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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, the price was 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.