There are many different resources available to you when you decided to purchase a coin, the most common include the Internet, auctions and coin dealers.
Using the Internet to Buy Coins
As a collector you are likely to turn to the Internet for any of a variety of reasons. While the Web can be of significant help, it’s very important that you recognize it, and your, limitations when it comes to buying coins.
A mandatory rule, especially for the novice collector, is to avoid buying any coins on the Internet, at least until you have a thorough grounding in grading. Like most rules, there are exceptions, like buying American Eagle gold or silver coins online from the U.S. Mint. The Mint, after all, is a reputable dealer, they aren’t going to rip you off. Still the general rule to follow here is:
“Don‘t buy a coin without seeing it, until you can grade it yourself.”
Learning to grade any coin accurately is a talent that will save you many dollars over a lifetime of collecting. Don’t depend on others to do your grading for you, grading is subjective, but that doesn’t mean you should go out and buy expensive gold coins before getting a good look at them.
On the bright side, the Internet is a limitless source of free information. Learn to use any search engine to answer your questions about foreign or domestic coins. For a typical research project, the search engine listed 500,000 pages of information. The most important information, however, is often on the very first page.
Unfortunately, not all the information found on the Internet is correct. If you have the slightest doubt, be sure to confirm the information from another source. Information is your best weapon against being taken advantage of. Remember, if an offer to buy rare gold coins, 1 ounce gold coins or any other coins, sounds too good to be true, it probably is.
Still, Internet can be a great source of information and opportunities to purchase coins. Use caution and sound judgment before buying.
Use Auctions to Buy Coins
The average person is likely to be more familiar with coin auctions on the Internet, but there is much more going on than that. Several large auction houses do only coin auctions, and hundreds of country auctions disperse large quantities of coins. There are also firms that only do telephone or mail bid auctions, or specialize in world and international coins.
The major coin auction firms issue catalogs for the sales they conduct, as well as setting up a room where the lots can be examined by potential bidders. Most coin auction catalogs contain a wealth of information that is not always available from other sources. The photos are of the actual coins in the auction, a point that is not always true of coins offered on the Internet.
A typical sale may contain up to several thousand lots. A lot may consist of a single, certified gold coin, it may contain several hundred silver coins, it may be made up of dozens of bullion gold coins or two or three rare old coins. Generally speaking, there is no limit on lot size. If you have your eye on a single coin in a lot with multiple coins, you must bid, and purchase, the entire lot, you will not be able to separate the coin from the rest of the lot. Auctions are great places to meet other collectors, where you can buy coin rolls, international coins, and United States gold coins, just to name a few of many options. Don’t spend all your time on purchasing coins, get to know some other collectors, and familiarize yourself with how the auction works.
There are other well established rules that are pretty much standard for coin auctions, usually stated in clear language in the sale catalog. It is well worth the time spent reading the rules and getting familiar with them, so that you don’t unintentionally break them when you go to an auction to buy coins.
A steadily growing trend for such auctions is to charge both the seller and the buyer a fee, making up part of the profit for the auction firm. These fees get into double-digit percentages, so it’s important to consider them when bidding on a lot.
There are numerous forms of auctions, both public and private. Most coin auctions are public, allowing anyone to bid. You may never hear of a private auction, held behind closed doors and by invitation only. Another term is “private treaty.” This is essentially an agreement between two parties to sell the coin at an agreed on price.
Bidding at a coin auction is much like other auctions. There is usually a reserve price that must be met to satisfy the consignor. The bidders may be in the room, have mailed in their bids or are using the telephone or Internet to place their bids.
The auction houses usually charge for the catalogs to defray part of the expense. Page after page of color photos of silver coins, even if not silver themselves, don’t come cheap. A search through a used bookstore will usually turn up a wide assortment of inexpensive auction catalogs, in themselves collectible. A handful of book dealers also handle them and feature them – especially the big “name” sales – in their catalogs or auctions. Many auction catalogs are devoted to old or rare coins from a single collector, usually one prominent in the hobby.
The auction houses also use the Internet to display important lots from a forthcoming sale. This allows them to reach a much wider selection of potential bidders. They are worth a look to further your hobby education (search online for “coin auctions”). Country auctions, while interesting, are not recommended as a place to buy coins. Except in rare cases the auctioneer has only a basic knowledge of coins and their values. The big negative factor is that the public doesn’t have any knowledge either and they tend in many cases to overbid the coins being offered, paying much more than they are worth. It’s not uncommon to see coins bid up to two or three times their actual value. Silver dollars are likely to go for even more. The sellers of course are tickled to death with that kind of bidding.
Many local coin clubs offer regular auctions as part of, or next to the club meetings. They may also offer members a mail bid sale. The American Numismatic Association (www.money.org) has major auctions at its annual shows, visit their site online to learn more.
All of us have seen the flamboyant TV ads and hucksters, 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, they are a detriment to the hobby.
When you see an ad from one of the firms that sets up shop 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. Information is your best defense when buying or selling coins.
TV and newspaper ads don’t come cheap. 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 coin investments are offers of “coins” cunningly worded to obfuscate the fact that they are not coins, just “gold filled” pieces with just enough gold 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. Gold plated coins will rarely, if even appreciate in value, making them a terrible investment. How to buy gold coins then? Carefully. Research and information gathering are key when you purchase gold coins. Privately minted copies of real old or rare coins are often correctly labeled as “non monetary,” but it’s a term easily misunderstood. Simply put, it’s not money, it’s not a coin.
One of the gold advertisements brag 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 opportunity to purchase silver coins, like 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.”
Never buy coins over the phone from someone you don’t know. This is especially true if they 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. The monetary difference can be significant. 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.
If you are looking to purchase rare coins, don’t look at the paper offered with it. 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 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. Don’t 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. Sadly, friends and relatives don’t know how to buy silver coins, or any coins for that matter. They don’t have the knowledge and information, and that makes them prime targets for con artists. 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. Don’t be fooled into buying at “discount place” gold or silver coin dealers, they offer bargain basement prices, but the deals are too good to be true. Again, information and common sense are your best defense against being taken advantage of.
More on Buying Coins (and Selling Too!)
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 2×2 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.
How and Where to Sell Coins
A frequent question from numismatic newcomers: “I have a coin. What is it worth?”
With certainty, the answer is that no one can tell anything about that coin from the owner’s all too brief description. If you have coins to sell, it is natural that you might wonder where you can sell the coins. The first, and most obvious answer is that you can buy and sell coins at your local coin shop. Coin shops serve as excellent locations where you can sell coins, as well as get more information about coins in general.
If you want to know how to sell old coins, or any coins for that matter, you need to start with a detailed description of the merchandise. Tell us as much about the coin as possible – denomination, date, mintmark, anything that looks “wrong.” Always helpful is to note the apparent metal, if you want to sell gold or silver coins, or just modern clad coins, make a note of the coin’s composition. A sketch of the coin, and a record of the wording on both sides, may be vital to identification, even if you include a photo or scan.
This is especially important if you are asking about a minting variety. Photos or scans of old coins you want to sell are useless if they are blurred, so get things in focus. Don’t waste money on a professional photo until you have a firm value for your coin. Few professionals are equipped to photograph coins.
The alternative is a rubbing, either with a soft pencil or aluminum foil. The problem is that neither one will survive a trip through the mail. A pencil rubbing will smear and a foil rubbing will look like it had been run over by a steamroller. You need to encase the rubbing in a reversed 2×2 cardboard holder or a small box, so that there is no pressure on the rubbing.
Don’t be afraid to ask if you feel you have a coin that has potential value. All too many collectors decide their coin is rare and valuable so they sit on it, in hopes of finding more.
Coin price guides mostly quote retail prices for coins. This is because dealers use wholesale prices and add their individual markup, so no two dealers are likely to have the same retail prices. Coin dealers won’t give you wholesale prices, but they may give a small discount if you look like a good customer.
When you do find a dealer that meets your standards, hang on to him or her. The more business you do, the more you are likely to profit from buying. Most dealers are happy to share their expertise with regular customers.
Before buying that beautiful coin offered on TV, try the local coin dealers. In most cases, they can provide the same coin at a fraction of the cost. When you sell, expect offers that are discounted heavily from the retail value, unless the coin is especially valuable, or one the dealer needs for a client. Like collectors, most dealers specialize; keep this in mind if you are trying to figure out where to sell gold coins, where to sell silver coins or where to sell old coins, the answer might be the same shop, or perhaps, three different shops.
Many collectors make the mistake of expecting full retail from a dealer. Like any other business, the coin dealer has to buy at wholesale in order to profit on a retail sale to pay the help, rent, taxes and other expenses of doing business.
Coin shops are businesses, and despite the prices listed in price guides, the average dealer has no use for rolls of circulated clad quarters, halves and dimes, or nickels and cents. The dealer has no market, since anyone with time on their hands can search rolls of coins. What this boils down to is that – except for the odd silver coin that shows up – you should spend the coins, rather than keeping them for a dreamed of day when a dealer wants them. Even dealers don’t know how to sell a coin that there is no demand for on the market.
Collectively there are probably millions of dollars worth of coins that are being hoarded, both by collectors and the public, based on the assumption that they will gain in value as they get older. The assumption is based in part on fact, but any appreciation will be painfully slow. It will be even slower than the better choice, a savings account. The important thing to remember is that in nearly all cases uncirculated grade coins will appreciate much more quickly than coins that are worn. This applies to bullion coins as well. If you are looking to sell bullion coins, you can expect to get at least the spot price of the precious metal in the coin, but dealers are still going to account for their profit margin.
Most price guides show the retail value of the coin, usually in several grades. This is confusing to the novice trying to figure out how to sell coins, who assumes that is the price someone will pay for the coin. The important point to understand is that the retail price is a base. Every dealer deducts his or her profit margin from the retail figure, just as every other business does. Be happy that coin dealers don’t use the really complicated formulas that are used in other instances.
Don’t make the mistake of trying to sell your coins by putting an ad in the local newspaper. You are asking to get your coins hijacked, even if you meet your potential customers in a bank. It’s unsafe at any speed. Most local coin clubs have swap meets or auctions where you are likely to do better and be in a safe environment. Like most aspects of numismatics, research is important, knowing where you can sell a silver coin isn’t just about having silver coins to sell, it is about knowing the value of the coin, and taking safe, reasonable measures to realize that value.
Many “vest pocket” dealers offer coins for sale in the hobby publications classified sections, just remember, until you can grade for yourself, you need to be careful of the offers. Knowing how to sell silver coins, or any coins, is just as important as knowing how to buy them. And just like when buying, it is important to keep a careful record of what you sell, and for how much.
When selling a collection, sell the coins as a group. Don’t let anyone “cherry pick” the collection by buying the valuable coins and leaving the lower valued pieces behind. Make a list of your coins, showing exactly what you paid for each one. If you cannot show proof you paid a premium for a coin, the IRS will take the difference between the sale price and the face value of the coin as taxable profit. Picture what that does to $20 gold coins you might sell. Copy this paragraph and post it where you can’t miss it.
When selling, take your list and a few sample coins and shop them to several dealers to find the one with the most interest in your collection. Talk to a dealer you trust if you have questions about where you can sell, especially if you have rare old coins, or gold and silver coins. If the collection is large or valuable, you will want to find an appraiser to give you an idea of the value before you try to sell it. Here again, the list comes in handy.
Coin dealers have had a bad rap. The public perception of coin dealers ranks them down close to used-car salesmen. This is an unfair assessment, due mainly to the fact that the public knows next to nothing about coin collecting. Their only contact probably was to try and sell some coins. Or they may have heard of a neighbor’s “bad deal.”
Word of mouth is great advertising for a firm, but it can never catch up with bad mouthing. While there are a few bad apples in the bunch, the majority of coin dealers are like any retailer, hard-working assets to the community. They are great sources of information, depending on their specialty, on where and how to sell gold coins, or where you can sell old coins. As previously mentioned, dealers, like collectors, are specialists, keep this in mind.
A big part of the problem is the misconception that coin dealers somehow differ from all other businesses that pay wholesale prices for the merchandise they sell at retail. Many collectors get furious when they are offered a discounted price for their coins. They display their ignorance of common business practices by this attitude and the result is unwarranted bad press for the dealer.
The solution is to realize that buying and selling coins is, in fact, a business, and it will not survive if there is no profit. You, in turn, have several ways to ensure that you are not being ripped off. It’s a good idea when doing business with a dealer you are unfamiliar with to first make several small purchases or sales.
Questions to ask yourself include, “Was the dealer courteous? Did he know his stock? Was the coin accurately graded? Were you satisfied with the cost?”
If the dealer passes the test you’ve found a good place to do business on a larger scale. This is the same thing you would do when buying anything. What’s different between buying a coin or going into a hardware store and buying a pound of nails? Or going to a grocery store? Coin prices fluctuate. So does the price of grapes or bananas. The grocer buys from the producer at wholesale and sells at retail.
Once you see the coin dealer as a business person, you will have come a long way toward a successful relationship with the dealer.
It will surprise you, but one of the biggest problems that dealers have are collectors trying to rip them off in any of a hundred ways, not limited to the thief who stuffs his pockets with coins when the dealer isn’t looking or is taking care of a legitimate customer. That’s one reason why you see heavy security at coin shows.