“Hotel Buyer” Scams Bring Federal, State, and Local Criminal Charges
By Patrick A. Heller
Commentary on Precious Metals Prepared for CoinWeek.com
On Tuesday morning, CBS News reported on the cessation of operations by THR Associates, which ran perhaps the largest “hotel buyer” operation in the US over the past few years. To view the story, Click Here.
In an earlier report in May about this company, CBS investigators in six cities experienced multiple occasions where their secret shoppers were lied to about the quality of coins and jewelry that they offered for sale. Even in the instances where the buyers correctly identified the merchandise, there were multiple instances where the buyers then offered less than 25% of the price at which the items could be liquidated on the wholesale markets.
Since then, THR Associates has suspended operations. So many of the checks written to sellers have bounced that the total exceeds a million dollars. There are federal, state, and local investigations and prosecutions in process, mostly to do with lying to customers about the quality of the merchandise they brought in for an offer to purchase.
At the ANA show in Philadelphia last week, I learned that another major “hotel buyer” company had discontinued operations over the past two months. The reason given was that the volume of merchandise being bought was not sufficiently profitable, even at the low rates the company generally paid, to cover the advertising and travel costs to set up hotel buying events.
The appearance of this story once again brings to the forefront the question of what potential sellers should do to seek the maximum prices for their coins, paper money, and jewelry they are considering selling. I wrote about this subject at length a couple years ago at . In this article, I offer sixteen tips on how to encourage buyers to offer their best prices and warn about possible scams to avoid.
The CBS story offered three tips on how sellers can protect themselves. The first was for people to realize what they have. Not all “gold” jewelry is solid gold. Also, not all gold is solid pure 24 karat. Some jewelry is gold-filled, which is an extremely low purity kind of gold, usually less than 5%, or gold-plated, which has almost no gold. In the US, most jewelry sold is either 10 karat or 14 karat purity, indicating 10/24ths or 14/24ths of the weight is solid gold. Jewelry marked 8 karat tends to come from Germany; if marked 9 karat it will tend to be from Great Britain. Jewelry marked 18 karat is worth more than less pure pieces. Much of the jewelry that comes from the Middle East or Far East is very high purity, between 21 karat to 24 karat.
The CBS story recommends first going to a jeweler who does not purchase jewelry to seek help identifying which jewelry pieces are solid precious metals and the relative purity of those that are. In the current market, there are so many jewelers who purchase gold jewelry that it probably still makes sense to visit at least two companies just to find out what you have. Once you have a rough idea of the purity of the items you own, then you should visit at least two places for purchase offers. I recommend visiting at least three places.
When my company has commissioned secret shopper teams to compare prices offered by local competitors, we have found a wide range of prices offered by different buyers. By seeking multiple offers, you are likely to find a strong buyer and realize a higher price for your goods.
In my experience, coin dealers frequently offer stronger buying prices than jewelers or pawnbrokers. I think the reason this happens is that coin dealers normally work on tighter profit margins than businesses in other industries. Therefore, coin dealers consider purchasing gold jewelry to be a high-profit margin niche, even if they offer higher prices than competitors. On the other hand, jewelers and pawnbrokers would have to work on tighter than normal profit margins to be competitive buyers and not all of them are willing to do so.
In November 2009, Consumer Reports wrote an article on selling jewelry where it suggested that a fair offer was one that represented at least 50% of the intrinsic scrap metal value. When Sears and Kay Jewelers were purchasing jewelry from the public, they tended to offer 61-62% of gold value. In my mind, a seller should seek to realize at least 70-80% of the value of the gold content.
When selling coins, it is possible to find a lot of information about metal value of gold or silver pieces. For instance, you can go to http://www.coininfo.com/calculators/ to get an idea of the current “melt” value of coins or gold jewelry that you might have. There are other sources that provide similar information.
If readers have other consumer protection suggestions other than those described in the CBS News report or in my CoinUpdate.com column, please add them.
Patrick A. Heller was honored with the American Numismatic Association 2012 Harry J. Forman Numismatic Dealer of the Year Award. He owns Liberty Coin Service in Lansing, Michigan and writes Liberty’s Outlook, a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at http://www.libertycoinservice.com. Other commentaries are available at Numismaster (under “News & Articles) . His award-winning radio show “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 AM Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio and text archives posted at http://www.1320wils.com.