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Understanding Your Diamond Appraisal: Changing Values

One of the things I am often asked to do is update appraisals from many years ago. Often, the value is similar to or even may be less than the original appraisal from 30 years ago, which is puzzling to most people. Jewelry--especially diamond jewelry-- is an investment and should increase in value over time, right? Well... yes and no.

The first thing to explain is that the retail margin, or markup, on diamonds now is razor-thin. With the increase in competition--especially for independent jewelers-- diamonds just aren't marked up very much at all. So, while wholesale costs have increased, markups have decreased. Very often, your appraisal from 1989 has a value similar to the one I will write now in 2021. The thing to remember is: An appraisal needs to reflect the cost of replacing a piece in the current market. It also determines what you pay in insurance premiums, typically 1-2% of the piece's value per year, so you don't want an artificially high value just so that it's more than a 30-year-old piece of paper. You need the value to reflect what it will take to replace the piece and make you whole again should it be lost, stolen, or suffer catastrophic damage.

Diamond shape also impacts value. If a shape was trendy at the time of purchase but is no longer the favorite, the values will reflect that. Interestingly, since fashion is cyclical, sometimes what is out of favor now will be the hot commodity in a few years and push the value up again. It's hard to say. Aside from the always popular round brilliant, in the 1990s, we saw marquises predominantly, while in the 2000s, we saw a lot of princess cuts, and in the 2010s, it went to cushions. Now, ovals are the shape of choice, sending the price per carat soaring from just a few years ago.

This fashion cycle is important to note because if you're updating your appraisal on your cushion cut engagement ring from 2010, don't expect that the value has jumped up just because 11 years have passed. Your insurance appraisal value will always be at least what is necessary to replace your ring should it be lost, stolen, or suffer catastrophic damage, whether the value is more than an old appraisal or not. Conversely, if it's a round diamond, chances are it has gone up at least slightly since the price per carat of rounds has gone up over time.

Oh, before I go, I need to say something about inflated appraisals. Sometimes you might be given an appraisal with a much higher value than you paid for a piece. These are used as a selling device and typically don't reflect the actual value. If you paid $5,000 and the appraisal gives a value of $10,000, it's either a going-out-of-business sale, an auction, an estate piece, or the piece is probably worth closer to that $5,000 mark. Keep that in mind when comparing values. There are always exceptions to this rule, but take every huge markdown with a grain of salt.

This barely scratched the surface of differing values-- I didn't cover how something might carry a higher value in, say, California than here in Kentucky, or how different appraisers use different margins as standards, or how different designers command different pricing structures for MSRP. I might cover those at another time, and please feel free to contact me with any questions about this or anything else that comes to mind.

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