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Why Do Jewellery Appraisal Values Vary?

As a jewellery appraiser, I get asked quite often to explain why an item is sometimes appraised for a higher value than it was sold for. I am also asked to explain why valuations differ from appraiser to appraiser. I am not sure this answers the questions perfectly, but I can give you an insight into my world of evaluating jewellery and I hope you will come away with a deeper understanding of its complexity.

Systems Are Good

The first thing I realized when I started to appraise jewellery back in the early 1980’s (yikes, I am a relic) was that there was hardly any consistency in terms of pricing. It was so hard to find a published price list for diamonds and almost impossible to find one for sapphires, rubies or pearls. Jewellers were “flying by the seat of their pants.”

I was hired as a diamond and gemstone buyer for a chain of jewellery stores. This allowed me to document prices as I did my purchasing. I was able to create a very reliable list of prices because I purchased stones from several dealers on a daily basis. I like to develop systems and I always feel they are important to remaining consistent in my work as an appraiser. All of my notes were about the wholesale prices. I was in the front seat as far as that was concerned.

The next thing was the question of markups. I wondered what the other stores used so I purchased a handbook which indicated the markups used by mainstream jewellery stores at the time.

Because I worked for a manufacturer, I was able to learn about so many techniques of fabrication. This helped me understand the time required to make different items of jewellery, in different ways.

Putting all this together was getting easier. I finally felt that it was possible to assess jewellery and remain consistent. But, there was one thing that worked against this:

Every time we made a piece, I would assess the value based on my systems and the store would discount the item by some percentage to demonstrate to the customer that our prices were good. So, instead of my appraisals being a reflection of the pricing, the pricing was becoming a function of the appraised value. This was not good. Appraisals were now becoming a marketing tool and I was at a loss as to how to deal with this.

So, were the markups that were listed in my handbook wrong? Weren’t these a reflection of what a store needed to survive? At least you would think so.

The store I worked at was close to an industrial park and people loved to come to us for good prices. We were not a reflection of “normal” – the full service retail stores you would see in malls or at a high priced urban street corner. Our overhead was lower and therefore, the prices we could afford to sell at were lower.

Should We Lower Appraisal Markups To Reflect Discounts?

This is a really good question that I wrestle with from time to time. It has been debated by other appraisers and it will remain a topic of discussion for jewellers, their customers and insurers.

The answer depends on the intended use of the appraisal and its function. If a person asks for a comparison value, I think we should reflect what the item would actually sell for, including a commonly seen discount. If the item is being insured, today’s discounted price may not be adequate to replace the item because the conditions under which the item was sourced may not be something that can be repeated. Therefore, for insurance purposes, it is wise not to discount the item in the evaluation.

What Does All This Mean?

Jewellery markups are always changing. That old survey of markups I used in 1981 doesn’t work anymore. There are so many retail store models now. We thought it was ingenious to set up our jewellery store in an industrial park back then, but now a jewellery store can nearly eliminate overhead by going online. The internet has really changed pricing. You can go and look at the finest jewellery in the world at places like Fifth Avenue, New York, or you can search the internet. I guarantee the jewellery collections are likely very different, but there is still a wide range of pricing models out there. This means that appraisers need to think about the most common way a customer would shop for a given item and reflect the markup used in that circumstance.

That last sentence is important so I will expand on it a little more. Let’s pretend that someday in the future, most stores are online and few real bricks and mortar jewellery stores have survived due to our buying behaviour. In a world like this, appraisers would reflect the pricing seen on the internet rather than the traditional bricks and mortar stores. Therefore, we are constantly adjusting markups to reflect the most common way an item is purchased and the price it is sold at. If instead, we were to somehow reject the internet in the future because of security concerns or something else, appraisers will reflect the prices charged by the sellers that most people buy from.

So, you can see that I use systems but what about other appraisers? Do they use the same price lists? Probably not. Do they lean more towards a bricks and mortar model of selling or do they adjust for other competition? One would think we are all thinking the same way but this is not possible. Our experience and opinions affect the outcome as well. Therefore, you should not expect that any two appraisers can give you the same exact evaluation of your item of jewellery.

I hope this was helpful. Please comment and ask questions and I will respond.

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Nugget Pendants

[x_text]These nugget pendants were made with recycled gold. It may be a little hard to see in the image but they are set with small diamonds near the edges. The centre of each pendant is matte finished and the edges are high polished. Each pendant is actually no more than 1 inch long.

Do you have some old gold to use to make one of these? No two are alike. The technique to make these is a store secret. There are many nugget pendants out there but we think these are different (and better looking).[/x_text]

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Ontario Has Changed The Rules Regarding Probate

Probate Jewellery Appraisals

Estate Appraisal Jewellery ProbateCommencing January 1st, 2015, new probate filing rules took effect in Ontario regarding the Estate Administration Tax.

It is now a requirement that once an executor applies for and receives a Certificate of Appointment of Estate Trustee, the executor must submit a detailed Estate Information Return within 90 calendar days to provide details of how the estate’s value was determined.

Included in the valuation of the estate is the Fair Market Value of the jewellery. The most common type of jewellery appraisal …. that which is used for insurance purposes, for instance …. is the Retail Replacement Value as of the date of issuance of the appraisal. The Fair Market Value, because it represents “the amount at which the property would change hands, in a free market, between a willing buyer and willing seller, neither being under any compulsion to buy or sell, acting at arm’s length, and both having reasonable knowledge of all relevant facts” is most often significantly less than the Retail Replacement Value.

In order to properly assess the Fair Market Value of an item, one needs the skills and technical knowledge of a Gemologist and experience in the retail and secondary jewellery markets

David Conger, President of Conger’s Jewellers, has been appraising jewellery for over 30 years. During that time he has appraised approximately 50,000 items, and his work has been accepted by all insurance companies. In addition his Clients have included the Ottawa Police Service and the Canadian Border Security Agency. He is a Graduate Gemologist, having graduated from the Gemological Institution of America in California. He also has operated his own jewellery store for over 20 years.

Conger’s Jewellers would welcome the opportunity to assess the Fair Market Values of an estate’s jewellery items.

Telephone 613-722-4547, email dconger@congersjewellers.com

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