Tips on Buying and Selling Coins|
November 29, 2010
All of us have seen the flamboyant TV ads and hucksters, the ads in service organization magazines and the full page newspaper ads from “motel room operators” offering to pay top dollar for your coins.
“In general, if the company doesn’t advertise in the hobby press, take your business elsewhere.” TV, radio and newspaper ads are mostly uncontrolled, so they can say just about anything, or skirt the truth. These firms use a team of lawyers to keep their ads as close to the edge as possible. The hobby publications usually weed out such ads since they are a detriment to the hobby.
When you see an ad from one of the firms that sets up shop typically in a motel or hotel room, you’ll see the line: “We pay up to....” for a certain coin. It should immediately raise a red flag. Over the years I have been told of numerous incidents, such as an elderly lady being offered face value for her gold coins. In a recent case, the buyer was deducting a 25 percent “smelting fee.” The sad part is that if these people had taken the coins to an established local coin dealer they would have undoubtedly gotten much more for their coins. Borderline ads are deliberately targeted toward the uninformed. Their favorite target is the proverbial “little old lady in tennis shoes.”
TV and newspaper ads don’t come cheap. You know that if a firm is paying heavily for their ads, the profit has to come from somewhere, such as out of your pocket.
Mixed in with ads offering gold for sale are offers of “coins” cunningly couched to obliterate the fact that they are not coins, and that their “gold filled” pieces contain only a minute amount of gold, just enough to plate the piece. Gold plating was prohibited for many years. So, when that law was repealed companies fell over each other in a rush to offer real coins that had been gold plated.
The public is taken in by the fact that some of the pieces are legitimate coins, so they pay a healthy premium for what amounts to altered coins, which probably never will appreciate. Privately minted copies of real coins often are correctly labeled as “non monetary,” but it’s a term easily misunderstood. Simply put, it’s not money, so it’s not a coin.
One of the gold advertisements brags that gold “never has been worth zero.” Like many other misleading statements this is incorrect. When gold was first discovered it had no value until someone found that they could make jewelry out of it. The same applies to the statement that “Gold does not go down, it goes up.”
Another ad offers the “Last 4,000” Morgan dollars, ignoring the fact that there are an estimated 300 million of them still around. Avoid firms that have to run disclaimers that their sound-alike names are not affiliated with the official United States Mint.
“Beware of telemarketers offering coins for sale.”
The sight unseen rule covers this, so I’d urge you never to buy coins over the phone from someone you don’t know who called you. However, if you have done business with the firm, they may call you with impunity. I’ve seen many collections of telemarketer coins that are worth only a fraction of the thousands of dollars the victims paid for them. Surprisingly, the targets were doctors, lawyers and other professional people who should have known better.
“Be careful of anyone who labels a token or medal as a coin.”
This is out and out misleading advertising, as only a government can issue a coin. See the definitions in the glossary to learn the difference. The monetary difference can be significant as coins are well cataloged while reference material for medals and tokens is limited. There are only a relative handful of rare and valuable medals, far outnumbered by rare coins with known mintages.
Certificates of Authenticity are as worthless as the paper they are printed on. They are not affixed to a coin, so they can be moved from coin to coin without recourse. Any ad that touts a certificate as a selling point is suspect. Unfortunately it has become a fad and even the official mints are including them with their collector coins. Coins that have been graded by third party grading services carry their pedigree with them, as they are sealed in hard plastic holders, called “slabs.”
Always read the fine print on any paperwork. Make sure you fully understand the terms and don’t assume anything, or accept a verbal promise. Ask questions until you are fully satisfied and then proceed with caution. Above all, get it in writing. Don’t accept verbal promises.
Coins or medals are being altered with enameled designs. The Royal Canadian Mint is one of several mints offering genuine colorized coins, but the jury is still out on whether they will appreciate in value.
Relatives and friends of collectors are often the unwitting dupes. They go out and buy colorfully packaged coins for gifts, more often than not buying coins that the collector has, or buying coins that have been cleaned, altered or damaged, worthless to the collector. If you must buy a gift for a collector, a gift certificate from his coin dealer will solve the problem.
You comparison shop for other items, so why not coins? The odds are that you can match or beat any of these motel room dealer’s offers by patronizing your local coin dealer. You can often beat the price by a third or a half.
There are some very important rules and regulations that apply to buying or selling, some unique to the coin hobby. The key rule has to do with those 2x2 cardboard holders and sealed plastic holders.
“If you buy a coin in a holder and remove it, by removing the staples or breaking the seal, the coin is yours.”
This means that you cannot legally return the coin for a refund if you discover it has been cleaned or has some other problem.
Opening the holder, without specific written permission from the seller voids any guarantee or return privileges. This is for the dealer’s protection, so the rule is rigidly enforced.
Obviously, you need to be very careful until you are satisfied that the coin is as represented. A simple solution is to ask the dealer to open the holder, so that you can examine the coin before buying it.
This rule causes problems if you send the coin in to be graded, as the examiner will have to open the holder in order to examine the coin. This is where seller permission is required, because otherwise he would have legal grounds to void his guarantee. The best way to avoid this is to ask the dealer to send the coin in for grading before you buy it.
If you are selling coins to a dealer, or having a collection appraised or graded there is often concern that they might switch coins and substitute a lesser grade coin. This is unlikely to happen. There is no 100 percent guarantee, but since their reputation keeps them in business there are very few instances of switching.
It might surprise you that for every dealer who risks his reputation there are a hundred collectors doing their best to scam the dealer, so in most cases it is your fellow collector that you need to watch. Talk to any coin dealer and they can reel off hundreds of stories of sellers trying to trick them.
One problem for dealers is the collector who comes in and says “I’m a dealer, so I want a discount.” A couple of quick questions will reveal that he is not a dealer and doesn’t rate discounts that apply in dealer-to-dealer transactions. Dealers will give discounts for a variety of reasons, especially if a customer buys several coins or a more expensive coin but they are in business to make a living, not to give away money.
If you are buying, make a list of the coins you are looking for with prices for the grade you have in mind. When you see a coin you want, you have the list to compare with the dealer’s price. There are no fire sale prices for coins, so be wary of any serious markdowns. That’s where your list comes in handy again and again.
In many cases, it is important to buy the big ticket coins you need for your collection first, then get the less expensive dates or mints later. This applies in most cases because the more expensive coins or grades are likely to increase in value faster than the more common dates. Most collectors start with the cheaper coins, only to find that the expensive ones are priced out of sight by the time they get to them. As a beginner, you should take it slowly, as you can get burned more on a valuable coin than on an inexpensive one.
Here’s what you need to remember:
1. Buy the book before you buy – or sell – the coin.
2. Know more about the coin than does the person selling it.
3. Know how to grade within a point.
4. Keep accurate records of every purchase and sale. The IRS is waiting.
5. Learn the minting process.
6. Collect what you like and want, not what someone tells you to collect.
7. There are no dumb questions.
8. Don’t clean your coins.
9. Walk before you run.
10. Make a list.
This is an excerpt from Warman’s U.S. Coin Collecting by Alan Herbert. The book is available at www.shopnumismaster.com and book stores nationwide.
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