How Liquid Is Your Collection?

By Charles Morgan and Hubert Walker ……..

Off the top of your head, can you say how much your collection is worth?

Do you have a game plan for selling in an emergency?

How liquid is your collection?

Your answers to any of these questions say a lot about you as a collector. How you buy. What you buy. Maybe even why you buy. But more specifically, they let you know how prepared you are in the event that you have to sell part or all of your collection. And eventually, even though it’s nothing the average person enjoys thinking about, it’s vital information to anyone who might one day inherit your coins and be thrust into the position of deciding what to do with them.

With the end of one year and the start of another, we felt it might be timely to bring up the topic, one that many publications and professionals can help you with but that still doesn’t get the attention it deserves.

So while this list is by no means conclusive, we’ve come up with the following pro tips to help you not only plan for the day when you decide to sell your coins, but also to help you buy with intent so that you and your heirs get a fair shake.

Tip #1: Have a consistent collecting strategy

“Measure twice, cut once“.

Good advice, no? In order to get the most bang for your buck, it helps to plan as you build your collection. And deciding what type of collection you want to put together is a great start. It then follows that you should develop a consistent method of choosing and buying coins. Less-experienced collectors tend to be the most aggressive buyers. They approach the hobby as if they are racing to accumulate as many coins as they can as quickly as possible (“Accumulate” being the key word, implying chance and a lack of direction). Many of these collectors spend their entire coin budget on smaller, lower-quality pieces, only to grow bored and sell their coins back to dealers a couple of years later, often at a loss.

This probably sounds all-too-familiar.

It’s okay, though. The earnest collector learns from such mistakes and, if they’re still interested in the hobby, returns a wiser and better participant. And as a collector gains more experience, the more nuanced his or her tastes become. Let’s say you’re looking for a 1950 proof set. Whereas a new collector might buy the first one that comes along (within their budget), a savvy, more-experienced buyer might look at details such as surface preservation, toning, and the possibility of cameos. Both collectors can score a good deal on the set, but for the beginner a truly great 1950 set is more a matter of luck than of skilled and determined searching. In the long run, it’s obvious who comes out on top.

Personally, we have two general criteria when we look for coins to add to our sets :

1) Is a particular coin up to our standards? And,

2) Would the dealer I offer this coin to later want to buy it for a price close to what I’m paying for it now?

If you can answer “yes” to both questions, then you’ve probably found yourself a great coin at a fair price. If you’re not sure about one or both of these points for any given purchase, then hold off until you can do more research into the matter*.

Tip #2: It helps to know which dealers specialize in the types of coins you collect

Don’t assume that every dealer wants to buy your coins. A coin dealer unfamiliar with, say, high-end Franklin proofs isn’t going to offer you the same kind of money as a specialist dealer. The bottom line is that there are dealers and an entire specialist community out there for every coin series. If you’re willing to reach out to and become involved in your series’ collecting communities, then you will have laid the most important groundwork for making your collection liquid. Based on our experience, your fellow collectors are more than generous and eager to share. You’ll soon learn when, how, and to whom you should sell your coins.

Charles: Consider what happened to me, when I tried to sell a conditionally-rare 1972 Type 2 Eisenhower dollar, worth $1750^[1]:

PCGS MS-65 1972 Type 2 Eisenhower Dollar

Offer 1: Ike Series Specialist Dealer: $1200-1300 (sight-seen, in-hand for solid coin)

Offer 2: Ike Series Top-Tier Collector: $1000

Offer 3: Nationally-Known Coin Dealer: $600 (“Our margins are very tight on modern coins”)

Offer 4: Nationally-Known Coin Dealer Two: NO OFFER (“We could offer it on consignment“)

Offer 5: Local Coin Dealer: NO OFFER (plus astonishment at the listed price in the price guide)

Offer 6: Local Coin Dealer Two: NO OFFER (“Red Book price of $60 at MS-63 is too high“)

Funny story…

My colleague Troy Weaver and I bought this high-end key date Eisenhower dollar for $903. We thought that the coin was a point or two overgraded, and in a bit of collector’s activism we decided to take it off the market and get it recertified. The plan was to send it back to PCGS for a guarantee submission, thus recouping our costs. It was offered for sale by Teletrade, whose flat and lifeless photography (it turns out), did the piece no great service.

When it finally arrived, I realized that the coin was, in fact, accurately graded, and that the flaws we saw online (abrasion at 11 o’clock on the obverse and geometric toning all over the truncation of Ike’s neck) weren’t so detrimental in hand. What’s more, the coin also happened to be a scarce sub-variety, giving it a little more “value” to the right buyer. We just have to find them.

First, I reached out to a dealer who specializes in the series. He routinely offers high-end coins of this type – which his clientele expects – and he’s not only sold this key date and grade before, but he’s also sold what is perhaps the finest known example one grade up (which sold for five figures a few years ago, by the way). He was definitely interested in the coin and stated a price of $1200-1300 if he can verify in hand that it’s solid for the grade. Taking this offer will net $300 to $400 over the purchase price. I have a good relationship with this dealer, and the price he offered me is fair and professional.

The second person I contacted is a fellow collector. This collector specializes in the series and buys and sells high-end coins to other collectors. He believes that I bought the coin at a fair price and that the coin is a good long-term investment at that grade. He was willing to pay me $1,000 for the coin – which he would either keep (it’s a variety that he doesn’t currently have at that grade) or sell to someone else at a profit. This collector and I have a great rapport. Considering all of the deals we’ve given each other over the years, this is a fair and equitable price as well. Net profit: $100.

Going outside of the Ike community, I decided on two nationally-known coin dealers. The first company offered $600, which is $300 below our winning bid. They said that their margins were tight on modern coins, and that recent auctions indicate that the market for this coin has softened. Their offer was the “best that they could do”. I asked them if they could get me a second 1972 Type 2 Ike dollar in PCGS MS-65 and they said that they currently didn’t have one in their inventory, but if I wanted to put it on a want list that they’d get back to me if one was available.

The fourth dealer is also nationally recognized and sells NGC- and PCGS-certified coins on the internet. In the past, I’ve bought two high-grade Eisenhower dollars from them for about a thousand bucks a piece. When I offered the coin to them, they told me that they were not interested in buying it at this time but would take it as a consignment and try to sell it for me. When I explained that I had purchased high-end coins from this series from them in the past, they looked at my file and told me that those coins were also consignments. It’s possible that I could sell our coin through them and get a fair price, but I have no way of knowing what to expect beforehand, and it’s clear that the company didn’t want to invest any of its own capital to take the coin off my hands.

The fifth and sixth dealers are local coin shops. These places are actually “cash-for-gold” type businesses that have an inventory of coins for show but don’t actually move very many numismatically-valuable coins. I chose these shops so you could see the kind of place your family might first turn to if you were no longer with them and if they had no clear instructions on how to proceed.

The first of these two shops looked the coin up on CoinFacts and saw the price listed as $1,750. He was shocked that an Eisenhower dollar was worth that kind of money and asked me if any of the Ike dollars he had in his mint sets were that valuable. I told him they probably weren’t, that this is not only an uncommon type coin for 1972, but that it was also conditionally-rare, with fewer than 50 examples graded Gem. He told me I’d be better off trying to sell it online and then told me he wasn’t interested in it because he didn’t know how he would be able to move it.

That’s still further than I got with the second small-shop dealer. He looked at the coin for about thirty seconds before flipping open the Red Book, which has the series top out at MS-63, valued at $60.

The bottom line is, unless you know who actually wants your coin, you might end up with much less than you paid for it when it’s time to sell.

Tip #3: Before you buy a coin, ask the dealer if they would be willing to buy it back at a later date, and if so, for how much?

Pragmatically, you can say there are two types of collectible coins: coins dealers have to buy and coins dealers want to buy. The first category is made up of all of the meat-and-potatoes coins that dealers sell at tight margins but still ring the cash register on a daily basis. The second category is made up of the special coins that stand out from the rest. If you’re the kind of buyer that seeks out typical-quality pieces, then expect typical retail prices when you sell them. The dealer has to make money, after all, and you aren’t offering them anything they don’t see day-in and day-out. If you collect standout coins, however, the tables turn in your favor. As long as you buy at the right price, turning the coin around should net you a bigger return.

When we’re considering a big purchase, we like to feel out the dealer. Ask the question “Hey, if I change my mind in a year or two, how much do you think you would offer me for it?” So long as the two of you have developed a good relationship and the dealer is honest, his confidence in the piece can be measured by his willingness to buy it back from you down the road. If the dealer doesn’t really want to answer the question or hedges that he might not be interested in the piece, then you know that you might have a difficult time getting your money back later. Knowing how liquid your investment is BEFORE you make the purchase is always good.

Tip #4: Establish your collection’s actual value

A coin is worth what you can get for it, not what a price guide says it’s worth. One of the hardest lessons for a collector to learn is when to ignore price guides. Price guides serve a valuable function so long as you know how to read between the lines, but using them as if they were the gospel truth is a bad way to go. Take, for instance, a brilliantly-colored, 1961-D Washington quarter in Mint State (let’s say MS-66). The Red Book lists the coin at MS-65 for $15^[2]. Numismedia lists the coin at $162.50^[3] and PCGS CoinFacts has the coin at $250^[4]. A Washington quarter nut will tell you how unusual it is to find nice color on early ‘60s silver quarters – so much so that the right piece could sell for hundreds of dollars more than even the highest listed figure of $250. On the other end of the spectrum, many issues aren’t worth anywhere near what the price guides list. Many classic commemoratives, mid-level Mint State, common-date gold coins (specifically the Liberty series and some Saint Gaudens-type double eagles), and a whole host of other conditionally-rare moderns.

The key is to know what you’re getting into before you buy a coin. This helps you not only drive the price but also have realistic expectations of what you’ll get for it when it’s time to let it go. Coins are such individualistic commodities that it’s tough to establish a “one-size-fits-all” rule as to what constitutes the actual value of the piece. A common-date coin of exceptional quality and uncommonly nice eye appeal is almost always going to command a premium over the rest of that year’s issue. Likewise, a drab-looking coin from a desirable year is not always going to bring in as much as you might expect.

If you win a coin at an auction, don’t forget that you actually offered more for the coin than everyone else. Whatever the amount you pay turns out to be, it is above what everybody else thought the coin was worth. You might be right, and pay a good price for it, but if you‘re not careful you could very well pay too much. The better you know a series, the more likely your cost of acquisition is in line with the coin’s retail value.

The same can be said about coins you buy from dealers. Most collectors aren’t aware of how long material has been in a dealer’s inventory – and some dealers won’t even offer their premium pieces when they feel the market is too soft. Hot markets tend to bring out the best coins, which can sell for moon money. In cold markets, these pieces tend to go into hiding. Also, if dealers already have plenty of stock of a certain date or type of coin, they aren’t going to waste their money on another piece. Think about this when you’re buying coins and it will save you a lot of grief later.

Tip #5: Leave instructions for your family

We‘ll all die one day. Before that day comes, it’s absolutely critical to leave thorough, written instructions so that your family or heirs will know the exact value, condition, and importance of every piece in your collection and what to do with them. A super rare, late-1960’s Full Step Jefferson nickel looks like pocket change to most non-collectors, and you can’t expect just any dealer to hand over buckets of cash for what is a highly-coveted and valuable coin to a small but zealous group of collectors.

In the Ike dollar anecdote I told earlier, the most accessible dealers for a non-collecting family member are the ones that offered me the least money. Now, if they live in or near a large city or major metropolitan area, the situation is a little better. But it’s still your responsibility to develop a plan ahead of time, so that your spouse or non-collecting heirs will know everything they need to know in order to liquidate your collection at a fair and reasonable return. To set this plan into motion, consider the following five steps:

1. Choose a person you trust to go over things with.

2. Make a list of contacts for specific parts of your collection (see tip #2).

3. Protect your collection and heirs by speaking to an Estate Planner, and set up what is called a succession plan.

4. Be forthright about the value of your coins. Provide as much information as you can about the price you paid and the coins’ approximate value. You may find it useful to keep some kind of spreadsheet of your acquisitions as you buy them. Click here for help on how to get started.

5. Make sure you communicate clearly where all of the coins in your collection are stored (i.e. branch deposit boxes, safes, etc.), and make sure your inheritors can gain access.

We know we’re going out on a limb here, but most of us collect coins because it‘s fun. Yet most of us do keep an eye on what our coins are worth and what they‘re going for in the market. So it doesn’t hurt to protect yourself and your family by planning ahead, having a good grasp of what you own and what it’s worth, and refining your collecting goals so that you have fewer problems getting out of it what you put in. We hope that these tips help you do just that.

*But we get it. Sometimes it’s fun to splurge. These aren’t hard and fast rules, nor would we ever want everyone think like an investor. Far from it. It’s your collection. Go have fun! You only have to answer to you. And maybe your significant other…

FLIP OF A COIN

We Totally Understand: When the Secret Service finally raided Harvey Kritzke’s personal mint, they not only found industrial-strength drills, presses and lathes, but also numerous and expensive books on chemistry, astronomy, mathematics, electrical engineering, and philosophy. It was the Great Depression, and the retired machinist had turned to counterfeiting to feed his bibliomania!^[5]

One Way to Look at It… : Sir Thomas More’s eponymous Utopians (1516) don’t believe in money, but understand that sometimes its use is unavoidable. So they keep it around, but in a surprising way: Gold, silver, and other precious metals, not being as useful (and therefore not as valuable) as other metals, are reserved for their chamber pots and the chains and fetters of criminals. Only little kids care about the shiny stuff^[6].

Or It Would, If They Still Used Paper Bags: Most people think of “paper money” as being made of paper. It’s also fairly common knowledge that American bills are actually made out of denim for the sake of durability. It’s denim that gives a dollar that crisp “snap” when you pull it tight, and, of course, that smell. And everyone’s probably aware of all the recent design changes and security improvements. But some countries (like Australia) are one step ahead of us and make notes out of plastic polymer. Brings new meaning to the phrase “Paper, or plastic?”.