Rare Coin Auctions, EBay, and the Games People Play, Part Two
By Vic Bozarth – Bozarth Numismatics
Rare Coin Auctions allow millions of individuals the ability to buy quality coins from the comfort and anonymity of their homes. There are literally millions of coins auctioned each year. While the coins being auctioned are numerous the ‘bargains’ are few and far between. The free market forces for auctions mean that you as a buyer are competing against a possibly huge, albeit unknown, number of competitors. In other words, there are lots of people willing to pay just as much or more than you. Remember, there are no BARGAINS.
Auction prices realized are often reported in price guides and rare coin market analysis as evidence of how strong the current rare coin market is at that point in time. I have always found it interesting that the total number of coins sold in any given auction is NEVER reported. In other words, have you ever seen an article or news about a specific auction that reported how many of the total coins auctioned actually sold at or above their reserve bids? Auction houses might report ‘sell through’ percentages, but these numbers don’t take into account coins sold ‘back of bid’ because the consignor was convinced to not ‘reserve’ a coin. Coin auction houses don’t publish these numbers for good reason.
Great coins bring big money, but AVERAGE and LOW END coins DO NOT. In fact, the auction prices realized have created a two tier market. CAC coins and potential upgrade coins sell for over bid, but average or low end coins bring less than bid-IF THEY SELL AT ALL. The Coin Dealer Newsletter ‘Greysheet’ reports bids for sight-seen coin bids and transactions. Unfortunately the average and low end coins continue to drag the market down because they don’t even bring wholesale bid. Thousands of coins are sold each month at less than the perceived market because they aren’t SPECIAL. Thousands of coins don’t sell at all because the price bidders are willing to pay don’t meet the reserve bids at auction.
Auction houses often encourage consignors to put their coins up for auction at ‘no reserve’. Indeed, this is good for the auction house because all the lots will sell-FOR SOMETHING-if not market. In other words, they still get their percentage. The dirty little secret is the BUYBACK fee most major auction houses charge if a coin does not sell at or above the reserve bid. Buyback fees, which are most often 2% or more, are negotiated when a coin or collection is consigned. Average or low end coins are often reserved at 60 to 75% of their Greysheet bids because the consignor doesn’t want to give their coins away and they don’t want to pay the buyback fee. In addition, many auction houses penalize or reward a consignor depending on what total percentage of consigned coins actually sell. For example, if you sell 100% of your coins, you get more. If you sell 50% of your coins, you get less.
The argument the auction houses use when negotiating with a consignor is that ON AVERAGE the coins consigned will bring over GREYSHEET prices. Well gee, that is great except for the fact that the average coins have brought well back of the perceived wholesale price levels. Once again, these average coins are the majority of coins that are auctioned. If the majority of coins that are auctioned bring less than wholesale levels, why would anyone consign coins for auction? Why indeed?
Buying nice coins involves lots of work in terms of time, advertising, and/or travel expense. Because most people don’t have the time to search for coins, auctions are very successful. An individual can sit in front of their computer and look at thousands of coins being auctioned each and every week. The large auction houses sell thousands of coins every month. Yes, that is great in terms of selection and convenience. BUT, because it is convenient everybody can bid on what YOU are looking for. What a deal! Remember, there are no bargains.
Because PCGS and NGC coins have specific unique serial numbers for each coin, a coin that has sold at auction can easily be tracked. The fact that coins can be tracked by ‘unique’ number means you can research online whether a coin has appeared at auction in roughly the last fifteen years. The ability to track coins in this way, has become a great tool for determining current value of a coin you are trying to either buy or sell. Yes, you can also see what other coins of that date and grade have sold for. Frankly, a coin that has appeared at auction in the last several years is of little or no interest to me as a dealer. Why, you might ask? Frankly the coin is ‘queered’ to the market. A coin that has already been exposed, viewed by thousands of potential buyers, and sold on the open market IS NOT FRESH.
There are lots of problems with using auction prices realized to determine the value of a coin. For example, if a particular coin has been in an auction in the last ten years, why would you pay more for it than what it brought at auction, UNLESS….either market has changed or the coin just didn’t get the exposure it deserved? The overall quality of the coin is still the biggest factor in what the coin will bring at auction, but with the internet thousands of coins are sold from ‘photos or images’ which just can’t duplicate the actual physical viewing and grading of a coin.
Am I suggesting that you as a coin enthusiast not buy coins from auctions? ABSOLUTELY NOT! What I am suggesting is that the numbers only tell part of the story. Buying coins from auctions is not only very convenient, but the selection is huge. Sometimes a particular coin is only available via auction. What I am suggesting is that THERE ARE NO BARGAINS. You as a coin buyer must determine whether or not auctions work for you. What many coin buyers don’t realize is what it costs in terms of time and expense to buy a nice coin. What is your time worth? What does it cost you to attend a show in terms of time and travel expense? And, lastly will the quality of the coin you bid on match the photo you based your bid on?
Bozarth Numismatics Inc. is a full service rare coin company. We buy and sell thousands of ‘hand picked’ PCGS, NGC, CAC graded coins each month. We attend roughly 40 coin shows a year in search of rare coins for our customers and for our extensive inventory. We put in the ‘footwork’ so you don’t have to! You can view our inventory on Bozarthcoins.com or in our EBay store. Best Regards, Vic and Sherri Bozarth.