Appraisals

Not only are appraisals often confused with certificates, they are also thought to be a simple statement of value that is equally useful in all circumstances. This is not the case. Appraisals take many different forms depending on their intended purpose and the needs of the client. Because my “Top Ten” is intended to help you make an informed jewelry purchase, I am going to limit my discussion to insurance replacement documents and new sales reports.

The lack of understanding about the purpose and limits of appraisals, not only by the public but by many jewelers as well, has lead to much confusion and mistrust and has also allowed the abuse of these documents to flourish. The most common abuse, one I see daily, is the inflated value. Inflating the true value of a piece of jewelry, usually to “prove” what a great deal is being given, has become an alarmingly common practice and goes hand in hand with the inflated pricing used by discounters. The pitch is simple; you walk into a store and ask to see a piece of jewelry that catches your eye. The sales associate says “Well, yes sir. Isn’t this a lovely diamond ring!” You say, “well ,yes it is. How much?” The associate says “It is $5,000.00, but (out comes the calculator) today (or for you, or because we sell wholesale, or buy in volume etc.) it is only $2,500.00! And we will even include for you an appraisal that states it is really worth $5,000.00!” 

An even better twist on this scenario is the claim of an “independent lab” issuing the “certification” and “appraisal.” The big chain operations are noted for this, but I have seen independents doing it as well. While these labs may be technically independent from the stores who use their services, I have yet to see a value from any of them that was not grossly inflated. There is a free standing (not in a plaza or mall) chain store in my market that does not discount prices, but uses these “independent” inflated valuations to mislead the consumer, which is no better than a fictitious discount.

The use of inflated appraisal values is an attempt to mislead; in doing so the practice often undermines the public’s confidence in the integrity of the jewelry industry as a whole, especially when these inflated values, as they often are, are used to obtain insurance.

I recently had a very upset lady come into the store asking for help. She had purchased a ring locally (the free standing chain store) about a year ago and it was stolen from her while on vacation. I asked if it was insured, she said it was, so I asked what her concern was. Well, the ring was insured for $8500.00, she had an appraisal that said it was worth that amount, and the company was only going to pay her a little less than $5000.00. She did not understand, her ring was “worth” $8500.00! I asked what she actually paid for the ring, having a pretty good idea of what the answer would be (I pride myself in being able to come in around 10% +- of what someone paid when doing a insurance replacement document on an outside sale) and she said, rather sheepishly, around $5000.00.

It is important to know that most jewelry insurance policies are written to “make you whole.” In other words they are required to replace or compensate you with an item of similar quality and value; if you where able to buy the jewelry for $5000.00 so are they.

When you make the purchase of expensive fine jewelry you should make sure that proper documentation to have the your jewelry insured can be provided. At many better jewelers, as it is with ours, this service is included, but some may charge an extra fee.

What you want is a “new sales report,” it is a document whose sole purpose is to obtain jewelry insurance coverage and is an estimate of the cost to replace the jewelry should it be damaged, lost or stolen.

A properly done new sales report or an insurance replacement document (the difference being that a new sales report is issued by the store selling the item and an insurance replacement document is performed by someone not involved in the sale) should contain the following information: a cover letter with an explanation of the purpose and limits of the report, a complete description of the jewelry, (when I was studying for my Certified Gemologist Appraiser title, I was told you should be able to “see” the jewelry in the description) a copy of any gemological laboratories grading reports, if the jewelry does not have a independent lab report there should be a store grading report that contains the same information, a summary page listing all the items in the report. Most of the time, there are only a very few exceptions, the value in a new sales report or insurance replacement document is going to be close, but not necessarily exactly, what was paid for the jewelry.

However good it might feel to have a piece of paper that says your jewelry is worth much more than you actually paid it is often no more than just a piece of paper; the old adage you get what you pay for is as true as ever and a piece of paper that says different does not make it so.

Till next time, that is how I see the world of jewelry from Rochester, NY

David West Nytch CGA  www.westandcompany.com