Cleaning Up the Appraisal Mess
By Larry Frederick -- JCK-Jewelers Circular Keystone, 3/1/2000
At its big international symposium last year, the Gemological Institute of America staged aptly named “war rooms” for airing controversial issues. Everyone, audience included, was encouraged to challenge and provoke. No such prodding was needed when the topic came to appraisals. It quickly became obvious that the issue has become the jewelry industry's exposed nerve.
The main problem, everyone agrees, is the prevalence of inflated valuations. Too often, appraisals are little more than self-serving sales tools to make the gullible consumer think he's getting a bargain. Prices are routinely magnified 100%, 200%, or even more. Facts are few, research nil. Often there's not even a true description. These spurious appraisals not only hurt the industry's image but also create legal land mines, easily detonated by an angry consumer or suspicious insurance company.
At last, though, there's hope for real reform. Much of the credit goes to the Jewelers Vigilance Committee and its executive director, Cecilia Gardner, a former prosecuting attorney. A relative newcomer to the industry, she's been surprised to find that appraisal complaints account for the largest percentage of claims JVC receives, and she's appalled by the industry's inertia on the issue. She's called for a bar-like appraisal organization to enforce discipline—and courageously has volunteered JVC for the daunting role.
The idea is a good one. Just as bar associations have the authority to go after wayward lawyers, we need a body with the power to discipline people who won't stop writing bad appraisals. It could do this by setting and enforcing educational standards, for both initial certification and continuing training.
Education is the keystone. Despite what many in the jewelry industry seem to think, preparing a competent appraisal requires skill and knowledge. Consider just two factors: gem enhancements and price. An appraiser should be able to tell not only if a gem has been treated but also which treatment was used and how it affects value. Nor is determining true market value a simple matter. You need to visit a number and variety of retailers in a geographic area, refer to guides, check Web sites, and question suppliers. And all these data should be updated periodically.
If education is Step 1 in straightening out the appraisal mess, determining what an appraisal should contain is Step 2. Right now appraisals vary drastically—ranging from the inadequate to the elaborate—but a solution is at hand. It's the Appraisal Foundation's Uniform Standards of Professional Appraisal Practice (USPAP), available to anyone who wants to apply them. These could be supplemented with the Council of Jewelry Appraisal Organizations' 1997 guidelines for what insurance appraisals should contain. There's no reason the combined standards couldn't become the industry-wide model.
In the meantime, jewelers can help move reform along. If you don't have education in preparing appraisals, don't wait for some policing organization to force you to get it. It's widely available at reasonable prices (see “Where to Get Training,” JCK, February 2000, p. 136). Also, if you're both the vendor and the appraiser, disclose this on the appraisal document. Both the consumer and the insurance company have the right to know. Finally, join JVC. Your membership dues will help back its laudable efforts to improve appraisals, not to mention lend support to the many other worthwhile activities of this underrated organization. At just $125 a year, membership is a bargain.
Bad appraisals aren't just a minor ethical breach we can keep sweeping under the rug. They're an embarrassment for everyone in the jewelry industry. There's no better time than the beginning of a new century to finally do something about them.
