Dear Barry:
Just a couple of questions regarding appraisals...
How do you tell what kind of appraisal you are looking at at the jewelers? i.e. my jeweler showed me an appraisal for a ring that states it is $6000 yet he is willing to sell it to me for $2800. Does this mean the price is inflated?
I know there are insurance appraisals, fair market value appraisals, etc. but how do you know what you
are looking at in the store? If you are looking at an insurance appraisal what would be the fair market value to pay for the ring...i.e. 50% ? 60%? of appraisal?

Hi!
To address your first question: It will say right on it (if it's a real appraisal).
A professionally done appraisal will always state what kind of appraisal it is and it will include a definition and usually what purposes it can legally be used for. For instance: Insurance appraisal, Liquidation Appraisal, Fair Market Value Appraisal.

Second question: Maybe, probably.
One key question is this: Can it be replaced for that amount? When someone says they can sell you something for much less than it is worth, you have to wonder how you know it is worth the higher price. Anything is worth what someone will pay for it. In theory that appraisal is saying that someone will pay $6000. If that is so, then this question comes automatically: why doesn't he sell it to that person instead of you? (How much can you sell a $20 bill for?)

There could be legitimate reasons why it really is worth $6000 and reasons why he really needs to sell it right now for $2800. BUT - if that is how he runs his business on a day to day basis (assuming it really is worth the higher amount) he will soon be out of business.

So find out if you can get another one at the low price. If you can, then that tells you that it is being sold for what it's worth and the appraisal is simply an inflated amount used as a sales tool. It does you the additional harm of having you pay too much for your insurance premiums. Keep in mind that when it comes time to replace the item, the insurance company won't "pay" you the inflated amount. They simply replace or pay you their cost to replace. That figure will be less than you paid and that can leave you feeling pretty raw!

Last question: If you are looking at an inflated appraisal, there is no way to tell what you should pay in relation to the price shown because you have no idea how inflated it is. If someone uses an "appraisal" as a selling tool, they will determine how big of a discount they want to give. Remember, a discount is like an overcoat - you can't take it off until you put it on. Does he want to discount to half? Then he has to mark it up double his normal markup. Does he want to discount it to 1/10th? Then he has to mark it up ten times more than usual. You have no way of knowing.

If it is a real appraisal, it should be very close to the price you pay. After all it is telling what the piece is worth, right? (In other words what someone (like you) is willing to pay.)

Fair Market Value though, is talking about what it would sell for outside the store. For instance, If you own the piece and a friend wants to buy it. Between you, you will decide upon a price that suits both of you, sort of a "meet in the middle" scenario. That price will typically be significantly less than it sells for in a store.

Usually when I look into these things, I find that the person who bought at a discount paid a little more than I think he or she should have. They didn't get screwed except that they were told that they were getting an amazing bargain and they weren't. That amounts to fraud, but since they got an okay deal, few people pursue it.

If you want to get the piece, get a guarantee (in writing) that you can have it checked by a certified appraiser (*NAJA, AGS, for instance) and if it doesn't appraise close to their appraisal price, you can get your money back. You can send it to me if you want. My appraiser is NAJA certified.

Does this help?

Take care, Barry

*NAJA - National Association of Jewelry Appraisers.  AGS - American Gem Society

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