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Buying Jewelry at Auction—Caveat Emptor—
and Other Musings from an Expert

Today the major auction houses are the primary source of some of the world’s rarest and most desirable gems and jewels, often at prices significantly below what you would pay at a major jewelry salon. I view most of the major pieces coming up for auction in order to evaluate their quality firsthand and then compare the prices they bring, because this provides me with an important indicator of current value—for a specific quality—and whether prices are strengthening or weakening in the broader marketplace. It also enables me to gauge trends with regard to various jewelry periods, such as art deco (ca. 1920s–1930s) or retro (ca. 1940s), and to track trends associated with various names (houses such as Cartier or Tiffany and individuals such as David Webb or JAR) and how these trends are affecting pricing. I love the auction market and find it exciting to view some of the rarest of pieces—some even finer than anything seen in any museum—and even more exciting when I’m bidding on behalf of one of my own clients ... and succeed in acquiring a magnificent piece for them! But buying at auction requires extensive knowledge and it is not for the casual buyer or investor.

Where jewelry is concerned, there is extensive fraud and misrepresentation—both inadvertent and deliberate—in the auction arena. Sparkling gems and rare jewels have always had great allure, but all too often the gems are not what they may appear to be. To quote the Roman historian Pliny, “There is no fraud or deceit in the world which yields greater gain and profit than that of counterfeiting gems”—and that was written in the year 77 AD! Counterfeiting gems was an art form over two thousand years ago, and today even more so. There are many clever imitations, synthetics, and substitutions of some of the gems—so that there are genuine gems and fakes in the same piece—forged marks, and faked names such as Cartier or Winston, and last but not least, gems are treated in a variety of ways to make them appear far more beautiful—and seemingly more valuable—than they really are. So unless you are a gemologist, or are willing to retain a gemologist to work with you and factor that cost into the cost of your acquisition, you are really buying blind. Some people don’t mind buying blind, and it may add to the fun and excitement of buying at auction, but you need to decide, in advance, what your limit is, what you’re willing to pay for the fun and suspense, and guard against getting caught up in “auction fever” and paying more than you can afford to lose!

It is critically important to clearly understand the auction house’s terms and conditions of sale, the risks involved and possibility of recourse should you learn after the purchase that your piece isn’t what it was described to be. For example, some auction houses will guarantee nothing; others will only stand behind representations made in the bold heading in the catalog but not the expanded description following the heading. A number of years ago, there was a case that involved a major international auction house and the sale of what looked like a beautiful pink topaz necklace. The auction house described the piece in the bold heading as “Antique 22 Karat Gold Necklace Containing Topaz and Seed Pearls, c. 1820”; the paragraph below the heading described the necklace in detail, referring to the “pink topazes” in the necklace and providing many other details about the piece. However, when the buyer had it appraised by a gemologist, she discovered that the “pink” topazes were not pink but colorless; the pink color was the result of pink foil that had been placed behind the stones and concealed by the gold backings behind each stone! Pink topaz is much rarer and costlier than colorless topaz, and she paid a higher price than she’d have paid if she had known the stones were “foil-backed.” The auction house refused to refund her money, and she had no legal recourse because the heading said “topaz” rather than “pink topaz” and the stones were, in fact, topaz. The auction house clearly knew what it was doing and knew that the stones were all foil-backed, but they also knew that, in most cases, the buyer would never have bothered to have it appraised independently because of the firm’s reputation as the premier “appraiser” of the value of gems and jewelry! Whatever the case, the woman was very disappointed with her purchase, but she was stuck with it. The auction house lost one customer, but for each lost customer there are many new customers.

This leads me to another important point that needs to be understood by anyone contemplating SELLING jewelry at auction. Do not rely on the auction house to tell you what you have and what it’s worth. Smart sellers will always turn first to an independent gemologist-appraiser or gem-testing laboratory to identify what they have and to learn its real value and what they can expect it to bring at auction. Armed with this information before going to the auction house will enable sellers to establish a realistic reserve (the price beneath which the item cannot be sold) and protect themselves against collusion among potential buyers and selling a valuable piece for too little.

What many don’t understand is that many auction houses, in order to protect themselves against a bad day like Black Monday in 1980, set the reserve as low as possible because this guarantees that a piece will sell, even in the worst of times, and they can then collect their fee from both the buyer and the seller. Normally, this means that the auction house will value a piece at approximately 1/4 what it should really bring because at such a low reserve, they will still earn the same fee that they’d have earned if the piece was valued at its true value and failed to sell (in which case they collect a reduced fee, but from the seller only). With a very low reserve, the estimate shown in the catalog will also be very low—which serves as a lure to collectors who think they may have a chance to get a real bargain! But the auction house also understands that if all is fine on the day of the sale, the piece will bring much more because the dealers who are bidding know the rarity/value of the item and will bid up to its true value. Then they can also put a very positive public relations spin on the story, touting the fact that X percent of pieces bring double (or triple, or four times) the presale estimates, making it appear that the auction market is strong and healthy and that their firm is the right choice to sell your jewels!

Another auction venue of increasing popularity is the Internet. For me, two words come immediately to mind: Buyer beware! My advice to anyone buying anything on an Internet auction is don’t buy unless you can structure the transaction in a way that permits you to verify the representations made—that the piece is genuine and the size/quality represented is accurate—before payment is made. I have heard many horror stories from victims of Internet auction fraud, and there is usually no recourse because the sellers just disappear into cyberspace, with your money! Where honest sellers are concerned, there are ways to arrange for money to be held in an escrow account until a piece can be sent to an independent expert; if the representations are accurate, the money then gets sent to the seller, and if not, the money is returned to the buyer. When dealing with the unscrupulous, excuses are endless—and often convincing—for not being willing to do this. In such cases, regardless of the excuse, my advice is don’t pursue this transaction because the risk is too great and you’ll probably lose.

When all is said and done, for those who find the allure of the auction arena as strong as the allure of the gems and jewels you seek, first take time to go to several auctions as an observer (and to the previews, too) and when you’re ready to take the plunge, remember that knowledge is the key to success … and lasting pleasure from your purchase! With a little experience, those with knowledge—whether your own or that of a consulting expert—can find that the auction arena can lead to some very sparkling discoveries … and rewards!