Who backs price quotes with cash?

March 1, 2018

Pat Heller

The value of rare coins, paper money and precious metals is a significant consideration in buy and sell decisions by collectors, investors and dealers. So, an important part of the decision process involves the question of “What is it worth?”

The technical answer of what something is worth is what someone else is willing to pay for it. So, how do you know that what someone else will pay is the highest price for it?

Unfortunately, there is no magic answer to this question. There are all sorts of printed and online price reference guides, including some that enable you to lock in prices. However, even if you can pin down the raw price, there are other costs that impact what something is worth.

For instance, if you are selling a one-ounce gold coin and lock in the price at which you are selling it, you still have the time and costs of packaging it, shipping it and waiting for payment. This applies whether you are delivering it yourself or sending it by a carrier. You also have more than a 0 percent probability of something going awry about delivery or getting paid. Packages get damaged, lost, or stolen; people can have traffic accidents when driving somewhere; buyers sometimes pay with an instrument that cannot clear or never pay at all.

If you are trying to sell a numismatic coin or piece of paper money, often the transaction depends on the other party approving it for quality. So, there is a risk that no exchange will occur.

To give you one story from several decades ago, my company was contacted by a customer looking to sell a quantity of $20 double eagles that we had originally sold to him. We made an offer of about a quarter million dollars where we would pay a specific dollar figure by bank wire the date after the packages arrived in the mail. We did not hear again from this customer until about six weeks later.

He had talked with a national competitor who claimed they would pay him six dollars per coin more than our offer, whereupon he shipped the coins to that company. But, the company did not send him an immediate payment. In fact, six weeks later he was still waiting to receive any funds. When he called the buyer to ask for payment, he was told that the terms were that he would not be paid until the coins were sold and that the buying price would not be established until that time. He asked if we could intervene with the other dealer on his behalf (we politely declined). That company is still in business, so I assume that they eventually paid for the coins. However, as that seller found out to his dismay, the coins would have been worth more to him to have sold them to my company for a prompt good-funds payment.

With any printed or online price guide, remember that they are only guides. With any products offered for sale at listed prices, it may sometimes be possible to purchase them for somewhat less. Also, any posted buy prices usually include a requirement that the items meet a particular quality standard. Even though a buyer and seller may agree on a technical grade of an item, a potential buyer may note some negative feature about the item to where he or she will not buy it at all, or at least not at the price that was discussed.

The foregoing discussion brings up an important point for numismatists. It makes a lot of sense to periodically test your collecting skills by attempting to sell at least one item in your holdings. You may find the transaction easy and satisfying in terms of what you thought the piece would be worth. But should you find out that what you are trying to sell is worth much less than you thought, you need to examine your purchasing and preservation skills. Should this latter experience happen to you, it is better to find out sooner rather than later.