buying out people's small collections...pricing and ethics

[JKK]

I've always been willing to buy out collections if they were within reach. Most of it in the past was junk silver and I offered a lump sum, but I'm likely to see situations that call for more exacting grading and pricing.

 

I want to do this ethically and fairly. What I think I should do is grade the coins just as I grade my own--slightly on the conservative side, but not overly so--as if their next step would be to take the batch to a dealer to have the same process done. (As well they might.) Then check the current values off some consistent source--say the PCGS guide--and offer a percentage of that value. Of course, they are free to decline any offer, but if they're dumping a collection they probably don't know very much about coins and would not easily be able to make a savvy counter-proposal. I was thinking about making an offer of 80-85% of current values, which would compensate me for my time and energy figuring all that out.

 

Do you think that's too much? Too little? How would you go about it (for those who are willing to reveal such potentially privileged information)? Do you think this is an ethical method? I don't want to hurt them and I don't want to hurt me.

[James_OldeTowne]

I have a simple formula that seems to work well. I grade the coins normally, then price them at a margin of 20% below (more or less) what I think I can sell them for.

 

For some coins, the margin should be much greater. For example, I do common bulk world coins at more like 80% below what I'd sell them for, since those tend to stick around for a long time unless I dump them. On the other hand, for obvious quick sellers, such as silver bullion, I'll do a margin of only 5% since those coins are gone as fast as I can ship them to SilverTowne.

 

On pocket change, of course, I do a zero-percent margin !

[BillJones]

The prices in the PCGS price guide are WAY too high for many items. One thing you need to remember is that those prices are retail amounts are for coins whose grade has been set by PCGS. Just because you might grade something one way, does not mean that it wll come back in that grade. It could be higher or lower, or it could even get a body bag.

 

When I make offers on collections, I use the Coin Dealer Newletter as a guide. There are some items that are underpriced and some that are overpriced. Overpriced items include stuff like rolls of Indian cents and Buffallo nickels in average circulated. I can't get those prices, and I know dealers who will sell those coins to you at LESS than those prices. Ditto for common date circulated Morgan Dollars. Also some items like circulated set coins (e.g. Indian cents even somewhat better dates) can take a while to sell. You need to figure in the factor that your money might be tied up for a while.

 

Underpriced items include really hot collector coins that lots of people want. These include key dates and early type coins with no problems. Paying premiums for those coins is both wise and ethical.

 

When I'm making offers I take a little off for coins that need to be certified. First this is cost of certification and the postage to and from the grader to consider. Second there is risk factor that I might not get the grade I think the coin deserves.

 

At any rate, don't be shy about figuring in a fair mark-up on the coins when you are making offers. Remember your time and expertise is worth something, and the costs of going to shows is part of your expense too. My cost of goods sold is my greatest expense, but it's far from my only expense.

[Dcoin]

Regarding pieces that are common silver, I like to look at this web page and calculate the exact melt value of the coins. From there pricing may be a little easier to determine.

 

Edit: This topic may be a really good "What you need to know" posting

[MarkFeld]

I was thinking about making an offer of 80-85% of current values, which would compensate me for my time and energy figuring all that out.

Another option would be to charge a nominal appraisal fee (at an hourly rate) and to waive it in the event that they sell the coins to you. That might even make you more objective in your valuations.

[JKK]

This is all, as usual, most helpful. Evidently there is consensus that my basic model of handling it is the way to go from an ethical standpoint; the only area where I need to show more sophistication is in pricing.

 

I'm not sure about charging an appraisal fee because I'm not a registered appraiser in the state. I suppose if I end up doing this very much, I could look into what that takes. But I guess I also have to take into account the risks of body bags, counterfeits and all the other factors that could make a coin worth less than what I offered for it, plus the cost of sending really good ones in for grading.

[MarkFeld]

This is all, as usual, most helpful. Evidently there is consensus that my basic model of handling it is the way to go from an ethical standpoint; the only area where I need to show more sophistication is in pricing.

 

I'm not sure about charging an appraisal fee because I'm not a registered appraiser in the state. I suppose if I end up doing this very much, I could look into what that takes. But I guess I also have to take into account the risks of body bags, counterfeits and all the other factors that could make a coin worth less than what I offered for it, plus the cost of sending really good ones in for grading.

Some items have a particularly large price differential based upon only a one point difference in grade, and that can make it difficult to be ensure that both the seller and buyer are getting a fair deal. One option is to make an agreement with the owner that you will get the coin certified and determine the price to be paid for the item after you have received the grading results. This presumes that you feel the assigned grade is realistic/accurate.

 

Another option is to buy the coin at a fairly conservative, but fair price, and later pay the owner extra funds if the item ends up grading higher (and is then "worth" noticeably more) than you had figured it at. Such options are obviously more complicated than a simple on-the-spot purchase at a specific price, but they offer the opportunity to try to make sure the transaction is fair to both parties.

[Bruceswar]

Mark that post you just made reminds me of certain hypo you just ask.

[MarkFeld]

Mark that post you just made reminds me of certain hypo you just ask.

Bruce, that's probably because most of my hypos are composites of various things I have seen and/or heard about and/or experienced or at least pondered over the years.

[Bruceswar]

Mark that post you just made reminds me of certain hypo you just ask.

Bruce, that's probably because most of my hypos are composites of various things I have seen and/or heard about and/or experienced or at least pondered over the years.

 

This is true. Many of these so called Hypo's happen in real life all the time.