Post # 1
I am having difficulty figuring out some of this diamond stuff…mostly about my own.
Long story short, I have had my second-hand diamond for almost 2 years now and even though it is small I love it and opted not to get another one when FI offered. I know that it is not the best diamond out there (0.36, SI-1, G-H, Medium cut) and FI only paid $500 for it.
What I have not understood since day one, is why the Gem Scan (done in 2005) would say it’s replacement value is $2400? After looking for similar diamonds on the internet, I figured Gem Scan doesn’t know what they are doing? This quality and size of diamond is, at most, what FI paid for it.
Then to add to my confusion, I finally took it to a jeweler/gemologist to get it properly sized last week and he wanted to build up the claws to protect my ‘investment’. He said FI paid a fair amount for the diamond ($500??). He guessed it was over 15 years old and said that without doing an ‘official appraisal’ he would guess it’s value to be above $3000.
I don’t get it.
Post # 3
@dihy: I’m not familiar with the Gem Scan, but the fact that it said “replacement value” leads me to believe it might be suggesting an insurance value. You’re typically advised to insure a diamond for 3x what it cost. When I was in the industry, I saw all the time, a diamond was sold for $1000 and along with the receipt for $1000 came an insurance appraisal for $3000. So, 3000 for a 500 ring is high… maybe the jeweler was trying to flatter you — nobody wants to tell someone “it’s not that great” but he could talk about the beauty of the stone while still being realistic about it’s value… I’m not sure. And even the 2400 is high for an insurance value, but again I know nothing about that scan thing. Oooh — here’s something I just remembered: some jewelers price their appraisals at, like 2% or 5% of the appraised price. So the higher they appraise it for, the more they get paid. Seems like a conflict of interest, yet it’s pretty common.
Post # 4
@Daisy_Mae: Ahhh…see, we would never have thought of looking at insurance as we paid so little for the ring in the first place!
Post # 5
Insurance value appraisals (the common type of appraisal) are usually very high… quite a bit more than what you’d pay for the diamond if you bought it the same day of the appraisal.
Fair market valuation appraisals will tell you what it’s actually worth on the fair market. This will generally be quite a bit less than what you’d pay for the diamond if you bought it on the same day (diamonds are heavily marked up, at some places much more than others. Retailers have no reason to sell it to you at cost, after all.)
Diamond fair market (true) values tend to go up over time. So will retail prices and insurance valuations. That’s why your insurance valuation has gone up… your diamond is worth more now than 2 years ago. But it isn’t worth what that appraisal says.
Think of it this way…
Insurance valuation appraisals are flattering, but you don’t really want them that high, because it’s what your insurance premium will be based on.
Diamonds are partially like sportscars, in that you are going to lose a lot of value as soon as you “drive it off the lot” …because you are not a retailer and can’t hope to sell it for the markup they can. But unlike sportscars, the bleeding stops there… they do not continue to depreciate. In fact…
Diamonds are also partially like works of art, in that they do tend to accrue in value over time. Some people/organizations do use them purely as investment vehicles, but I wouldn’t recommend it because there are less risky investments to make. And yes, sometimes they are bought to be enjoyed and later sold at a profit. The longer a diamond is kept and the better quality the diamond, the more likely this is to be the case. If you want to know what its true value is on the market today, have a fair market valuation appraisal done by a proper appraiser.
Post # 6
@joya_aspera: Maybe stupid question … how do you know what kind of appraisal you got? I think I just asked the jewelry store that set my stone for an estimate (I have an heirloom stone w/no papers)? Thanks!
Post # 7
@wrkbrk: you specifically have to ask for a fair market appraisal, by default they will always give you an insurance/replacement value appraisal (or estimate of it, it sounds like, in your case). Also you can generally tell by whether it is significantly higher or lower than you paid!
Post # 8
@joya_aspera: Thanks! I didn’t specify and we also didn’t pay for it (obviously, as it was an heirloom) … it doesn’t seem drastically higher than what it would sell for right now, but a little bit. I was just curious!