“Guaranteed Appraised Value”

During a sales presentation, the customer asks what the item is worth or “What will it appraise for?” Many jewelers pitch the notion of higher value during a sale, provide a formal “guarantee” of the appraised value or provide point-of-sale appraisals for an amount higher than they just charged. They say this is OK since appraisals of gems and jewelry are unregulated. Is it advisable to proceed this way?

Such traditional practices could put a jeweler in harm’s way if they’re not thought out and performed in accordance with reality and in compliance with any relevant laws or regulations. It’s a common but erroneous belief that appraisals are unregulated. While it’s true that no government licenses personalty appraisers (including gems and jewelry), appraisals are covered by a host of long-standing business and consumer protection laws as well as regulations related to particular types of appraisals, e.g. insurance, estate, etc.

Since the qualifications and competence of appraisers generally are unregulated, it’s unwise to close a sale based on a guarantee that any appraiser’s opinion will support your value. If given at all, you should qualify such a guarantee with certain conditions. Some issues to consider:

  • Range of value. Professional appraising is based on certain principles, procedures and methodology, but it is an inexact science. There might be legitimate differences of opinion on application and appraisers will have different opinions of value. Merchants might be well advised to make this clear and to couch any view of value within a reasonable range for their area.

  • Qualifications and affiliations. Since the study of gemology is limited to the identification and grading of gemstones, you might insist that the consumer consult only an appraiser who also has formal education and testing in valuation science (appraising). Qualifications alone do not assure either competent performance or ethical conduct, but it is wise to at least start from a base of qualifications and ongoing education. In addition, some of the respected appraisal societies do make an effort to monitor ethical conduct.

  • An “appraisal” in writing. You might want to be clear that you are referring to a formal written appraisal and not just the verbal opinion of a competitor. You might also want to be clear whether the assurance hinges on an appraisal as an indicator of value or if you will accept the new “Insurance Replacement Estimate” that another store might provide. The latter is a statement of what that merchant would sell the item for in his store. If a range of value is being assured rather than any other store’s selling price, the distinction should be made.

  • Cap on fees and expenses. Unless you are willing to reimburse a consumer for any level of appraisal fee, you should make clear who will handle fees and how much you will reimburse if you include such an option.

  • Clarity on return policy. Do you promise to refund the customer’s money if the appraisal doesn’t pan out or only offer an exchange or credit? Do you intend a “limited refund” of the difference between the selling price and any lower appraisal? If you intend the latter, some states require that this be stated as opposed to a “Money Back Guarantee,” which usually means all the money the customer paid.

Don’t assume that the consumer understands any of these issues. Be sure that the conditions of any value assurances are clearly stated and explained. Work out specific language that might be attached to any valuation expectation with competent legal counsel in your area.

There are many laws, interpretations and definitions of terms like “express warranty” and “implied warranty.” Most probably lean towards the view that any statements made during a sale regarding an item’s “value” are an assurance that the item is “worth” that amount. There’s a fine line between permissible sales “puffery” and definitive statements that could be considered part of the contract for purchase. Be careful that sales presentations do not rise to the level of “warranting” the value of the item. Providing a higher written appraisal at the point of sale ups the ante and will often be taken as an express warranty. Any formal “Guarantee of Appraised Value” almost always will be considered an “express warranty.”

If a consumer is led to believe that an item is worth more than he or she is paying, legal remedies can go from a return of the customer’s money to punitive damages for “expectation of the purchase” or “benefit of the bargain.” In some jurisdictions these add-ons can result in “treble damages.”

Elly Rosen is a freelance appraisal principles consultant in Brooklyn, N.Y. His Appraisers’ Information NetWork OnLine (AIN) offers subscriptions for appraisal consultations; The Appraisal Reporter (an appraisal principles journal) with gemological appraisal supplement; a Glossary of Appraisal Ter- minology; and a related Laws Data Base. Rosen also offers appraisal report “boiler-plates,” formats for appraisals, client information brochures, and an audiotape lecture series.