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Advice On Emerald Cut Purchase From Private Seller


kaizr
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A private seller known through a connection ended up not using his ring and is willing to sell it to me.

 

He did not have any documentation but I personally had it appraised at a local dealer.

 

It is a three stone emerald cut diamond on a platinum band. The center stone is 2.5ct H-I color and VS2 to S1 clarity. The two matching side stones total 0.8 ct trapezoidal cut with same clarity and color as center stone.

 

Appraisal value of $25,000. They did not unmount the stones to do the appraisal. I do not have further information, being I have not received the paperwork. I know what I know from the secretary who should have sent this by now. Alder's in New Orleans was the location.

 

Seller is asking for $17,000.

 

I know that the appraisal value is quite inflated and I'm wondering if I'm getting a good price or not.

 

I know it's not the most romantic way to purchase the ring. But if it's a good deal on something I know she will like that I may not be able to afford otherwise then it will be worth it, as the price is really stretching the limit of my budget.

 

Basically, if it's an item that would cost me significantly more through more traditional ring purchases, I may want to consider this. If I'm not getting a deal, or even getting ripped off, then I think I would avoid this ring.

 

Below is a link to a picture of a SIMILAR ring just as an idea, but not exactly what I am looking at: http://www.shapirodiamonds.com/ringdescriptions/images/621a.jpg

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Some observations:

 

1. You should go back to the appraiser - whom I assume you paid for his/her services - and ask them what a fair price for the item should be for a private purchase. If you are paying them, you should be paying them for something that is of value to you, not for an insurance/replacement value appraisal.

 

2. Presumably you trust the appraiser - but be aware that the difference between a fairly graded H/VS2 and a fairly graded I/SI1, everything else being equal, can be of the order of 40-50%. If you assume the appraiser is one grade off, J/SI1 is significantly lower still, as is I/SI2. Where is your stone? $17,000 could be a reasonably good deal for you if it is an H/VS2. It could be a fairly good deal for the vendor if it is a J/SI2. Note: this is not a comment on the ability of the appraiser - quite honestly, a split grade is quite normal with a stone already in a setting - but nevertheless, if I were plumping out nearly $20k for something, I'd need to know what I'm getting.

 

3. We (and possibly you) have no information at all about the cut. This can make for another 20-30+% difference on fair price. Similarly, the side stones and the setting can "add" quite a lot (at least to your replacement price), or relatively little, but we have no way of knowing.

 

The appraiser has seen the ring. Yours are all very fair questions, but they are best asked to someone who has first hand, expert evidence.

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Appraisal value of $25,000

ANY statement of value must contain a component of how much it's worth to whom, when and under what circumstances. If your appraiser didn't discuss this topic then you didn't receive a complete appraisal. You were smart to hire your own appraiser, now make them earn their money. Ask questions. 'Approximately 2.5/H-I/VS2-SI1' is a big range and it's important to understand what it means if you're going to use it for shopping data. Does that include the possibility of J? Betcha it does. How about SI2? Tiny details make a big difference.

 

There's a common methodology for appraisers that applies about 90% of the time. The objective is to describe the piece for purposes of replacement with 'like kind and quality' in the case of a loss and to set a price that allows the insurance company to pay for this. These are called 'insurance appraisals' or words to that affect. It's a reasonable enough thing to do but lets look at the who/when/circumstances question:

 

Most insurance docs give the benefit of the grading to the stone. That is to say, 'approximately 1 carat' is taken to mean 'at least 1 carat' at replacement time. If it was actually a 0.95, the replacement stone in the case of a loss will be bigger (and probably more expensive). A similar phenomena applies to clarity and color. H-I means at least I, even if it was really a J. The specs given are the minimum standard for the replacement and descriptions routinely tend to inflate. If they can't decide between SI2 and I1, most appraisers will call it SI2 on the report.

 

The same thing happens with the price. That's the MAXIMUM limit of liability for the company. If they can get it for less they will but they wll not pay more. Few people complain about high appraisal values and low appraisal values cause all manner of trouble for the appraiser. The result is high value conclusions. A ring that you bought for $10,000 and 'appraised' for $20,000 isn't necessarily a bargain, it may just be a function of the way the appraisal was done. Without knowing more about the appraisal you just don't know. What does this $25k value mean and, equally importantly, what doesn't it mean?

 

As a shopper relying on appraisal data this is a terribly important issue. Remember, YOUR objectives are different from 90% of the appraisal clients. You want the benefit of the doubt to go to YOU. If it's a tossup between SI2 and I1, you want to call it an I1. 'Approximately 2 carats' is a big deal and the difference between 1.99 and 2.00 can be thousands of dollars. The onus is on the seller to be providing you with a decent description and the appraiser is then verifying or disputing what they're presented. If they can't tell because, for example, the seller won't let them pull the stone, and the seller doesn't have a credible way to back up their claims, assume down, not up.

 

This is one of the big reasons that YOU want to be the client and I applaud you for doing it. Make sure the appraiser understands the question(s) at hand and then talk to them about it. The correct answer to the wrong question is doing you no favors but if you didn't ask the question, it's partially your fault.

Edited by denverappraiser
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