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Donít Buy Othersí Problem Coins
By Patrick A. Heller
December 31, 2013

Every dealer has lots of them, as do a high percentage of collectors. I’m talking about coins that have problems. By that I refer to any feature that does not represent ordinary wear as a coin is manufactured, then placed into circulation.

There are so many kinds of problems that a coin might have that I’m sure this list only scratches the surface: cleaning, wiping, whizzing, artificial toning, fingerprints, corrosion, rim damage, tooling, repairs, altered surfaces, milk spots, orange spots, scratches, clipping, removed mounting, holes, solder residue, “green slime,” mottled or pickled surfaces, spooning, bent, chemical residue, environmental damage, and on and on.

Some of this damage occurs for innocent enough reasons, such as the storage of old collections in materials that unfortunately damaged coins over time. Some is done by uninformed people who think that cleaning or otherwise altering a coin may somehow make it worth more – and in the process invariably decreases the value. In the last category are the deliberate kinds of treatments to coins to deceive a buyer into thinking they are of greater value than they are.

Numismatic organizations have wrestled with attempts to define accidental and deliberate damage, with no descriptions meeting universal acceptance. At best, ethical coin dealers should identify problems with coins about which they are aware. Major grading services either do not grade coins with problems or encapsulate them with information about the problems.

Coins with problems are more difficult to sell because collectors generally seek problem-free coins. There are numismatic niches, such as Bust half dollars, where a high percentage of coins were cleaned long ago and many have retoned to a relatively natural appearance, but such coins are the exception rather than the rule.

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If coin dealers are being offered problem coins, they almost always would not purchase them at the same price levels as for problem-free coins. In my decades in the business, I have seen problem coins trade at best for maybe two-thirds of the value of problem-free coins down to less than 5 percent of the price of the same grade of coin with no problems.

While it might seem to be a bargain opportunity to purchase coins “almost as nice” as problem-free coins but at a lot lower price, the downside is the illiquidity of problem coins. Problem-free coins will sell readily to almost all collectors, while demand for problem coins comes from a much smaller collector base. As a result, dealers tend to work with a wider buy/sell spread when trading problem coins. Sure, problem coins may seem like a bargain when you buy them, but you will get clobbered should you ever try to sell or trade them.

As a general rule, purchasing problem-free coins will return better results down the road than going for problem specimens. There are some series where a high percentage of surviving specimens have some kinds of problems, such as U.S. Colonial issues. If you are considering the purchase of problem coins, try to get information from someone other than the seller as to what the resale value might be.

If you go around coin shows, you are bound to come across some dealer cases where just about every coin has problems. There are markets for such material, but not all dealers of such specimens are totally forthcoming to potential customers about the condition of their inventory. It also happens that dealers occasionally make mistakes, where they don’t catch every problem on every coin they have in their inventory. If you are considering a purchase of a problem coin, make sure to do your homework first and ask for buy-back or return options. Happy hunting.

Patrick A. Heller was the American Numismatic Association 2012 Harry Forman Numismatic Dealer of the Year Award winner. He owns Liberty Coin Service in Lansing, Mich., and writes Liberty’s Outlook, a monthly newsletter on rare coins and precious metals subjects.

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