Which is "worse" - when a grading service over-grades or under-grades a coin?

[MarkFeld]

Not so hypothetically, PCGS grades a Flowing Hair Dollar AU50 and it ends up in an NGC MS61 holder.

 

I have not viewed it in person (or if I did, I didn't make note of it), so I have no opinion regarding its "correct" grade. For the sake of this discussion, however, let's pretend that 1) nothing was done to it after it was cracked out of the PCGS holder, before it was submitted to NGC and 2) everyone on the planet would grade the coin AU58 - remember, I said. "let's pretend".

 

Which, if either, was the bigger offense, the under-grading by PCGS or the over-grading by NGC? Please explain why you chose your answer. Thanks.

[James_OldeTowne]

Someone can potentially lose money either way, so overgrading is as bad as undergrading.

 

This all assumes, of course, that one believes in "right" or "wrong" grades (which I don't).

[DonHeath]

I'll be honest and tell you I've been disappointed before by undergrades, but have had the TPG's overgrade my coins on occasion, and the overgrades are the ones that caused me to rethink the worth of the holder. The overgrades (PCGS/NGC/ANACS) caused me to believe:

 

a) The graders weren't really looking at my coins

b) My opinion differed enough from the TPG's that I couldn't trust the holder sight-unseen

c) The system was at best flawed, and no amount of scrutiny could reconcile the range of coins found in a single holder grade

d) There was little or no consistency from one submission to the next

 

I have been told by different graders on different occasions "If a coin is a $50 coin, who cares, give the submitter the grade", and "In a perfect world, this coin is AU, but in today's market, there's no way this coin won't get into an MS holder."

 

I trust the TPG's to give me an opinion, but I don't expect I'll know what the qualities of a coin are by the holder grade.

 

 

[MarkFeld]

I'll be honest and tell you I've been disappointed before by undergrades, but have had the TPG's overgrade my coins on occasion, and the overgrades are the ones that caused me to rethink the worth of the holder. The overgrades (PCGS/NGC/ANACS) caused me to believe:

 

a) The graders weren't really looking at my coins

b) My opinion differed enough from the TPG's that I couldn't trust the holder sight-unseen

c) The system was at best flawed, and no amount of scrutiny could reconcile the range of coins found in a single holder grade

d) There was little or no consistency from one submission to the next

 

I have been told by different graders on different occasions "If a coin is a $50 coin, who cares, give the submitter the grade", and "In a perfect world, this coin is AU, but in today's market, there's no way this coin won't get into an MS holder."

 

I trust the TPG's to give me an opinion, but I don't expect I'll know what the qualities of a coin are by the holder grade.

 

Don, a serious question if I may - couldn't/shouldn't under-grades lead you to the same (a,b,c and d) conclusions that over-grades apparently have?

[DonHeath]

Mark,

 

As a submitter, I expect the TPG's to give my submission careful scrutiny, and to err on the side of caution. When they wiff and miss one of mine high, it rattles my confidence in their product as a buyer.

 

Don

 

[rbrown4]

This scenario brings up a lot of different effects.

 

I believe Don's reply above is a good analogy and I would tend to apply the four items he identifies as concerns to either an overgrading or undergrading occurence. His other points, as well as similar references to "comments" by other graders are worrisome to me overall. Does it really affect me or my coins, yes in some cases I am sure it does. But in the end as James says who is to say there is a right or wrong grade.

 

It goes back to what I believe is the opinion and beliefs of the owner, buyer or seller of the coin. And that of course leads to the honesty, integrity, motives, and professionalism of the individual.

 

Basically both instances are not good. I have experienced both.

 

Rey

[DonHeath]

Let me follow up for a second. If I believe service X is consistently tough on all of my submissions, I trust they must have been with other submitters as well, so my chances are good of buying a quality coin for the grade in one of their holders. If on the other hand they missed one of mine high, I know chances are good they've missed others, and I need to be careful of their holder. Also, it's very difficult to sell one you believe is overgraded. I just crack them and reload.

 

BTW - I realize by posting this, it's likely the TPG's will restore my faith on my next submission. For what it's worth Mark, I'm glad I learned early that my opinion of the coin is the one that counts.

 

[Oldtrader3]

My own previous experience is that PCGS almost always has under graded my coins by approximately one grade. PCGS is now the same as NGC. Historically, NGC has varied from one grade low to two grades high against my standards, on coins that I have looked at. However, most of the coins that I have sent to NGC in the past year have come back right on grade. I won't a buy coin in either holder unless it meets my standards.

 

To answer your question, I think TPG market grading has graded many nice AU58 coins at MS61/62 levels and this has hurt the market. The low-end MS coin market is so skewed now by sliders, that grades between AU55 and MS62 are almost meaningless. You have to see the coin in hand to grade it. This applies to common coins and to fairly scarce coins as well. I think that the TPG's have hurt their grading integrity with these practices. I see many over-graded coins in both service's slabs. The impact to me is having to pay higher prices for decent AU classic coins.

[BankNote1]

Under grading is bad and so is over grading. I have sent back many a slabed coin that didn't look like I thought it should have looked for the grade on the holder. I have also got out my little hammer and freed the coin from its slab to send it in for an upgrade as well!

I know several dealers that have made a fortune from crack-outs. It would be nice to be able to trust the grade on the holder. I must say that I have sent back more PCGS slabs than NGC slabs, though.

I must admit that I have never sold a "high end" coin to a dealer and have never bought a "low end" coin from that same dealer! I have offered coins to dealers and had them thrown back at me and told that I had over graded junk. Then sold the coins to another dealer just to see them in the case of the dealer that said I had junk! Of course, that dealer had some "new high end pieces" to show me. I think they forget that there numbers on the holders.

My San Fran. friend dealer called me last night and I asked him about the Consortium. He is all for it and thinks it is well overdue. If he likes it then I guess I like it. He has several big problems with a certain D.H. and what he has seen done at the beach.

I think the biggest problem in the industry is just plan ole honesty! I don't see any TPG'er or Consortium ever fixing that!!!

[toyonakataro]

I don't know Mark.

I want consistency best, but if I have to chose, I'll say overgrading is worse.

If grading service undergrade a coin, someone will crack out and resubmit the coin until it gets the right grade.

But one the grading company overgrade a coin, it's likely that the coin will stuck in that slab forever..........

[WinstonWare]

I would say undergrading if the coin is “certified.” That is if one can recoup the fair market value of the TPGs grade I would be more offput with an undergraded coin.

 

Overgraded coins have no effect on me as I buy the coin and not the holder anyways

[TomB]

It is worse when a TPG is internally inconsistent.

[MikeInFL]

I'm not sure I like either option, but if forced, I would say overgrading is worse.

 

The rational for this is because the coin, once overgraded, will likely remain in the overgraded slab (i.e. coffin) and priced incorrectly.

 

 

 

[WinstonWare]

Oh man! I missed that PCGS thread on the coin. Now that I have read it, I would like to add to my earlier response: I think the real travesty here is that the coin was rewarded for being worked – dipped in this instance. It’s disappointing…

[ziggy29]

Overgrading by a mile. An undergrading mistake will likely be corrected quickly by a collector or dealer who has a good eye for quality, cracked out and tried again for the grade it deserves.

 

An overgrading mistake is in its overgraded tomb forever.

 

Plus, in your specific hypothetical, "everyone agrees it's a 58". So everyone sees a touch of rub, perhaps manifested as a small luster break on the high point. If everyone agrees it's a 58, if everyone sees a trace of wear, how on earth is it in an MS holder? It's one thing to waver over 55 versus 58 if you know you see wear. It's quite another to see wear and possibly even consider putting an MS label in the holder.

[carson city]

Not if it has a CAC Sticker on it !

[bsshog40]

I would say over-grading also. As Ziggy stated, most people will not remove the coin from it's slab only to endure a loss of what it was. It will more likely be passed as is.

[DC Dawg]

I am not going to be drawn into this hypothetical because of how an argument one way or another can be used to justify the CAC. Since the CAC is a considerable topic of conversation around here, and it is known that Mark is a principal in this venture, I see no point in helping prove a point in the validity of the argument.

 

Sorry Mark, I am beginning to see a pattern forming that suggests this venture is less than altruistic or "for the good of the hobby." That worries me more than whether this "service" is worth doing or not.

 

Scott

[TJ'S Coins]

Without reading anyone's response to the original question, I believe that over

graded is the bigger of the two problems.

 

Rarely will an over graded coin be submitted for a review downward. This skewers the market and the relative value of properly graded coins. A legitimately under graded coin will be resubmitted until the proper grade is attained.

 

An over graded coin may demand a very high premium. An uninformed buyer who solely trusts the plastic, the grade and the hyped sales pitch may be very disappointed when they show the coin to less biased and more objective collectors/dealers/numismatists.

 

On the other hand, there will always be someone to come along who will throw crazy money for the prestige of ownership of such a "valuable" that is expensive rarity.

[Revenant]

I am not going to be drawn into this hypothetical because of how an argument one way or another can be used to justify the CAC. Since the CAC is a considerable topic of conversation around here, and it is known that Mark is a principal in this venture, I see no point in helping prove a point in the validity of the argument.

 

Sorry Mark, I am beginning to see a pattern forming that suggests this venture is less than altruistic or "for the good of the hobby." That worries me more than whether this "service" is worth doing or not.

 

Scott

 

Kinda interesting that only you saw it that way... not good or bad, just interesting. Mark seems to have a real love of hypotheticals though, both before and after CAC came up.

[Mirrored Morgan]

The members here need to read this book, then they would not have to rely on the CAC sticker.

 

[DirtyGoldMan]

Easy. Overgrading when you are buying and undergrading when you are selling. QED

[James_OldeTowne]

I have to keep coming back to what I see as the biggest problem with such a question. It assumes that there exists a "correct grade" for every coin. If one believes in such a proposition, then the only "correct" answer is that any deviation from the "correct" grade is unacceptable.

[TJ'S Coins]

I have to keep coming back to what I see as the biggest problem with such a question. It assumes that there exists a "correct grade" for every coin. If one believes in such a proposition, then the only "correct" answer is that any deviation from the "correct" grade is unacceptable.

 

James, could you expound on your thoughts regarding a "correct" grade for every coin? I believe you are saying that some coins may be assigned different grades based on valid reasoning?

[James_OldeTowne]

I have to keep coming back to what I see as the biggest problem with such a question. It assumes that there exists a "correct grade" for every coin. If one believes in such a proposition, then the only "correct" answer is that any deviation from the "correct" grade is unacceptable.

 

James, could you expound on your thoughts regarding a "correct" grade for every coin? I believe you are saying that some coins may be assigned different grades based on valid reasoning?

Sure! It always comes down to a grade being subjective. It's always an opinion!

 

I may be a collector who can't stand a coin with bagmarks on the primary devices, but feel less strongly about minor rim dings, and you might be a collector who can't stand even the slightest rim ding, but can tolerate minor bagmarks. We would each grade coins differently, according to our own standards.

 

Let's suppose that there are two Morgan dollars, both graded MS-63. Both are nice, basically MS-64 quality, but one has a rim ding and no bagmarks, the other has absolutely no rim dings, but a few scattered bagmarks across Liberty's portrait. Thus, each was knocked a point by the grading service. It's pretty clear that you and I would grade these coins differently from each other, despite having the same grade assigned by the grading service. That is why grading is subjective. Each person should determine for himself what is acceptable for a grade and what isn't. If a coin displays something unacceptable to you for the grade, then in your opinion, it is overgraded.

 

There will be those that try and say that it doesn't mean the third-party grade is "wrong" - that it's just a matter of choosing what you find acceptable, but that's what a grade is! It's an evaluation of a coin's value, and everyone is entitled to what they think plays into a coin's value. I am saddened by the fear that many collectors seem to have in disagreeing with a third-party grade.

 

Thus, when a coin is graded by a third party, that's the third party's opinion. I might think their opinion is too low, while you might think it is too high. It's all subjective, all the time, and that is why I simply do not believe there is any such thing as a "correct" third-party grade. It's almost an oxymoron.

 

By contrast, by industry standards, an ounce of pure gold is an ounce of pure gold, no matter who weighs it, provided scales are properly calibrated. There is a 100% objective way to measure how much a gold nugget weighs, thus there is no room for opinion here. No matter how much you and I could argue, we can't dispute that every properly calibrated scale shows the nugget to weigh exactly one ounce. But grading coins just does not work that way. There isn't some kind of "scale" that "measures" the coin. We only have professional opinions as to the coin's value, which implies the grade.

[BillJones]

Under grading is as bad as over grading in my opinion because understating the level preservation is unfair to the person who submitted the coin. When you go to sell it, the buyer might say, “Yea I agree with you, but it’s in this holder so I can’t pay that much.”

 

There are some areas of the market where under grading is expected the prices are pushed up accordingly. Those who think that they are going to “pick off” a dealer in early American coppers finds out very quickly that they are not going to get a bargain when they here the price quote. Still for most series under grading is a problem for the owners of such coins.

 

It’s my view that the grading services don’t spend enough time providing their services. They claim that there are three graders plus a verifier. If that is true there have certainly been a lot of miss graded coins falling though the cracks. And I’m not talking about miss grades that were due to professional differences of opinion. These were serious differences.

 

My view is that each grader spends maybe 20 to 30 seconds looking at a coin. They have quotas to maintain, and they are also human with human frailties like tied eyes at the end of the day or week. At any rate I’ll wager that most graders to spend the time many collectors and dealers do before they buy a coin for their collections or inventory.

 

Many graders also don't know early coins very well and have not learned the art of taking surfaces into account when they are setting grades. An example of this is an 1801 half dime I own that is pretty close to Mint State. The trouble is the coin was struck when the obverse die was just about finished. It has a big break right down the middle that caused the whole right side of the coin be weakly stuck. PCSG gave this coin an EF-45. When I asked NGC is they would consider upgrading it, they rejected my question out of hand. Yet the piece is totally orginal and shows over 50% of its mint luster.

 

[jesbroken]

According to who you are and whether its the short term or long term--Undergrading absolutely hurts the buyer, but does not greatly affect the hobby in the long term as it can be regraded.

Overgrading also hurts the buyer,equally as undergrading, but absolutley hurts/degrades the hobby in the short and long run and may not be corrected, thus permanently damaging our hobby. The seller is negatively affected by his/her liability to their customer in the long term, while possibly showing positive gains in the short term.

 

[jesbroken]

James,

Would it not be beneficial to our hobby if ANA established a set of new MS guidelines that all parties need to adhere to? Such as: No rim dings/no bag marks for MS64 or 3 bag marks and 1 rim ding for MS64(I'm only talking hypothetically not in actuallity) The PQ stuff would be in addition to the grade(such as, prooflike, dmpl, etc). But a set of rules that anyone could go by to get the basic grade down and exactly what hinders that grade. I feel it would enhance our hobby's creditability greatly. JMO.

[MarkFeld]

I am not going to be drawn into this hypothetical because of how an argument one way or another can be used to justify the CAC. Since the CAC is a considerable topic of conversation around here, and it is known that Mark is a principal in this venture, I see no point in helping prove a point in the validity of the argument.

 

Sorry Mark, I am beginning to see a pattern forming that suggests this venture is less than altruistic or "for the good of the hobby." That worries me more than whether this "service" is worth doing or not.

 

Scott

Scott, you have apparently jumped to an entirely incorrect (and in my mind, unfair) conclusion regarding my motives for starting this thread. My thinking had/has nothing to do with CAC, and I'm insulted that you have accused me of such. In fact, in reply to a question in another thread, I believe I responded that in the case of a grade/value disparity as large as for the Bust Dollar in question, a CAC sticker wouldn't have prevented the coin from being cracked out, etc.

 

I started this thread, primarily because most of the participants in the recent discussion about the Bust Dollar focused on the crime of over-grading coins, while there was virtually no talk about the problems associated with under-grading. For example, what about the seller of the AU50 coin? What if the coin deserved an AU58 and he received far less money for it than he would have, had the coin been accurately graded?

 

Many of the problems with over-graded coins are well publicized. But sales of under-graded coins often fly under the radar and owners of such pieces who have sold them often have no clue as to how much money they left on the table. In a sense, under-grading can be just as bad as over-grading.

 

 

[TJ'S Coins]

I have to keep coming back to what I see as the biggest problem with such a question. It assumes that there exists a "correct grade" for every coin. If one believes in such a proposition, then the only "correct" answer is that any deviation from the "correct" grade is unacceptable.

 

James, could you expound on your thoughts regarding a "correct" grade for every coin? I believe you are saying that some coins may be assigned different grades based on valid reasoning?

Sure! It always comes down to a grade being subjective. It's always an opinion!

 

I may be a collector who can't stand a coin with bagmarks on the primary devices, but feel less strongly about minor rim dings, and you might be a collector who can't stand even the slightest rim ding, but can tolerate minor bagmarks. We would each grade coins differently, according to our own standards.

 

Let's suppose that there are two Morgan dollars, both graded MS-63. Both are nice, basically MS-64 quality, but one has a rim ding and no bagmarks, the other has absolutely no rim dings, but a few scattered bagmarks across Liberty's portrait. Thus, each was knocked a point by the grading service. It's pretty clear that you and I would grade these coins differently from each other, despite having the same grade assigned by the grading service. That is why grading is subjective. Each person should determine for himself what is acceptable for a grade and what isn't. If a coin displays something unacceptable to you for the grade, then in your opinion, it is overgraded.

 

There will be those that try and say that it doesn't mean the third-party grade is "wrong" - that it's just a matter of choosing what you find acceptable, but that's what a grade is! It's an evaluation of a coin's value, and everyone is entitled to what they think plays into a coin's value. I am saddened by the fear that many collectors seem to have in disagreeing with a third-party grade.

 

Thus, when a coin is graded by a third party, that's the third party's opinion. I might think their opinion is too low, while you might think it is too high. It's all subjective, all the time, and that is why I simply do not believe there is any such thing as a "correct" third-party grade. It's almost an oxymoron.

 

By contrast, by industry standards, an ounce of pure gold is an ounce of pure gold, no matter who weighs it, provided scales are properly calibrated. There is a 100% objective way to measure how much a gold nugget weighs, thus there is no room for opinion here. No matter how much you and I could argue, we can't dispute that every properly calibrated scale shows the nugget to weigh exactly one ounce. But grading coins just does not work that way. There isn't some kind of "scale" that "measures" the coin. We only have professional opinions as to the coin's value, which implies the grade.

 

Thank you, James, for your well expressed reply. I agree with your premise and am glad that you clarified it further!