Buying Jewelry?

How to Buy a Diamond

If you're planning on purchasing a diamond, you should spend some time learning about the "Four C's" - the value factors of a diamond.“ Color, Cut, Clarity and Carat Weight". Most buyers know little about these quality points. If someone were buying a new car, they'd know what kind of engine they'd want, whether or not leather upholstery was in the cards or a costly GPS system or fancy wheels fit their budget. Looking at a diamond is no different! Are you really getting value for the price? Without knowing the "Four C's", one cannot buy, sell or appraise jewelry intelligently.

Protecting Your Investment

When buying a diamond, the prospective buyer should follow these basic steps:

Find a Certified, Independent Appraiser of Gems and Jewelry in your area. This is a person who doesn't buy or sell Jewelry and one who is not connected in any way to a retail Jeweler. Be careful! Being a Graduate Gemologist does not make one an appraiser. Being educated in the Science of Gemology does not make a person an appraiser. Your appraiser should have a Graduate Gemologist Degree from the Gemological Institute of America (or its equivalent), and must be certified by an Appraisal Organization or Society. This certification should be earned through education and testing in the Appraisal Sciences. Most Appraisal Societies have "Accredited" or Senior" Member status which should be your minimum requirement. You should consult either the American Society of Appraisers, the National Association of Jewelry Appraisers, The International Society of Appraisers, or the Appraisers Association of America for guidance.
Select any jeweler you feel comfortable with. Jewelers should be chosen with the same care you use in selecting a Doctor or Dentist. Ask your friends where they shop. Go online... Visit local Jewelers to get a feel for the store and employees. Get recommendations. Choose a Jeweler you trust.
Select your jewelry item from your jeweler of choice and get an unconditional money-back guarantee for say... seven days. If the jeweler you've chosen won't give you this guarantee, choose another jeweler... there are plenty of Jewelers who will give you this form of guarantee. But, be careful... Some Jewelers will give you a guarantee that states "if the item doesn't appraise for more than I sold it for I'll give you your money back!" That's a "condition"! Take that condition out of the guarantee... You want to be able to return it for ANY reason!
Bring the jewelry item you purchased to your local independent appraiser and have it appraised. If it's what it's supposed to be... Keep it! If not... Return it immediately!

Why Pay More?

For hundreds of years, people have been buying jewelry at great discounts. “You can buy a diamond for $5000 that's really worth $10,000!” Or at least that's what people were told when the item was purchased. The jeweler sold it for $5000 and gave you an appraisal for $10,000! OK... tell me one other thing in the world that you can buy for $5000 that's really worth $10,000! Why would a jeweler sell you a $10,000 item for only $5,000? Hey... if you CAN buy something for $5,000 that's really worth $10,000, then I'll bankroll us, and let's buy as many of the items as we can. We can sell it for $5,500 and make lots of money! Face it… if that were the case, I would have retired many years ago!

Let's face it… there's almost nothing in the world that can be purchased for half of what its value is. Although one of my clients did purchase an item of art at an auction for $2000 represented to be a “copy”. Later on, it was authenticated as the “real McCoy” and he sold it for $30,000! Typically, if someone receives an appraisal for $6,200 from a “certified appraiser”, on an item they paid $5,000 for, they're doing really well and have made a great purchase. In a world dominated by the internet, the profit margin that retailers can make has dropped drastically.

In 1975, a jeweler could purchase an item at wholesale for $5,000 and easily sell it for $9000. Because the profession of Independent Jewelry Appraisers didn't exist, an appraisal might have been as high as $15,000. Today, however, that's all changed. Retail jewelers simply cannot make the markup we did in the '70s. In 1975 there was no such animal as an “independent professional jewelry appraiser”. If you wanted something appraised, where would you go? To a retail jeweler! And, in most cases, the jeweler who sold it also appraised it!

Let's just take a surface look at this scenario… You buy a ring for $5,000 from your local jeweler and he/she gives you an appraisal saying, “I'll write the replacement value at $9,000.” Wow, that's great! You purchased an item for $5,000 that's really worth $9,000.

Why? Why insure an item for so much more than you paid for it? Who benefits from this type of inflated appraisal? I guess the jeweler does... it makes it look like he/she is giving you a great price. And, who else benefits? The insurance company! They make out by collecting higher premiums. Why pay a premium on such a high value when you know YOU can replace it for a lot less. If YOU can replace it for less, don't you think the insurance company can as well? The insurance companies do millions of dollars a year in the jewelry replacement business. Believe me, they can buy for less than we can.

What do you think happens when you lose an item of jewelry that's insured? No... They do NOT give you money back. Unless In fact, you've made specific arrangements with the company and are paying a much higher premium, most insurance company's that you and I are insured with have an option that will allow the company to replace your lost or damaged gems or jewelry with “similar” items. That's right... if you lose an item of jewelry, the insurance company goes into the market and replaces it through one of their “insurance replacement specialists.”

And, in fact, replacement is the best thing that can happen. As the insured, we really don't want to go out and start looking to buy the replacement ourselves. Starting the purchase process over is much too much of a hassle.

Insurance Policies:

A complete, descriptive, professional appraisal will reinforce your protection and will make sure you are covered for truly similar gems and jewelry. An explicit accurate description is as important for your protection as is the estimated retail replacement value.

Because of volume buying power and purchase agreements with their suppliers, most insurers can purchase an appropriate replacement for substantially less than a consumer could, and most contracts limit cash settlements to the insurance company's actual cost. For this reason, and because it is hard to substantiate the quality of a hypothetical replacement item, you should consider accepting a physical replacement for any loss that might occur. Consult with your agent or adjuster. Cash settlements are usually less than the face value, unless your policy is an "agreed value" policy, which generally settles through a cash payment equal to the face value of the policy.

There are several types of jewelry insurance policies available; replacement policies and practices vary greatly, even among insurers offering similar insurance contracts. You are urged to consult with your insurance agent, broker, or company representative as to which type of policy would be best for your needs. Be sure you fully understand the contract's settlement options and the claims policies and procedures followed by the particular insurance company before making your choice of insurance coverage.

Unless you own stock in the Insurance Company… why would you want to pay a higher premium for Jewelry Insurance?

The Five Deadly Sins of Diamond Buying

Assuming the eventual purchase of a home and one or more new automobiles, the engagement diamond is likely to be the next most expensive purchase most people will ever make. Yet with all the care people will take in choosing the two former possessions, the diamond purchase is somehow paid less attention. The following “Five Deadly Sins of Diamond Buying” are meant not to cast aspersions on jewelers or the jewelry industry. In fact, there are thousands of reputable, hard-working jewelers in this country who would be “pleased as punch” to have you as a customer. The “Five Deadly Sins” are those mistakes you might make if you are not careful about whom you do business with. They are intended to assist the generally unwary consumer when taking the costly yet romantic step of buying the engagement ring diamond.

Sin #1: Shopping for a bargain instead of shopping for value

Price and value are quite different things. For example, I was once called by a client who wanted me to accompany her as she negotiated the purchase of a diamond from a merchant whom she said she didn’t trust. When I asked why she was making such an important purchase from a jeweler she found less than trustworthy, she replied, “Well he’s kind of sleazy, so I think I might get a good deal there.” If the logic escapes you, it is because her line of thinking was devoid of all logic! This was a classic case of someone shopping for the best price rather than the best value. What’s the difference? Value comes in many forms. It is found in the longevity of a jeweler who will continue to be available to service the item(s) you purchase. Relationships have value.

"Sleazy" people who may or may not be charging a fair price, do not provide good value. Value is found in your sleeping soundly during the shopping process and after the purchase is made. Value is found in an honest, reasonable return/refund policy that allows you to rescind your purchase if you are unhappy for any reason. Value is also found in the honest, accurate representation of the diamond you are buying. Any less than the value elements described above amounts to what may or may not be a good price, and nothing more. Think about it as you explore...

Sin #2: Paying cash in order to save sales tax (this is illegal) and in lieu of a proper sales receipt.

I shudder at the number of times I have been told, after informing an unhappy client that their diamond was not what it was represented to be, that they had “paid cash in order to avoid sales tax.” As an added bonus, the manner of the purchase resulted in their having no receipt for the diamond they had just purchased from a stranger. Imagine spending thousands of dollars for anything without asking for a detailed sales receipt. Would you buy furniture this way? An automobile? An expensive fur coat? I won’t even buy a book at Barnes & Noble without taking a receipt! Without a receipt, you have little or no recourse if there is a problem. Imagine accusing someone of misrepresentation when in fact they have represented nothing. Yet that is the position you might find yourself in if you commit Sin #2.

All the verbal assurances in the world will not protect you if you have no proof that the representations were made. Not only should you insist upon having a detailed sales receipt, it should clearly state that the diamond is “not clarity enhanced or artificially treated in any other manner, including but not exclusively drilled with lasers or infused with any foreign matter [to mask imperfections within the diamond]”. If you choose to purchase a diamond that has been treated or artificially enhanced in some way, be sure that such treatments are disclosed and explained on your sales receipt or other documentation.

Sin #3: Accepting the seller’s overstated value appraisal as gospel.

There is an unfortunate and rather embarrassing tradition in the jewelry industry. Fortunately, the practice has been abandoned by many reputable jewelers. But it is still widespread. Your opportunity to commit Sin #3 can occur in a variety of places, from the large discount store’s jewelry department to the chain store found in an upscale mall, to the single unit “mom and pop” store in your neighborhood or the stall at a large jewelry “exchange”. This is not to say that all of the above-mentioned venues participate in this practice. It is merely to say that you may encounter it in widely varied kinds of establishments. The (by now you think unspeakable because I have yet to speak it!) practice I refer to is the intentional overstatement of value on an appraisal provided by the seller. It would seem obvious that a jeweler could not stay in business selling diamonds for a fraction of their actual value. Yet this is what some jewelers would like you to believe they do. Typically, when the practice is engaged in, the appraisal provided “for insurance purposes” by the seller is anywhere from 30 to 100 percent over the actual selling price. You must ask yourself this: If the jeweler can sell you the diamond today for $5,000.00, for example, and again tomorrow for the same price, and again next week for $5,000.00, how is a stated value of $8,000.00 justified on a point-of-sale appraisal? A professional appraisal reflects actual value in the marketplace. And how is value in the marketplace determined? By actual transactions—by actual selling prices. If the actual selling price of a particular quality diamond in this and other stores in your area is typically around $5,000.00, that that is the diamond’s “value.” In this case, anything significantly higher is absolutely unjustified. Generally speaking (with rare exceptions), a seller’s appraisal should restate the selling price of the item.

If employees of a jewelry store consistently tell their customers that they are selling jewelry for less than its value, they cannot be telling you the truth. That should be obvious, but somehow it seems it is not. When you see signs proclaiming jewelry “60 percent off!” you should ask yourself, “60 percent off of what?” Is this a discount from a realistic, actual selling price, or is the price first inflated in order to leave room for the discount? If you are not yet offended, keep in mind that most insurance policies pay only the insurance company’s (truly discounted) cost of replacement in the event of a theft or other insured loss. So, you may pay $5,000.00 for that diamond, and you may submit an appraisal that states a value of $8,000.00, but if that diamond is stolen and your insurance company can replace it for $4,000.00 (and this is likely), that may be all you’re entitled to as a cash settlement. Yet you will have paid premiums, perhaps for years, based upon a stated value of $8,000.00. If you accept the overstated-value appraisal as the absolute truth you will have committed Sin #3.

Sin #4: Not having a guaranteed period of time in which to have your diamond examined by a professional, independent appraiser before you are committed to the purchase (and Sin #4A: not insisting on the store’s policy in writing, as well as Sin #4B: not reading the guarantee carefully)

Many different kinds of guarantees are offered by sellers of diamonds. One states that the diamond will appraise for double its selling price ... or your money back. However, the small print states that “money back” is in the form of a store credit. So, if your $5,000 diamond appraises for anything under $10,000 (or worse yet $4,800), you will be obligated to exchange the diamond for other merchandise, rather than receiving the cash refund you may have expected. Read the guarantee carefully, and be clear about how much time you have to change your mind—for any reason. Some merchants will insist that you have the diamond appraised by an “independent appraiser” in order to activate the guarantee, but without defining what they mean by “independent.” Generally, the term is accepted to mean someone who does not buy and sell jewelry: a full-time appraiser who has nothing to gain (i.e., “stealing” a sale) by giving false negative information about your diamond. Be sure you will not have to travel 200 miles to find such an appraiser! And remember, independent status does not guarantee qualifications. Compare qualifications before you select your appraiser.

Sin #5: Buying your diamond out of the United States

Years ago I was the bearer of bad news to a young, newly engaged couple. In a romantic moment on the beach of a Caribbean island, the gentleman had proposed marriage, and his lady love accepted. They rushed back to their hotel, changed into street clothes, and went shopping for a diamond. $8,500 later, they had purchased a diamond engagement ring that they could have found in the United States—for at least $2,000 less. Not only was the quality of the diamond grossly misrepresented, but the price was also very high for what they actually received.

When they phoned the jeweler to complain, they were told to see the jeweler’s “sister company” in New York City. When they contacted the New York firm, they were told that they were “not really sister companies,” but knew each other and occasionally did business together. The New York firm claimed to have no legal connection to the Caribbean store and refused to make good on the representations made on the island, and the couple had no recourse but to hire an international lawyer. The cost of retaining such an attorney far outweighed the possible gains without a guaranteed victory in court. Unlike the jeweler, the attorney was honest. He said he could make no such promise, given the sketchy documentation provided by the jeweler and the absence of any written statement of quality or guarantee. It is safe to say that all several “sins” were committed in this case.

Final thoughts

In most cases, a diamond purchase can be considered a major investment. No, it is not the kind of investment you can count on to appreciate and generate a profit for you in the future. But it is an investment not only of your money, but of your time, energy, and very often, your love. Perhaps if there is a “Sixth Deadly Sin” it is getting so wrapped up on the romantic feelings that inspire the diamond purchase, that you forget it is just that—a purchase. That is not to say you should not enjoy the romantic aspect of buying a diamond. On the contrary, it is to say that if you lay some ground rules before you begin shopping, and avoid the “Five Deadly Sins of Diamond Buying,” you stand a very good chance of ending up not only with good value in a good diamond but cherished romantic memories as well.