Appraising Finished Goods

The most important factor is not what tests you perform, but how you inform the client about what you did.

You have a piece of diamond jewelry to appraise, but you don’t know the weight or grade of the diamond and can’t be sure of the metal quality. Should you perform a scratch test to confirm metal content and remove the diamond to determine weight and grade? Or, if you decide to grade the diamond in the mounting, should you provide a single color grade or a range?

The answer is – it depends. It depends in part on the situation: Are you buying estate or period pieces, over-the-counter goods, or finished goods from a supplier? Are you appraising old items or items bought elsewhere?

Most will agree that it’s unreasonable to damage an estate or period piece in order to sell or appraise it. But what about a new item brought in by a client for appraisal? Some in the trade are quick to grab the scratch stone or prong lifter, but does it make sense to damage your client’s property in order to tell him what it was worth before you damaged it? To be sure, there may be limits to valuing the piece as is, but if so, say so, and let the client decide how to proceed. (Don’t forget about third-party appraisals; use the appraisal report to inform them about any such limits so they can decide if they need more information.)

In the case of finished goods bought from a supplier, you should be able to rely on the supplier’s information. (If you can’t, begin spot checks immediately or restrict your purchases to more reliable and precise suppliers.) But consider posting any caveats that might pertain to suppliers’ information. For those treacherous total-weight goods, for example, a prominent notice of the possible range might be in order: “Because of modern, high-speed manufacturing processes, rings marked ‘1/2 carat total weight’ could have an actual total weight between .47 carat and .56 carat.”

Disclosure is the key. In appraising mounted jewelry, the most important issue is not what you do or don’t do but how you handle disclosure. Inform customers of the conditions of the sale. Tell appraisal clients and third parties what you did (or didn’t do), what critical assumptions you made, and the basis of your opinion about the piece’s value. Be open, honest, and thorough.

For used jewelry, estate or period pieces, or goods bought over the counter, look to the major auction houses for guidance. They regularly sell finished items without taking them apart, but they also provide prominent disclosure of the conditions of sale. Look in an auction catalog from any major house, and you’ll see a notice informing readers that all statements regarding the authenticity, identification, weight, or grade of items are statements of opinion only. Jewelers might provide a similar statement with regard to secondhand or after-market goods.

Appraising mounted goods. What’s the best way to grade mounted diamond center stones, identify gemstones, and determine metal quality? The answer is that there is no “best” way. It depends on the problem at hand. A diamond solitaire set in platinum prongs presents a different color-grading problem from that posed by a diamond solitaire mounted in a heavy yellow gold gypsy setting.

Perhaps a better question to ask is: How should you approach the grading and appraising of a mounted diamond center stone? The answer is found in the way you would “grade” and appraise the mounting. Let’s review that process:

You make your best effort to non-destructively determine what the metal is and base your monetary estimate on that conclusion. You also make clear in your report that the precise metal content might differ from your estimate and that more extensive, possibly damaging tests are needed for exactness. You emphasize that the estimates are based on your current belief and add that they might change if the state of your knowledge changes.

Follow the same logic for center stones (or side stones or melee). First, base your monetary estimate on a particular grade, not a range. You should, however, include a proviso that not only acknowledges the limitations resulting from the setting but also provides ranges for color or clarity. In addition, add a sentence to the effect that it was not within the scope of the assignment to violate the integrity of the item by removing the stone for grading.

Remember, there’s a distinction between appraisal valuation reports and appraisal evaluation reports. The former provide estimates of monetary worth based on readily apparent identity; the latter are more concerned with confirmation of identification as well as grading issues. Which report is most appropriate depends on the needs of the client or third party.

What if the client has a sales receipt stating that a mounted diamond weighs 1 ct., but when you use a template or measure it, you come up with .98 ct.? Don’t decrease the value of the diamond’s stated weight based on an imprecise formula or, worse, on a diameter template. Instead, report that the weight by formula was .98 ct., but you based the value on the weight stated on the client’s sales receipt.

Elly Rosen is a freelance appraisal consultant in Brooklyn, N.Y.