Resale valuations: Creating specialized services to meet the client’s needs

by charlene_voisin | June 1, 2012 9:00 am

By Mark T. Cartwright

Perhaps it’s the extended economic worries, the high price of gold, or just another cyclical trend, but the public’s need to understand the value of the jewellery they plan to sell has increased significantly in recent years. Most people have deeply ingrained misconceptions about what their jewellery is ‘worth’ and often become angry or disillusioned when they try to sell it. Most of our initial interaction with resale clients consists of extensive seller education that often serves as a ‘reality check.’ Our assessment of the most appropriate market and market level for their property can serve as a guide for the most cost-effective service we can provide.

My approach is to offer an array of different services providing increasingly more detailed information, while remaining compliant with Uniform Standards of Professional Appraisal Practice (USPAP) and the ethical standards of the professional organizations to which I belong. Whether it is a ‘consultation’ or a ‘market value appraisal,’ the client must be made aware of each service’s limitations and degree of reliance on the results, including our disinterest (or interest) in purchasing or brokering their jewellery. For these types of assignments, the client’s specific needs must be met, though not at the expense of professional standards.

Hard times, hard facts

One of the great joys of working in retail jewellery is the feeling one is a participant in the most significant celebrations of our clients’ lives. Jewellery is linked to the owner’s emotions and can be a constant reminder of the happiest of times. Unfortunately, when circumstances change and our clients need to sell their jewellery, these same emotions can present a number of obstacles to the process. As an independent appraiser, the least enjoyable part of my job is deflating their emotional bubble with the cold, hard facts of the market value for used jewellery.

Our industry has worked tirelessly to create and reinforce a belief in the enduring value of gems and jewellery. The public has accepted as a given that their treasured family heirloom becomes more valuable with each generation. Many people believe their jewellery is an investment that never loses value. After all, the ‘replacement value’ seems to constantly increase when they have it appraised for insurance. These misguided beliefs are fed by a lack of understanding and perhaps a bit of wishful thinking. The truth is, for the vast majority of people, the only jewellery appraisal they have ever experienced was for scheduling insurance coverage, and many of those were ‘optimistic’ in their valuation. It is not surprising, then, that someone trying to sell a cherished, though 15-year-old ring, would have an inflated view of its value.

So, where do we, as appraisers, begin? It’s important we recognize that unlike an insurance appraisal client, people wanting to convert their jewellery into cash can have a wide range of motives for doing so. If we are to be of any assistance, we must be able to offer a variety of services, and not all of them will be appraisals. However, if you are required to comply with USPAP, or are claiming to comply with those standards, it’s important to understand how this organization defines the concept of ‘appraisal’ for personal property appraisers. It’s really pretty simple—if you are approached in your capacity as an appraiser and you offer an opinion of value or a range of values, you’re providing an appraisal, no matter what you call it on your pricelist. On the other hand, if you are acting exclusively as a broker or resale agent, it may be appropriate to offer a range of potential values as part of your consultation process.

Keeping it real

For most clients, advice and a reality check are the primary services we can provide. I charge an hourly rate to provide a ‘resale consultation’ that may evolve into another type of assignment. I’ve learned it’s seldom a good idea to offer advice without first examining the property and understanding the seller’s needs and motives. If they are willing to make the trip to my office and understand that as a highly trained professional my time is worth paying for, they are much more willing to accept that my advice is grounded in fact. Free opinions are seldom worth the asking price. In addition, I’ve found few people actually know anything about what they’re trying to sell, and the opportunity to examine it first-hand makes my advice more credible.

The consultation always involves the aforementioned reality check/education in which I explain most jewellery is actually a depreciable asset that, much like a car, loses significant ‘value’ once it leaves the store. I explain the impact of the buyer’s motivation, as well as the importance of style, condition, and the chosen resale venue on the potential value of their property. We talk about the pros and cons of different methods of disposal, and which one may be most appropriate for their situation and jewellery. I provide a list of local retailers offering consignment services, contact information for auctioneers, etc. I also clean and inspect the jewellery for damage or other issues that could influence a potential buyer’s offer. In essence, we discuss the differences between replacement value, resale market value, and marketable cash value, as well as the ‘how to’ of selling pre-owned jewellery. All the while I do a delicate dance around the question, “How much is this worth?” If they insist on an answer, we must enter the realm of an appraisal.

It is my opinion that for most resale clients, the valuation of their jewellery is neither necessary nor desirable. Most buyers have already done price research on the Internet, and they are most concerned that the seller’s representation of quality and condition are accurate. In addition, in light of the public’s general ignorance of different types of appraisals, most buyers assume the value is inflated and will only offer a fraction of the amount shown in the appraisal. That means sometimes an appraisal can become an impediment to achieving the highest price.

By far, the most common services I provide for my resale clients involve qualitative analysis and authentication—they are less expensive than an appraisal and can provide much of the same reassurance to prospective buyers. I offer reports for identification/authentication, diamond and gemstone grading, qualitative analysis, and I can act as a liaison between the client and major laboratories or auction houses if necessary. Once the seller understands the reality of resale and adopts the buyer’s mindset, he or she appreciates a less costly, equally effective alternative to an appraisal. However, sometimes they still insist on an answer to ‘the question.’

Getting in the ballpark

Many appraisal organizations forbid verbal appraisals; USPAP does not, but imposes the same standards for developing and reporting an appraisal whether it is presented in written or verbal form. Clients trying to sell their jewellery sometimes only need a range of values to establish their ‘asking price’ and ‘firm price.’ My clients often refer to this as ‘a ballpark value.’

I call it a “Limited, Restricted Use Resale Valuation.” For any appraiser to adequately provide a credible value, it is necessary to properly evaluate the property’s physical and non-physical attributes and to determine the ‘apposite’ market. In other words, we have to know what’s there and which is the most common market for resale. For this type of ‘value range’ appraisal, it may be appropriate to do less extensive market research, broaden the comparables, and provide less descriptive documentation, depending on the client’s needs. I prominently declare this type of report a “limited, restricted use” appraisal, with potential third parties specifically advised that they should not rely on it. These valuations are limited in scope and restricted to the client’s exclusive use. We need to clearly explain their shortcomings to our client and in the written report, when one is provided.

If the seller’s intentions and the potential value of the property warrant it, I may suggest a ‘resale market value’ appraisal to the client. Normally, these take the form of a summary type of report, but in the case of high-value items, I’ve found a ‘self-contained’ format offers both the buyer and seller a more complete understanding of my value opinion. This may result in a higher realized price and less haggling in the process. Unlike an insurance appraisal in which the third parties will never actually see the jewellery, we may assume our report will be used by the buyer as a means to identify the object they are examining. To that end, it’s important to include any specific information that might be useful to an untrained observer without access to magnification or precision instruments. Multiple photos are often most useful for identification, especially when they include extreme close-ups of significant details.

Be gentle

The reasons people sell their jewellery can be just as varied as the jewellery itself. Clients seek us because we are the jewellery experts—we need to become people experts as well. Recognizing the emotional and sometimes irrational value people place on their jewellery can help us develop a gentle bedside manner with carefully chosen words that soften the blow to their egos. If we create a range of appraisal products to fit their needs while remaining true to our professional obligations, our practices and our reputations can benefit.

Mark T. Cartwright, ISA CAPP, ICGA, CSM-NAJA, GG (GIA) is president of The Gem Lab, I.C.G.A., an independent American Gem Society (AGS)-accredited gem laboratory. He has been a jewellery designer, goldsmith, gemmologist, and appraiser for more than a quarter century. Cartwright can be contacted via e-mail at gemlab@cox-internet.com[1].

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