Your Appraisal Questions Answered

Q: We’ve been thinking about providing a “guaranteed appraised value” on items we sell. Other stores do it, and we were wondering if there are any reasons we shouldn’t.

A: It’s not a good idea. Very often such a tactic runs afoul of deceptive-advertising laws. Even when it’s done in compliance with the law, consumers usually aren’t given all the information they need—for example, that the cost of the appraisal will not be refunded. The result could be distrustful, unhappy customers. More important, it’s risky to provide what amounts to an “express warranty” that the item will later be appraised for a given amount. Many such guarantees fail to include conditions related to the independence and impartiality of the appraiser or to the appraiser’s required gemological credentials, not to mention his or her professional appraisal credentials.

When customers bring in their old or used jewelry for an insurance appraisal, we always write the appraisal for the amount it would cost to buy a new, similar piece today. Is that the right way to do it?

A: Not if the customer has a “cash value” policy that requires the insurer only to pay for what was actually lost. Nor is it your job to decide for the customer that he should buy more expensive coverage in which the insurer promises to replace the lost old item with a similar new one.

I’ve read in appraisal books that you should do a scratch test to be sure of metal quality. Wouldn’t any appraiser know that to begin with?

A: Actually, a professional appraiser would know not to do it. We aren’t in the business of damaging clients’ property so that we can tell them what it was worth before we damaged it. Anyway, a scratch test confirms no more than the quality of the thin, tiny surface area that was scratched. All this should be explained to the customer so she can make an informed decision based on a calculation of the cost vs. the benefit.

Q: When we have an “old-mine” cut diamond to appraise, should we estimate what it would weigh as a recut modern brilliant and base our value on the selling prices of the modern recut stone?

A: No. The first principle of appraising is to appraise that which exists in front of you, in its current quality and condition. The soundness of that principle is aptly demonstrated here because the value of the old-miner isn’t necessarily equal to the value of the modern stone that it might be cut down to. Even if the client asked you to appraise it based on a redone modern cut, the result would not be the value of the stone at hand but rather the value of a different item you haven’t seen. If you go ahead and provide such an appraisal, your report should indicate that it is a prospective appraisal based on hypothetical information.

If value is based on what “a willing buyer would pay a willing seller,” why isn’t whatever price I charge equal to value?

A: The answer is in the question. If any and every “price” were equal to “value,” then there would be no such thing as “value” but only prices. Consumers need an appraiser to tell them what an item is “worth” precisely because there is a range of prices willing buyers regularly pay willing sellers. Market value is usually based on how the greatest number of appropriate buyers and sellers typically behave, and not just any one buyer and one seller.

We have a solitaire engagement ring to appraise that is fairly new and stamped “Tiffany,” but we can make a similar ring in our shop. Should we write the appraisal for the amount we would charge for such a ring?

A: No. The ring you produce might look similar but would in fact be a very different item because it would lack the Tiffany brand. That means it would probably be worth less in the marketplace. Provenance (origin or background) can’t be ignored when it adds value.

Elly Rosen, who has written numerous courses on appraising since 1982 and served as an expert witness in 35 trials, answers jewelers’ questions on JCK’s Web site (www.jckgroup.com) and provides instruction through Appraisal Information Services (http://ais.polygon.net), which he founded in 1995 in Brooklyn, N.Y.