Gemstone Appraisals

[gems4ever 10]

From time to time customers ask us for an appraisal on a gemstone they've purchased from us. We find it such an odd request that we're never quite sure what to say.

We find it an odd request for several reasons. For one thing, it suggests the customer has been buying from a gem dealer who does give appraisals on the stones he sells. It's not a very ethical practice, since the dealer may well give an unrealistically high value in the hope of selling the gem. An appraisal should be an objective assessment of value, not a sales tool.

The other reason the request is rather odd is that the dealer has in effect already made an appraisal of the gem when he put a price on it. If the dealer is selling the gem for R100, he apparently thinks it's worth R100. What's the point of asking for a second appraisal? It's like asking your doctor for a second opinion after he's given you his diagnosis. (As the old joke goes, the doctor says, "Ok, you're ugly too!").

What is the customer really looking for when he asks his gemdealer for an appraisal of a gem that has already been priced? Does he simply want to know that he got a good deal on the stone? Or is wondering how much he can get for it when he sells it? The first question can only be answered by looking at the prices of comparable stones in the market, presumably something the customer already did before he made his purchase. The second question depends very much on market conditions when it comes time to offer the gem for sale.

There are people who professionally offer appraisals of gemstones and jewelry. Most often these appraisals are done for insurance purposes and specify the "replacement value" of the item. Buyers who are thrilled to receive a higher than expected appraisal on a gem are less thrilled when they discover this means only that they have to pay a higher premium to insure it. The problem with the appraisal industry is that it is not regulated and the appraisal mainly constitutes the opinion of the appraiser. If the appraisal included an offer to buy the item at the appraised price, then that would be an appraisal worth taking seriously!

The issue of gemstones appraisals is quite separate from the issue of gemstone certification, where a recognized gemological laboratory identifies a gem through scientific testing. But these certifications do not set a value on a gemstone. In fact in most cases they do not assess the grade of the gem at all, but certify its type, size, weight, color, clarity and (often) treatment.

The value of a gemstone is determined in the marketplace. Prices for comparable items do vary, as smart buyers know, since the prices that dealers pay for gems vary according to where they buy and in what volume. But it's very unlikely that a dealer will sell you a gemstone for R100 if he really thinks it's worth R300.

[Lukeness 10]

Sometimes buyers plan on insuring their items, for this they require an appraisal. Others would like the piece of mind that comes with a gem identification and grading report and simply get an appraisal while they are getting that.

 

Ideally, if the dealer does provide an appraisal, it is from an independent third party. While appraisals will always be somewhat subjective and the opinion of the appraiser, established appraisers will use various market sources including actual selling references, industry pricing guides such as the Rapaport or IDEX diamond pricing guides and good documentation of previous appraisals to provide benchmark values and compare them to the current market. This makes them much more objective and a better representation of there values in the specified market place.

 

If the reports are recording the gemstones "type, size, weight, color, clarity and (often) treatment", then they are indeed grading the stone. Of course more in-depth reports would also include cut, symmetry, polish etc.

 

While some gemological laboratories do not provide appraisals, many internationally recognised ones do. They are also best-placed to make solid objective decisions in assigning values.

 

As most gems sales on BoB are via auction rather than 'buy now' sales, it is hard to gauge the sellers perception of the items true value from the selling price. Most gemstones sold on BoB are done so at far less than even the prices of gem wholesale companies who supply jewellers which also accounts for the high variation in values compared to selling prices.