a bit over the past five years.

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Especially it was explained to the client.

This is the key.

 

With pre-loss insurance replacement type appraisals, the standard of value is appropriate funding to allow the item to be replaced by another new one of like kind and quality in a reasonable amount of time and in the customary marketplace. For most, but not all, jewelry items the ‘customary marketplace’ is a local jewelry store. For people who buy elsewhere and wish to insure things using this standard, this can cause a perception of a bargain where in fact none exists. It’s like defining the value of a hot dog as what they cost at the ballpark and then using this as evidence that a dog bought nearly everywhere else is, by definition, a great bargain. Jewelers learned this trick long ago and ‘appraisals’ being used as sales tools is a well-established tactic. Very few explain what they mean by their values and often the value conclusion is complete fiction. I’m with Barry, a new sale presented with an appraisal that has a value conclusion substantially different from the transaction price without a clear explanation of what they mean by the value and WHY it’s different is almost certainly an intent to deceive.

 

By the way, very few discount jewelers go through the necessary research to know what other jewelers are actually charging. They may be experts in their own pricing structure but claiming to be an expert in what someone else might charge is an entirely different issue.

 

Neil

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Someone who is selling the very same piece of merchandise he is "evaluating" for the purposes of an "appraisal", is in conflict with his own vested interest to sell the merchandise. This is highly unethical regardless of whether the appraisal value attributed is the same, or (certainly) more than the invoice amount.

 

Did you ever see a seller appraise his own merchandise for less than what he actually charged the customer? :rolleyes:

 

Would you buy a house with a crucial "home inspection report" provided by the seller??

 

Regards,

Edited by DiamondMaven
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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?

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Hi everybody!

I was just wondering what everyone's opinion is on this.

I know we have some very professional appraisers who post on this board, along with sellers.

 

 

 

My question: what is your opinion of a seller charging the buyer for an appraisal of the diamond, or piece of jewelry they are buying from that seller?

 

No I don't think so David. When you think about it, an appraisal is just an opinion, and this should be given free of charge from the seller. Because if he's not giving you his honest opinion in writing in the detail to your satisfaction, then what good is his word or service? If you ask them to provide an outside appraisal/report, then yes they should charge for this. But I think it's the consumers best interest to work with a third part appraiser of their own choosing.

 

I recently did a 3-stone oval ring, center = 1.16ct VVS2/G, sides=0.45ct VVS1/G + 0.44ct VVS2/H. Center stone was already GIA graded, but the customer asked for the side stones to be GIA graded as well. So I charged him for the reports/shipping/etc and had them graded. Stones came back as VVS1/F and VVS2/G so everyone is happy. That's the only real time I would charge someone is for grading of diamonds.

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I believe that in order to avoid any semblance of impropriety, the seller should not issue an appraised value on the merchandise he has sold to his customer. Get a third-party Independent Appraiser to do that for you.

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Extremely informative thread. Let me throw a curve ball here. If the seller gives you an apprasisal (for insurance purposes) at the time of sale at no charge and the customer comes back, lets say after 5-6 years, requesting a reappraisal due to climate changes in the market--is it reasonable to expect the seller to charge for such a service?

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Extremely informative thread. Let me throw a curve ball here. If the seller gives you an apprasisal (for insurance purposes) at the time of sale at no charge and the customer comes back, lets say after 5-6 years, requesting a reappraisal due to climate changes in the market--is it reasonable to expect the seller to charge for such a service?

 

Yes.

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I believe that in order to avoid any semblance of impropriety, the seller should not issue an appraised value on the merchandise he has sold to his customer. Get a third-party Independent Appraiser to do that for you.

 

All due respect Barry, this is only a conversation... aren't you qualified to appraise what you sell?

 

 

If the buyer has done their homework, and picks the seller they feel comfortable with, in this case we're talking about you, I believe that you could write an appraisal for the buyer that would serve them for the purposes of insurance.

The alternative would be adding to the price of the diamond by involving a third-party to appraise it.

I believe part of the value of buying from a well-established company, like yours, is the ability of that company to provide documentation that would serve this purpose.

 

If the seller is questionable, of course you'd want a third-party. But then again if the seller is questionable why send them any money at all?

Edited by diamondsbylauren
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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.

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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

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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

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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

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