When you buy a diamond ring from a retail jewelry store, 80% (or more) of the price you pay is used to cover the store’s overhead expenses such as payroll, rent, insurance and advertising. Only 20% or less of the price you paid covers the actual cost of the item you purchased.

Some of the most expensive stores to run are large corporate companies such as Jared, Kay, Zales, etc. These stores usually have very high rents, many employees’ wages to pay, enormous advertising budgets among other expenses, and the need for profit. Once you take realize this, you must understand that they pay for all of this by selling you jewelry at a MUCH HIGHER price than their actually cost of goods sold.

The price written on the appraisal is a high end retail price estimate and has absolutely no bearing on the actual cash market value of your item. Remember, appraisals are usually written for customers to give to their insurance company to purchase a policy for their item. Insurance companies charge based on the retail value of the item.

Insurance companies typically charge around $10/$1000 of insurance per year. If you have an appraisal stating your ring is worth $10,000 (for example) than the insurance company can charge you $100/year for a policy on that ring. However, if you were to lose that ring, the insurance company must replace it with a like kind and quality ring. Or if you choose to cash out, they will pay you what they can replace it for, which will be much lower then what you paid.

Also, if you just spent $10,000 for a nice diamond ring, you would feel better about it if you received an appraisal showing $15,000 right? With this appraisal, you feel your item is worth at least what you paid or even more. You feel like you made a smart investment, and that the item is actually worth what you paid or more. However, when you do decide to sell your item, only then do you learn that it’s only worth maybe 20% of the appraisal value.

I can’t tell you how many times I have read an appraisal, and then looked at the diamond and felt like the appraisal wasn’t even for the same diamond! For some reason, the color, clarity and other quality criteria are always over estimated on appraisals. For example, I will see G color SI2 clarity on an appraisal, but when I examine the stone, its visually yellow making it J to K color. Then I look at clarity and it says SI2 which means no flaws to the naked eye but the stone will actually have large visual flaws making it I1 or even I2 (bottom of the chart). The main issue here is that the resale value of a G SI2 verses a K I2 is an enormous difference. We’re talking thousands vs. hundreds. So it’s no wonder people will have high expectations looking at the high quality and super high value on their appraisal, but they will be very disappointed with the actual cash value.

If you shop around you will quickly learn that only a certificate from GIA (Gemological Institute of America) will be taken seriously. GIA is very strict and accurate with their grading of diamonds. They also catch on type of artificial treatment or enhancement that other labs may miss. If you have a certificate from another lab such as EGL, IGI or any other, consider it a starting point only. Once the stone is examined by a qualified buyer, the true and accurate color, clarity, cut grade and other factors can be determined, and a fair price can be given.

Perhaps you bought a ring that is loaded with small diamonds. Maybe it has 5 carats of diamonds, and you paid $5000 at the corporate jewelry store. Well, the bad news is, it will only be worth around $1000 to $1500 at most. This is because small diamonds are only worth at most $300/carat for nice quality stones. Lower-grade small stones (we in the industry call them mellee) can be worth as little as $25/carat. So please don’t think you can compare 5 carat total weight to a single 5 carat diamond that can easily be worth $25,000 or more. A single stone will always be worth dramatically more than a group of small diamonds.

Jewelry Designers we buy include but are not limited to; Breitling, Bvlgari, Cartier, Chanel, Chopard, David Webb, David Yurman, Fope, Fred Paris, Georg Jensen, Graff, Hermes, Ilias Lalaounis, Ippolita, John Hardy, Lagos, Levian, Marco Bicego, Mikimoto, Piaget, Roberto Coin, Rolex, Seaman Schepps, Scott Kay, Simon G., Tacori, Tiffany & Co., Van Cleef & Arpels.

Mike purchases Diamond jewelry and collections of Gold, Gemstones, and Diamond Jewelry, Designer Jewelry, Vintage Jewelry, Antique Jewelry, Loose Diamonds, and Sterling Silver. Mike frequently meets with his clients along Barrington, Chicago’s North Shore, Highland Park, Kenilworth, Lake Forest, Northbrook, Oak Brook, Skokie, Wilmette, Winnetka just to name a few.