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Can Someone Help Me Understand The Difference From Appraisal Value To Purchase Price To Resale Value?


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I tried to sell my engagement ring (I'm divorced now) to the jeweler who provided the appraisal for insurance purposes when the ring was first bought. His appraisal lists $3,449. My ex-husband bought the ring for $2,100-$2,400 (I think). When I tried to sell the ring, the jeweler said he could only offer me $300-$400.

I knew I wouldn't get the appraisal value or the original purchase price. The ring is not in particularly rough shape. I was the original owner & wore it for nearly 2 years. I expected much more than $400. I don't understand why his offer was so low.

 

Ring specifics:

Center stone - square emerald cut ( asscher), 0.46 C, color: F, clarity: VVS1, polish: excellent, symmetry: very good, measurements: 4.26x4.23x2.89mm

Ring - 14k yellow gold, split shank, 0.25 C total weight of 0.05 C diamonds set in shared prongs along the shanks (these diamonds - clarity: I1 & color: G).

 

I do not want to sound like I'm complaining. I just want to better understand what my options are & try to figure out how to get the best price. I appreciate any advice anyone can offer.

 

Thank you.

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There are at least two issues here. One is why is the price offered so low compared not only to the appraisal value, but to the buying price. The second one is whether the price offered is in any way fair.

 

Starting from number one:

 

I. The appraisal price was obviously inflated. The fact that your ex bought the ring for 2/3 of the supposed "retail replacement price" is a clear indication that equivalent objects could be bought for far less than the stated appraisal value. Not uncommon, and not a huge issue; the only result is that you paid a little more for insurance than you should have.

 

II. See it from the jeweller's point of view: the setting is worth its scrap value, since there isn't a big market for used engagement rings and yellow gold isn't particularly popular at the moment. 3 grams of 14 k gold are worth about $60. The small diamonds are virtually worthless, other than for repairs, and even then the labour to take them out may be more than the price of a new G-I1 quality stone (BTW, I doubt they are 0.05 ct stones - they would look totally disproportionate with a 0.45 Asscher cut centre).

 

This leaves the centre diamond about which we don't know two very important things: whether the F/VVS1 grading is in any way reliable, and whether it is well cut.

 

In any case, a GIA-graded 0.45 F/VVS1 Asscher can be bought retail for about $1000. Which means the jeweller pays less, since he/she has to make a profit to keep the business running. Say $800 - with sale-or-return privileges, a recent GIA report (worth $150 including shipping and handling) and not requiring the jeweller to pay any cash for a few weeks or even until the diamond is sold. Of course he is going to offer significantly less for a stone that requires regrading (and that BTW may no longer be a VVS1; it takes very little) and that needs to be paid immediately against an uncertain resale prospect at an undetermined time.

 

I suspect your stone is not GIA graded, which means its fair retail price is significantly lower than $1000, but the rest of the reasoning remains valid. This is where the apparently low-ball offering comes from.

 

Whether it actually is a fair offer depends on what you actually have, but unfortunately it is very likely that you (or your ex husband) overpaid considerably even if the stone was correctly graded in the first place.

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Allow me to start with some definitions:

 

The transaction price is a matter of historical fact. It’s what the jeweler actually charged.

The appraisal value is the jewelers estimate of what he thinks it would cost to replace it with another one of ‘like kind and quality’ in the case of a loss. New, at retail, locally.  The appraisal is also an opinion from some historical date, possibly long ago, possibly not but sometimes it's relevant. 

The bid is what the jeweler is willing to pay, in cash, now and in it’s present condition.

I list these just so we know what we’re talking about. Confusion over the definition of 'value' is often at the heart of these questions. They’re completely different. I, of course, can’t give any sort of evaluation of ANY of those numbers and how they apply to your situation so I'm coming at this from a strictly theoretical basis. They can charge whatever they like and what they actually got is a matter of historical fact.  They can bid whatever they like and, presumably, they would be willing to go through with it if you agreed.  Their estimate of replacement cost can be reasonable or not. Often they’re not, but that’s a different discussion.  There's a giant conflict of interest involved with sellers writing their own appraisals.  We know it was wrong right out of the gate because the replacement cost new, retail, locally was 50% more than he JUST charged, retail, locally for that very same item on that very same date.

Why was his offer low? Mostly I suspect it's because he’s bidding on the parts. It's like buying your car for it's weight in steel. People don’t much care for ‘used’ engagement rings for the same reasons that I suspect you wouldn’t. The result is that he’s going to recycle the materials and, for the most part, that means the center stone. He’s going to have to get a new lab report on it and he’s going to have to tie up his money for a while. $400 still seems a touch low assuming the grading is accurate but not as much as you might think. Lastly, he’s trying to make a buck on this. He wants to pay you LESS than it would cost from his regular suppliers who have better payment terms.

By all means shop him around. There are lots of jewelers in most places. See what the other buyers have to say. If you’re anywhere near Denver I’ll be happy to take a look at it and give you some straight answers. It’s certainly possible you can get more, but it’s not as much of a ripoff as it sounds.

Edited by denverappraiser
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I really appreciate both of your responses. I'm completely ignorant of the whole situation and needed insight. I will take the ring to some other places and see what they say. I was on track in thinking that if a jeweler buys it they will take it apart & do whatever with the pieces. While it is a beautiful ring, I wouldn't expect it to be resold, as is, by a jeweler.

 

Unfortunately, I'm not near Denver. I'm in TX. I'll see what I can do around here. The jeweler suggested selling it on ebay. I'm not opposed to that, but I do have reservations about expecting a complete stranger to transfer a large sum of money to me, as well as putting something so valuable into the mail/shipping system.

 

Thank you, both, for your responses. I think I understand better what's going on. I appreciate it very much!!

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eBay has changed their rules on returns and they're a problem for sellers. In effect, you've got a 30 return policy if the buyer objects to any line item on your description, no matter what YOU called the return policy. They'll issue the return ticket directly and they'll suck the money right out of your bank account.

 

http://pages.ebay.com/help/policies/money-back-guarantee.html

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It depends. You're going to take a hit, and possibly a fairly big hit, but exactly how much really depends on what you have and how you sell it. If you're going to do ebay, make sure to charge enough to be worth the risks and the expenses. You'll need a formal appraisal for example. Not a lot of people have huge problems but it's good to be aware of the potential. The T&C are decidedly tilted towards the buyer at the moment but that's not without it's upside. Happy buyers is a GOOD thing. Don't ebay it for $400, but if you can get $1000 it may be worth it for example.

 

Other options include selling to different dealers, selling directly through Craigslist or equivalent, direct advertising on the likes of diamondbistro or louptroop and consigning through through shops like idonowidont.com that will accept nearly anything.

Edited by denverappraiser
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