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In-Depth
Details and More Details
In the appraisals business, it’s the details that count.
By Ettagale Blauer
A jewelry appraisal — a seemingly innocuous piece of paper — is worth more than its weight in gold, but only if it has been prepared by a trained professional with an obsessive attention to detail. Although appraisers are not licensed, they have a cornucopia of rules to follow from professional appraisal associations and organizations. Their ability to comply with those rules depends on a lifelong dedication to knowing as much as they can about gems, jewels, metals, manufacturing, treatments, fraud, the marketplace, the history of art and the fickle finger of fashion. It is the ultimate catch-22 that while people writing appraisals are not licensed — and there is no official licensing body or process for them to become licensed — the appraisal itself is a legal document with legal standing in a court of law.
An appraisal is an opinion of value for a particular market on a particular date, according to the definition of the National Association of Jewelry Appraisers (NAJA). And the appraisal document describes all the qualitative and quantitative attributions necessary to arrive at the value conclusion. Basically, it is the appraiser’s job to identify all the components, issues and characteristics of a piece of jewelry that affect its value, document them in pictures and words and put a value on it.
There is personal liability attached to acting as an appraiser. Cecilia Gardner, president, chief executive officer (CEO) and general counsel of the Jewelers Vigilance Committee (JVC), says, “If you hold yourself to be an expert, you are legally responsible for the opinion you render.” And, whether it is because we live in a litigious age, because there are sellers willing to inflate value to close a deal or simply because gems and jewelry have emotional and historical value in addition to their intrinsic worth, 10 percent of the complaints that consumers bring to the JVC involve appraisals.
Compounding the challenges for appraisers, the appraisal itself can have many purposes. The very first task an appraiser faces is establishing the purpose of a particular appraisal before the work begins. Is it for insurance? Replacement value? Divorce settlement? Estate valuation? These factors must be taken into consideration when the appraiser sets a value on the jewelry and must be discussed with the client before the appraisal process begins. Depending on the purpose, the appraiser might want to establish market value, replacement value or liquidation value. For replacement value, is an identical piece available or one that is similar? Is the piece readily available or must it be searched for? Is the piece available at auction or privately? Liquidation value is for someone who wants cash, now. This is the price at which a piece can be sold as quickly as possible.
Appraisers are made, not born. They bring to their complicated task a lifetime of knowledge and experience. While appraisals contain a tremendous amount of science, they also embrace a fair amount of art, a sense when something is not quite right with a piece of jewelry. An appraiser recognizes, for example, when a piece shows the telltale signs of being “married,” the somewhat nefarious business of joining two pieces of jewelry together that were not originally joined and were never meant to be part of the same jewel. If an original part has been damaged, or lost, such as a clasp or a section of a necklace, and a new element is added, the jewel cannot be considered “of the period.” It may say “Cartier” on the clasp, but is the whole piece Cartier? Did the elements present in the piece exist during the same historic era? And just what is that brilliant cut diamond doing in a piece of Victorian jewelry? Any inconsistencies decrease the dollar value of the piece.
From the moment a piece of jewelry sits in the appraiser’s hand, the job is to investigate the piece, not to take any grading report or even a mark on the piece as gospel. A gold piece stamped 14k is simply that — it’s stamped 14k. It’s up to the appraiser to determine the actual metal content, using an X-ray spectrometer that deduces every element in the alloy. If the piece is a chain, or includes a chain, the piece is tested at three different places along the length of the chain to confirm the actual metal content.
The same is true of gemstone reports, particularly diamonds. The appraiser will make note of each major gemstone, measuring and weighing it with a variety of tools and against a variety of guidelines. Even the smallest diamonds must be counted, which is why Indian-made goods with their micropavé pose a considerable challenge to the appraiser. If the stones are set in rows, they’re easier to count, but if there is no pattern and they cover the surface, the job is that much more difficult and time consuming. Diamond slices — literally flat, polished slices of a stone — popular in jewelry today also present challenges in measuring and assessing value.
Sometimes, a piece of jewelry is not valuable enough to warrant the time and expense of a complete appraisal. That may become apparent to an appraiser during the initial examination. It’s important for the appraiser to have an upfront discussion with the client when that happens. Appraisers charge by the hour or by the piece; it often happens that a piece of jewelry may not be worth the appraiser’s time or the owner’s money to proceed.
Another consideration, and in some ways the most critical, is the question of ethics. Is it ethical for a retail jeweler to appraise pieces one of its customers wants to sell? The answer is unequivocally “no.” JVC’s Gardner says that often “Retailers are pressured to provide appraisals” by their customers. Her advice: Say no. Not only does the retail jeweler not have the special knowledge needed to assess jewelry but the potential for a conflict of interest is huge when the same person establishes the value — and therefore price — of an item he plans to buy.
Barry Block, whose website describes him as “the jewelry judge,” says “We don’t buy or sell; we only appraise. It’s a conflict of interest for a retailer” to do both.
To assist those who do appraisals as well as those in the industry who work with them, the JVC offers J-BAR, the Jewelers Board of Appraisal Review. This home-study course covers the legal standards that apply to appraisals. Gardner says, “The J-BAR course informs the reader of the elements of written appraisal” as considered by the courts. The material is “case-driven,” derived from real-life court cases. Those who do appraisals are strongly advised to have insurance that covers them for “errors and omissions.” Even the most diligent expert can make a mistake. “In making an appraisal,” Gardner asks, “Were you reasonable? Did you do it correctly?” And, does the person making the appraisal have an interest in the outcome of the transaction? “If you say something, be prepared to back it up.”
The appraiser should be equipped with intellectual tools, as well as up-to-date scientific equipment, to conduct an appraisal that would stand up in a court of law. The basic requirement is certification as a graduate gemologist or a comparable gem education. But that’s just the start. Gemological training tells you what a stone is, but as Gail Brett Levine, executive director of NAJA, says, “it doesn’t tell you the value.” And given the array of treatments now being used by gem dealers, identifying the type of stone is just the beginning. According to Levine, “If you learned your skills in the 1980s and haven’t been to a gem or jewelry conference since,” you’re too out of date to prepare a twenty-first-century appraisal.
Appraisers keep up their skills through events and classes held by their associations. For jewelry appraisers, the principal organization is NAJA, the only appraisal organization exclusively for those dealing with jewelry. The Uniform Standards of Professional Appraisal Practice (USPAP), founded in the 1980s to establish standards for real estate appraisals, refer to jewelry in two of its ten standards. Other associations, including the Appraisers Association of America and the International Society of Appraisers (ISA), deal with personal property and fine art, as well as gems and jewelry.
There also are printed resources available to appraisers, including The Complete Handbook for Gemstone Weight Estimation by Charles Carmona and Gems & Jewelry Appraising, written by the late Anna Miller and updated every ten years. The most recent updating was by Levine. With diagrams, tables and charts, this work gives appraisers various tools to make a determination not only about weight of stones but also types of settings and mountings.
Levine and most independent appraisers do their work in full view of the client, even if the client is a lawyer for a trust or estate. The appraiser should not assume that anyone actually knows the contents of a package of jewelry acquired by the lawyer for an estate until that bag or case is opened and the contents displayed.
Rob Aretz of Gem Appraisers and Consultants, a New York City jewelry appraiser, notes wryly, “I prefer to have someone with me when I examine the goods. There might be things mentioned in the will that are not there when we open the package.” Family members may have been told that Grandma is going to leave them some wonderful piece of jewelry, only to find out that it never actually existed. There also are assumptions about value based on circumstances, Aretz says. “This belonged to a wealthy person; it must be good. Or, if it isn’t valuable, why was it in a bank vault?”
Missing jewelry is hardly a new phenomenon. There have been stories throughout history about portraits that depict a woman of fashion and position wearing a piece of jewelry that was created by the portrait painter. “Let them look for that one when I’m gone,” might be the taunt of such a presumed owner. Then, too, jewelry that has been in a family for a lifetime may have been sold by a later generation. For any of these reasons, an appraiser always wants a third party present at the first examination of the goods.
The question of stone treatments is one of the most problematic for appraisers. If a stone bears suspicious inclusions, visible under 10-power examination, Levine suggests the piece be taken to a jeweler to have the stone unset and sent to a laboratory for further analysis. Even antique and period jewelry may contain stones that appear to be more valuable than they are.
Any time an antique piece contains a red stone, people often assume it is a genuine ruby but, says Aretz, “Synthetic rubies have been around for more than 100 years.” Diamonds also can turn out to be something less than they appear to be. When Levine begins an appraisal, she says, she picks up her loupe and peers closely into the diamond. “I examine the interior to see if there are wispy veils, unresolved crystals. These indicate it may be synthetic. If it’s laser drilled, there are certain indications, or if it has been oiled or waxed. I look at the outside to see if there are any surface-breaking fractures.” All reduce the value of a stone.
Although virtually all the diamonds Levine appraises are set, she says you can still examine the girdle. “The girdle will tell you a volume of things.” If the table is built up away from the prongs, she says, she can peer well into the stone. Then she uses her reflectometer or polariscope for further inspection. “Is there strain or conflict in the stone on an atomic level? When I start to plot a diamond or colored stone, I put it in the microscope to see the inclusions.” These are then plotted as part of the appraisal.
Even if a piece comes with a certificate from a laboratory, it is the appraiser’s job to establish the color, clarity and proportions of the stones. The sad truth is that all labs are not created equal — nor equally reputable — and some have been known to exaggerate the color grade to conform to the seller’s description. “There are labs throughout the world that are notorious for not even being close to the color grade,” says Aretz. Retailers can take these inflated certificates and use them to misrepresent — and price — a stone as H, VS2, for example, when its actual color grade is two, three, even four grades lower. Such practices erode consumer confidence and undermine the reputation of the industry.
It is not unusual these days to see jewelry sold with a statement that a piece is “guaranteed to appraise for twice the price.” The exaggerations are everywhere, even in advertisements placed in well-respected magazines. One recent example offered inexpensive gemstone jewelry that the seller claimed would appraise for seven times the asking price. The ad boasts that a $99 ring set with Zambian emeralds is “independently appraised at $690.” A legitimate appraisal would establish that the $99 ring is worth no more than $99, and quite possibly considerably less.
Appraisals, like gem certificates, don’t improve with age. They should be kept up to date to be current with today’s values. For insurance appraisals, Aretz says, “The rule of thumb is to get jewelry reappraised every three to five years.” The market does go up, but not consistently and not across the board. Some insurance companies will automatically increase the insured value of jewelry by 6 percent a year, according to Aretz, but the problem is that increased value doesn’t always reflect the true value of the jewels. Specific pieces of jewelry may be either overvalued or undervalued using that guideline.
For anyone seeking to learn the current value of a piece of jewelry, independent appraisers who neither buy nor sell are best suited to make the determination. Their opinions are the result of years of experience, training, immersion in the marketplace and up-to-date scientific knowledge.Article from the Rapaport Magazine - May 2014. To subscribe click here.
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