Selling your diamond can be a daunting and stressful task. Questions abound. What is its true quality? How much is it really worth? Should I sell it to an individual or a dealer? How do I know who I can really trust? With all of these questions and possibly many more, the biggest question is, where do I even start? Fear not! The answer to all of these questions and more are all here. Armed with correct information, you will be able to walk into any room with any buyer and speak confidently to your diamond’s quality and true, fair-market value.
Thinking like a diamond dealer:
The first place to start your diamond selling process is in your own head. Often the need to sell results from a dramatic and emotional life event such as divorce, a death in the family, or a job loss. Even if you are just selling to upgrade or change to a different piece, the chances are that you will have some sort of emotional attachment to your diamond. You first have to resolve in your own mind that selling is necessary and take the emotion out of it. This is a business transaction for the buyer, so it should be for you, too. While sellers often feel that their emotion will appeal to a buyer’s sense of humanity, unfortunately, a predatory buyer will see desperation and a huge payday for themselves.
Finding your diamond’s true grade:
Once you have a buyer’s business mindset, you need to gain market knowledge. Diamond value depends on a number of factors including the four C’s of diamond grading: Color, Cut, Clarity, and Carat weight. While two diamonds may appear to have the same quality based on the four C’s, like a snowflake, no two diamonds are exactly alike, and slight differences in the placement or type of inclusion (flaw) can mean a significant difference in value. Cut not only refers to a diamond’s shape, such as round brilliant cut, pear shape, marquis, princess cut, etc., but it also refers to a diamond’s proportions. A diamond that is well proportioned is more brilliant and can demand a higher price. The cut of your diamond in terms of its shape also affects price, since cuts that are currently popular among buyers are more marketable and bring a higher price. Aside from the four C’s of diamond grading, other factors may also play a role in its value. These include elements like the presence and intensity of fluoresce or abrasions at the facet junctions.
A major issue with diamond grading is that certain elements, like the importance of a particular flaw, are subjective. One buyer may grade a diamond as one quality while another may disagree, and far too often, if a diamond’s quality is in question, the buyer will try and protect themselves by grading the diamond at the lowest possible quality. Since you are not expected to become a graduate gemologist overnight, how do you, as a seller, know your diamond’s true grade? The best possible option is to have your diamond independently certified by the GIA (Gemological Institute of America). The GIA is considered the authority within the diamond industry, and diamonds are often sold between dealers sight unseen based on the GIA report alone. Buyers may argue the grade of your diamond based on any other report, but armed with a GIA report you establish the grade of your diamond, not the other way around. Please note the difference between a GIA report and an appraisal done by a GIA graduate. For a true GIA report, your stone must go to the lab at the GIA, not simply be appraised by a GIA graduate. Details on GIA locations, pricing, and much more information can be found online at www.gia.edu.
Often people hesitate to take this step, either because they are afraid of shipping their diamond, they do not want to spend extra money on something they want to sell, or they simply do not have time. My strong advice is to send it. Diamond dealers and jewelry store owners send thousands of diamonds through the mail each day. My recommendation is to ship via US registered mail and insure your package. In my personal experience shipping thousands of diamonds each year for over 15 years, I have never suffered a loss. It is true that obtaining a GIA certificate will cost you some money. But like your home or any other piece of valuable property, it is simply the wisest course to have an independent evaluation before attempting to sell.
If time is critical and the need to sell immediately is necessary, sending your diamond off to a GIA lab may not be realistic. In this case, have your diamond appraised by a reputable appraiser. Things to look for in an appraiser are, first, that they are only an appraiser. If they buy or sell jewelry or diamonds, they may be biased in their own financial favor. Don’t choose an appraiser unless they are a GIA Graduate Gemologist and a member of the NAJA (National Association of Jewelry Appraisers). Finally, be sure to make them aware of your intention to sell, and request a fair market appraisal and not an insurance appraisal. A good appraiser who meets the criteria outlined above can be your best advisor.
Determining your diamond’s fair market value:
Once you have determined your diamond’s grade, how do you determine its value? When you begin shopping your diamond, even armed with your GIA certificate or independent appraisal, it is important to have two figures in mind. First, know what you believe your diamond is worth to a buyer and, second, know what price you are willing to accept? Again, selling your diamond with a business mindset is imperative, because that is how the buyer is thinking.
Start determining your diamond’s worth by locating a comparable diamond’s retail price. With a relatively quick search online, you will be able to come up with a fairly tight price range for a diamond like yours. Next, you must factor in retail markup. Most retailers work on keystone or 100% markup. So, if they purchased a diamond at wholesale for $1000 they will sell it at retail for $2000. This is a simple, yet unbelievably accurate, way to find a diamond’s wholesale price. While you may assume that this should, then, be your asking price, there are more factors to consider, if you are truly thinking like the buyer. The problem with this $1000 wholesale price point is that the dealer is getting no deal by paying that price to you. This is because traditional jewelry stores rarely own their diamond inventory. They simply get their diamonds on memo (consignment) from larger diamond dealers and pay for them at the point of retail sale. If they do purchase instead of memo, they receive a 10%-15% discount if they pay immediately, and a 5%-10% discount if they take payment terms, which can be anywhere from 30 days to 12 months. So, your price has to be low enough to be worth their writing a check to you immediately and stocking your diamond.
Making the sale:
Now we are in the homestretch. You are over the shock of how much money the jeweler who sold you the diamond put into his pocket and ready to find the one who will pay you the highest amount. There are four different potential buyers for your diamond, and each has different pros and cons.
The first type of buyer is the end user. Any time you are able to sell your diamond to the end user, or private buyer, it is a win all the way around. They are able to purchase a diamond well below retail price, and you are able to sell them that diamond for above what you have determined is your diamond’s wholesale price. Diamonds sold this way typically yield between 25% and 50% off the average retail price. There are, however, several problems with private buyers. How do you find them? Do you trust them? How long will it take to complete a sale? Where do you meet them? Is safety an issue? And remember, a legitimate private buyer will have all the same concerns about you that you have about them.
The second type of buyer is your local jeweler. I have already discussed the issues with memo and the retail jeweler, but there is an occasion where you can get lucky. If a retail jeweler does indeed purchase their diamond inventory and they just happen to have a hole in their inventory that your exact diamond would fill, they should be willing to work at any price that is a savings from their typical diamond source. While these cases are a matter of luck in being at the right place at the right time, it does happen. One of the main issues with retail jewelers is that they simply will not even make an offer to buy. This is because jewelers simply don’t know each and every one of their customers, and it is very difficult for them to explain to you how something that you purchased just six months or year ago for $2000 is now only worth $500 today, especially after they told you how you were getting such a good deal, and they were making almost no money when they sold it. The final issue with a retail jeweler, if they are willing to make you an offer, is their ability to market your diamond. Most independent jewelers are only drawing from a client base within a 10 to 15 mile radius. If they do not find that perfect buyer looking for your exact quality of diamond, they could have it for a very long time, and that time is factored into their offer.
The third type of buyer is the wholesale diamond dealer. This is the buyer that I recommend the least. While they may have the best looking websites and fancy downtown office, the reason not to sell to them is glaringly obvious. Just like the retailer, they are only buying your diamond because they are able to purchase it cheaper from you than from their typical source. Then they want to sell it to a retailer for wholesale. So how much could they possibly pay you?
The last type of buyer is the professional diamond buyer and/or broker. The difference between these buyers and the others is that buying from the public is their main focus while selling is the main focus of the first three. These buyers understand that to maintain and grow their business they need to build a good reputation for paying top dollar. If the sellers quit coming, their business will simply fail. They are willing to work on far smaller margins because they are interested in volume and not the big score. Most brokers will either buy or broker your diamond for as little as 10% to 20%. That is a far cry from the 100% profit that so many in the retail world demand. Also, professional buyers and brokers typically have spent years building a vast network of buyers, both private and within the industry. Large networks allow these professional buyers to overcome saturated local markets with their national and international networks of buyers. The bottom line is that these buyers are more likely to buy or broker your diamond and provide you a higher selling price than other buying sources.
Here are some final tips to let buyers know that you are knowledgeable and help you command a fair value for your item no matter which type of buyer you choose to shop.
1. Always walk into an appointment with pen and paper. This lets the buyer know that you are shopping around and that if they want to buy, they better give a fair offer.
2. Pay close attention to the words buyers use. If a buyer knows you are shopping they will often use tricks like saying, “your diamond is worth X.” If they are not making you an offer to write a check, they are not making you a genuine offer. This is simply a ploy to stick a high number in your brain that he knows no one will beat, and make sure that you come back to him. You can be sure that the price will drop on your second visit, in hopes that you are simply tired of running around and want to just be done with it. I would never do business with this type of buyer on general principal alone.
3. Never tell the buyer your need to sell quickly. This cannot be emphasized enough. Keep the ball in your court, and don’t give them any reason to feel that you are desperate. If anything, do the opposite. Tell them that if you can get a fair price you would sell, but you don’t mind just keeping it, either. They are human, too, and we all want what we think we can’t have.
4. Be ready to sell if a buyer meets your predetermined price point. If that happens in the first location, then that’s good. Many sellers feel like they have made a mistake if their desired offer comes too quickly, and they decide to go for more. The problem is, if you don’t find more and come back to the first deal, the buyer now knows that they offered higher than everyone else and the price will often drop, because they can pay less and still be the highest. Don’t outsmart yourself, you did your research, now trust it.
By Todd Latson, President, US Diamond Traders