Valuations Used to Support a Sale

 

N.A.G. Institute Registered Valuers must only issue insurance replacement valuations for items which have been sold.

    It has been known for some retailers to ask valuers to produce such documents for their stock items which are then used as a higher comparison price against an actual price.  This is done to induce a sale.

    There has been considerable abuse of two price marking in the past.  Members of the public have been induced to buy goods because of inflated higher comparison prices.  The government’s Consumer Protection (Code of Practice for Traders on Price Indications) Approval Order 2005 prevents misleading price marking.

    It includes the following:

 

1.8.1    Do not compare your prices with an amount described only as ‘worth’ or ‘value’.

and

1.8.2    Do not present general advertising slogans which refer to ‘value’ or ‘worth’ in a way which is likely to be seen by consumers as a price comparison.

 

    The jewellery trade is particularly susceptible to this kind of deceptive price marking because the goods are unbranded and consequently there are no manufacturers’ recommended prices.

    While the Code does not explicitly outlaw goods based on a higher comparison price justified by an insurance valuation, the Institute will view such a use of an insurance valuation, which is a statement of opinion, as misleading and hence unacceptable for the following reasons:

1. 1.    With New Replacement Value basis correct use of prudent assumptions by the valuer will usually lead to a higher valuation than the price for which an article is sold.  An example of such a prudent assumption would be reflecting the greater cost of matching diamonds where there is more than one in an article.  Another example would be in assuming that the full benefits of economies of scale of a longer production run would not be available for the piece being valued.
2. 2.    Where a valuation is carried out on a Facsimile Value basis the valuation will inevitably be greater than the price at which an article is offered for sale.

    Accordingly, the Institute will not allow an IRV knowingly to carry out a valuation to be used in this way.  Its use will almost inevitably be misleading therefore against the interests of the public which the Institute was set up to serve.  The onus will be placed on an IRV whose valuation has been used in this way to justify his action and actually show how he knew that the public were neither intended to be nor were misled.

    You are also reminded that valuations for insurance replacement must show a name and address of the owner (which makes this form of abuse more difficult).

    The above guidance is mandatory on all IRVs because of the Institute’s parent organisation’s (the National Association of Goldsmiths) Code of Practice adopted by General Meeting on 20 October 1998.