• My Adventure on Bling St.

    This post has been cited by the 213th edition of the Carnival of Personal Finance, hosted by Man vs. Debt.

    Last year I sold a 2.25 carat diamond that had been in my family for over a half-century. If it hadn’t been for the horrors of World War II my maternal grandmother would not have purchased that diamond. She had been saving money to send her parents back to Poland to visit family. When the fog of war cleared she and her parents learned that there was no family left to visit. My grandmother had the cash for a gift but the one she had in mind was no longer possible to give.

    Instead she bought her mother (my great-grandmother) a diamond, which she wore for years. After my great-grandmother’s death the rock was placed in a safe deposit box. Years passed, as did my grandmother, and the diamond just sat locked away. No one else in the family wanted to wear it—not their style, too large and gaudy. So, last year, after much consideration, we decided to sell.

    I eagerly took up the task. It was fairly easy to research online how to price and sell a diamond. I also learned the essential diamond trade lingo. I visited the two jewelers in my small town to get some expert opinions on quality and value. I was shown how it was an old fashioned cut, how it had certain imperfections, and how it was not of prime clarity (VS) or color (J). In the lingo of the diamond trade, my diamond was “not so good.”

    Armed with this information from the internet and local jewelers I went to The Big City, which has a jewelry district on Bling St. (Obviously I’ve changed the city and street names to protect the innocent.) In the course of a few hours it was easy to hop from jeweler to jeweler to get many quotes.

    I quickly learned two things. One, very few jewelers wanted to buy my diamond, with all its imperfections and suboptimal qualities. Nevertheless, they were all willing to quote the fair price for which they thought I should be able to sell it. The second thing I learned was that the fair price everyone quoted me was within a very small range. The variation was only about 5% of the average quote. That gave me considerable confidence that I would not be taken advantage of, that I now knew the fair market value.

    I chose the merchant to whom I would sell the gem and confidently stepped into the store. Then the fun began. Mr. Smooth (not his real name) offered me the same fair price I’d been quoted many times. I accepted. Then he began to verify the stone’s characteristics.

    The typical way a jeweler discerns a diamond’s color is by comparing it to another for which the color is already known. Mr. Smooth placed my diamond and one from his collection side-by-side on a white card, then swapped out his diamond for another, and then another, until he found one that appeared to have the same color.

    But Mr. Smooth did something no other jeweler had done. He chose diamonds from his collection that were larger than mine. It is silly to take big diamonds out of one’s collection just to match color because you never know what can happen to a stone once it is out of safe storage. Sure enough, Mr. Smooth’s hands shook a bit and he dropped my large diamond and his huge, 3.5 carat one. (When you’re accustomed to seeing the 0.5-1 carat diamonds that most women dare wear a 3.5 carat one looks like a doorknob.)

    The stones danced on the glass display top for a few seconds and mine came to rest while his disappeared from view. “Where did it go?” Mr. Smooth asked. In the diamond trade, dropping a stone is called a “goof,” dropping a huge one is called a “flub,” and not seeing where it went is called a “job loss.”

    We both looked around but couldn’t find it. He got down on the floor behind the counter and then popped up and asked, “Could you look on your side?” I dropped to my knees and surveyed the carpet with my hands and eyes, finding nothing. As I stood up I felt a tickle down my wrist. His huge diamond had bounced up my sleeve! (It would have been a neat trick had I planned it. And if I had, the next place that diamond would have gone would have been where no strip search could find it, down my throat.) I handed Mr. Smooth his huge gem. “Better put that away,” I suggested.

    Satisfied with my diamond’s characteristics, Mr. Smooth cut me a check. I was a few feet from the door when he said, “Wait! I didn’t weigh it.” He had just bought a diamond without validating its carat weight. In the diamond trade, that’s called a “stupid mistake.” Of course I knew it would weigh out to what I told him, having watched it weighed a dozen times. I waited while he assured himself he hadn’t been ripped off. Then I walked to the nearest ATM and deposited his check.

    I rode the train home enjoying the memory of my adventure on Bling St. and contemplating how to spend my new cash. It occurred to me that it was really a gift from my grandmother (whom I hadn’t seen since her death nearly two decades ago) or my great-grandmother (whom I never knew). How would they have wanted me to use the money? While I could not use it in precisely the way my grandmother had originally wished, I could one day do something in the same spirit: take my family to Europe. Maybe one day we’ll go to Poland, maybe elsewhere. I guess that’s what grandma really wanted. In the diamond trade, that’s called “full circle.”

    • Great story! Really enjoyed reading it. I am just curious how you decided that this is the guy you will sell it too? Did he seem a little dumb and made you feel like there are less chances of getting conned?

    • @Manshu – The guy didn’t seem dumb, he just made some strange mistakes. While all merchants estimated the price at which I could sell the diamond, only two were willing to buy it. The guy to whom I sold it had the higher price of the two. I expected that going in to the store because of the nature of the two businesses. The other guy who wanted to buy it specialized in estate purchases. The one I sold it to was a jeweler. All the jewelers I spoke to quoted a price above that of the estate purchaser.

    • Just discovered your great blog from Weak.

      The prices of diamonds always annoyed me. I bought the Wife’s Ring from Jewler A (a family friend….who doesn’t buy their ring without knowing the guy?) and had it appraised at Jewler B. The Appraisal came back MUCH higher than what I paid which made me happy, but all I could think was there is ZERO chance that this guy would actually give me that in cash.

      So in the end what is the point of an appraisal? For insurance purposes only? Just some random thoughts

      • @My Journey – There are lots of types of “price quotes.” One type, as you point out, is appraisal for insurance purposes. That’s supposed to be what it would cost you retail to replace the diamond. That is not necessarily what it would cost you to buy your specific diamond. The diamond I sold was appraised for insurance purposes at a price much greater than what it could be sold for by a jeweler. That’s because it was an old-fashioned cut and its retail price would be discounted for that reason. But I would not be able to find that cut on the market. If I lost it and wanted to replace the diamond I’d have to buy a modern cut and pay the price for it.

        The insurance appraisal price of a diamond is also quite a different thing than what you can sell it for to a jeweler. When I shopped my diamond around I got quotes for how much a jeweler would pay me to buy it. It is reasonable to expect to be able to sell it to a jeweler for a fraction (I think 50%-70%) of the jeweler’s retail price. This is just the bid-ask spread in diamonds. Nobody should expect a bid-ask spread of zero. There has to be something in it for the jeweler and he has costs to cover.