Photo: RNB Jewellery
By Duncan Parker
With appraisers getting asked to value jewels on a regular basis, it’s important for them to understand that the term “value” goes far beyond one meaning.
A jewel is worth what someone will pay for it. That seems correct, and it is. Some questions that still create differences in value include who is buying and selling the piece, why it is for sale, how quickly it needs to be sold and its final destination.
If a manufacturer sells a ring to a wholesaler, the value is the amount that the wholesaler is willing to pay the manufacturer for the ring, based on the need to sell it on to a retailer as well as the willingness of the manufacturer to sell at that price). Let’s call this “manufacturer value.”
If a wholesaler sells a ring to a retailer, the value is the amount that the retailer is willing to pay to the wholesaler for the ring, based on the need to sell it to the final consumer as well the willingness of the wholesaler to sell at that price). Let’s call this “wholesale value.”
If a retail store sells a ring to a consumer, the value is the amount that the customer is willing to pay to the store when purchasing the ring from that store as well as the willingness of the retailer to sell at that price. Let’s call this “retail value.”
We’re looking at the traditional supply chain, and there have been rather drastic changes in how the links of that chain join together these days. Vertical integration has led to the weakening or elimination of some of those links. However, the general principle still applies: there is a certain value for a certain item in a certain market.
A consumer can buy from a wholesaler or a manufacturer these days. There arealso brokers working on tiny margins bringing goods from far back in the supply chain directly to the consumer. This is a new type of “retail value.”
There are manufacturers buying back from retail consumers. One major diamond manufacturer I know recently told me they have “discovered the world’s largest diamond mine”—old ladies.
It is important to understand the type of market we are discussing.
If the retail consumer wants to sell their ring, where do they go? What’s that ring’s value now?
Consumers often ask appraisers for an opinion of “market value.” Unfortunately, this doesn’t mean very much because there are so many markets. Consumers generally understand market value to be the traditional retail price of an item that might be paid in a traditional “bricks and mortar” store. They assume that this value is also what they could realize for the jewel if they were to offer it for sale. Hey, an appraiser told them that it’s worth that much, so it must be, right?
What the consumer really needs is “fair market value”. This is a descriptive term recognized in legal procedures. Fair market value is based on an amount that “a willing buyer would be prepared to pay a willing seller, both parties being aware of all pertinent details, and time not being of the essence.” How do we know what this amount is? The only consistently documented prices for items bought and sold at fair market value are prices of items sold at auction.
Auction houses are expected to publish their results, so those results are available for research and comparison purposes. In court, auction results are accepted as a standard of fair market value. Consumer, planning on selling their ring, heads out to realize market value, but quickly discovers that a retail purchaser selling a ring is similar to an owner selling any consumer product. They can’t get the purchase price back. Apart from real estate, there are basically no consumer products that can be both bought and sold at retail price.
As an auctioneer, I’m telling people about fair market value all day. The person who wants to sell their ring might end up in my office, where I’ll offer an opinion of an estimate of fair market value. Once an auction rolls along, we’ll know the actual fair market value because we will see what someone is actually willing to bid for the ring. Auctioneers want to get the highest value because they get a commission that is a percentage of the selling price, but there are certain limits to the amount a buyer will bid.
Our ring owner has gone full circle. He’s bought a ring at retail, placed it up for sale at auction and realized the maximum “value in one of the “markets.” The auction market produces true fair market value.
Appraisers ask me whether there is a standard level for determining fair market value. What they want to know is whether there’s a standard percentage difference between retail and fair market values. There isn’t.
Like everything, there are forces that affect fair market value. Cultured pearl necklaces are not currently popular, and are selling at auction for maybe five to 10 per cent of their retail price, while a, currently very popular, signed Van Cleef & Arpels necklace might sell at auction for close to retail price at times.
Although prices on eBay and Amazon are readily available, they don’t always affect the price of jewellery pieces. An asking price on eBay, even a “buy it now” price isn’t actually a selling price; it is an asking price only.
The consumers’ perception of value is definitely influenced by online prices. The Internet is a public forum that is fully searchable, providing lists of apparent “value,” at least the Internet asking price.
Availability of the Internet pricing definitely has a negative impact on retailers, there is a consumer expectation that a retailer should have the flexibility to adapt to Internet prices, which, in most cases, is impossible due to inherent pricing. Auction houses are not so strongly impacted, because they generally don’t own the items in auctions, and, therefore, have an ability to adjust to current pricing.
Similar to art, rare gems and jewels may sell better at auction than in any other market, for example, a rare ruby ring sold at a Dupuis auction for over $100,000 per carat a couple of years ago.
Whether it is a low price cultured pearl necklace or an astounding ruby selling for record prices, if it is selling at auction, it is fair market value.
Markets move and shift, and while they may go up or down at times, fair market value remains a clearly defined thing, with known statistics coming from a particular place—auction, a market that sets a certain value on jewels.
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