Program Speaker: Scott Gould

Gem and Jewelry Appraising

by Scott Wilson

The New Mexico Faceters Guild was privileged to be addressed by Scott Gould, Graduate Gemologist, gem and jewelry appraiser for Mark Diamonds Jewelers in Albuquerque. Scott presented a brief introduction to appraising and appraisal standards and opened the floor to questions from the audience, which came in rapid succession.

Scott is a student of Larry Phillips, a very well known and highly respected gem and jewelry appraiser in Albuquerque. Scott is a native New Mexican who got into appraisal work via his interest in rocks and minerals as a youngster. He took a one-year gemology (GG) course at GIA, also receiving training in jewelry and manufacturing arts. He gained experience rendering design and fabrication work in Hawaii. After a visit to Albuquerque with some friends, he began appraising at Mark Diamonds Jewelers.
At the time, Scott related that there were many people in the area doing appraisals, but there was very little control of quality, qualifications, or guaranty of claims. Poor or incomplete descriptions were rampant, incorrect grading was common, and the whole process was very loose. Scott wanted no part of that and began to take courses from the American Society of Appraisers. He became one of only four ASA qualified appraisers in the state of New Mexico.

Scott related that the appraisal process is universal in approach, regardless of the object being appraised. A strict set of standards exists, the Uniform Standards of Professional Appraisal Practices (USPAP), an oft-forgotten resource that can help keep appraisals consistent, repeatable, and accurate.

A key aspect is “disclosure, disclosure, and disclosure”. Every aspect of the object, including intangible factors, such as who owns it, its history, fame, owner interest in the object, etc., must be disclosed to establish a compete record and background for the valuation.

Any appraisal must clearly recognize the use to which the valuation will be placed. Typical uses include appraisal for insurance, tax donation, and probate or estate matters. The value of an object may vary, depending upon the use to which the appraisal and the object appraised is placed.

Value is estimated by a few general approaches. The “cost approach” looks at the original price, cost of parts and labor to recreate an identical piece, comparable, and last auction price. Another approach, “market data” looks at nation-wide sales figures for similar pieces. This type of data is compiled in various publications (expensive ones) that, if properly used, can help provide a reference point for the appraiser. Yet, another approach is the “income” approach, which estimates value based on rental or royalty proceeds and not often applicable to gems or jewelry items.

It is clear that for the more custom a piece is (like our custom gems and jewelry), the market becomes difficult to evaluate. This is because there are very few transactions, and those may not be known widely enough to be used as reference. One-of-a-kind and unique pieces are the most difficult to deal with in appraising. Whatever the case, Scott observed that the appraisal should be to the “highest and best use” to preserve the accuracy of the appraisal.

A question was raised about the evaluation of a custom cut stone that might be under consideration for donation, perhaps, to a museum. Scott pointed out that the stone must be evaluated on the “secondary market”, not the retail market, according to IRS standards. The result is that an exquisite, top-end rhodolite garnet similar to one seen in a local store for $3,000 cannot be donated and tagged with that store’s marked value. Its value would be that which the buyer of the store could turn the stone around and resell it via the local market. This appears to be self-contradictory, in that the last sale price for a similar item, a “comparable”, in the open market establishes the value. However, the IRS apparently cannot deal with that fact.

Another question arose regarding the now famous Fred Ward emerald case, which will not be detailed here. Scott was asked how the appraiser might have done things differently that would have provided better protection for himself. Scott felt that a more complete and comprehensive description would have been the most valuable, including many more photographs. Scott felt that every appraisal must be done as if there would be a court case about it the very next week. Scott also felt that Fred Ward probably did everything right, but that he needed some additional credentials to prove his qualifications. Apparently, the first thing a court asks for is credentials. If those are not stellar and impeccable, then the case can take a sour turn, even if everything was done perfectly. Scott noted that Fred Ward’s job would be very difficult, as plotting maps of inclusions in emeralds is a hard job, due to the nature of the material and the skills of the gem treatment industry at hiding flaws.

A question was raised about how best to select an appraiser. Scott felt that the best approach was to look for one that has set, flat fees (not based on a percentage of value), one that has quality ethics, qualifications, and credentials. Look for one that can show examples of their work that clearly substantiates and documents the methodology and value of an item.

Scott provided some handouts from the ASA that detail the qualifications of the ASA Master Gemologist Appraiser credentials and some aspects of the appraisals an ASA/MGA will produce. This would serve as a good starting point for evaluating an appraiser.

Scott was asked how much time it might take to do an appraisal on a $20,000 emerald. Depending on the stone, the buyer, and the situation, he felt it would take several hours for evaluation of the stone itself, collecting data by observation and testing, and photographing the stone. Another several hours would be needed to do market evaluation and research (apparently quite a number of stones of this level trade regularly) and a few hours analyzing the data and documenting the valuation. Probably, it would require nearly all of a day’s work.

Scott closed by observing that an appraisal must be comprehensive, with full disclosure of all aspects of value and anything known that might have an influence on that value. Scott Gould can be reached at Mark Diamonds Jewelers, 505-296-9525.