by Jeff Garrett from the NGC Weekly Market Report ........
Jeff Garrett shares his knowledge and expertise regarding bidding at rare coin auctions such as the upcoming FUN Heritage Auction. If you've never attended a rare coin auction or you need a refresher on how to prepare, read on for his excellent advice.
As I write this article, most rare coin professionals and many serious collectors are preparing for the upcoming Florida United Numismatists (FUN) show in Orlando, Florida. The show is highly anticipated, and is considered a bellwether event in the rare coin market. It is also one of the best attended shows in the country, with over 10,000 collectors expected to show up. The FUN organization runs a great show and does a wonderful job. Florida is considered by most to have one of the best concentrations of collectors in the country. The show also draws thousands of collectors from around the United States who are excited to soak up some sunshine in January.
One of the biggest draws each year to the FUN show is the huge auction conducted by Heritage. There will be thousands of rare coins, currency, tokens and medals sold over the course of the week. Platinum Night on January 10th will see several hundred coins sold with the average being over $10,000 per lot. The FUN sale will give collectors of about any given series the chance to improve their collections. Dealers will be competing as well to purchase coins for stock or to fill want lists for customers of their own. For anyone who has not participated in a major rare coin auction, the whole process can be a bit intimidating.
For someone new to the hobby, walking into the lot viewing room can be a bit scary. The room is huge and there are guards everywhere making sure the room is secure. Heritage does a great job, but new collectors might not understand how the process of lot viewing works. The first order of business is to register as a buyer in the sale. You will need to provide some information: name, address, email, and how you are going to pay for your won lots. If you are interested in credit, which many dealers and some collectors take advantage of, you will need several references. Credit is best taken care of well before the sale, as the staff is very busy at lot viewing and might not have time to check references in time for you to place bids. After registration, you will receive a bidder number – usually a large number printed on a piece of paper. This will be your tool for bidding. Contrary to what you see in the movies, auctioneers much prefer bidders to raise their bidder cards in the air and not try to figure out if your raise of an eyebrow means a bid.
Floor bidding is important, but the internet has literally changed the landscape of coin auctions. The room might be mostly populated by dealers, but collectors around the country are able to compete from the comfort of their home or office. For years, dealers dominated the rare coin auctions, and probably purchased over 75% of the coins sold. This has changed dramatically in recent years. I now estimate that collectors purchase around 75% of the coins that cross the auction block. Before you enter this exciting competition, however, you need to examine the lots.
After you receive your bidder number, you can then ask to examine the coins being offered for sale. This is an incredibly educational opportunity for collectors. You have the chance to hold and examine millions of dollars worth of rare coins in one room. You can study the individual coins that interest you without pressure or rushing. This is not always true on the bourse floor. You can also study coins closely to get a better understanding of how rare coin grading works. You may have always wanted to purchase a nice High Relief Double Eagle, but could not decide which grade to buy. Now you can do side by side comparison of an MS 61, MS 62, MS 63, MS 64 and probably several even better. That would be impossible anywhere else.
Auctions are also a great place to be able to compare coins of the same grade, and then examine how the marketplace values them when they cross the auction block. This will give you a better understanding of how toning, strike and other factors affect the final price of coins that have been graded the same. This can be very enlightening, but somewhat confusing. You might see a coin sell for double or triple that of a similar grade coin. Remember there are professionals trying to buy coins that they think could grade higher, and even those guys get carried away sometimes!
After you have examined the lots, it will now be time to figure out how much to bid for the coins that are of interest. This is extremely important to do in advance. As mentioned above, it’s easy to get caught up in auction fever during a sale. That one last bidding increment can be painful. With most auctions now charging a 17.5% buyers charge, only an Einstein can do the math in his or her head as the sale is going off. After you have identified the lots of interest, now is the time to do some basic research. Try to figure out what similar grade coins have sold for at auction in recent months or years. Auction prices realized are now one of the most important research tools for dealers and serious collectors. Come up with a price you are willing to pay, and then do the math to account for the buyer's fee. I would recommend targeting several lots to bid on. Otherwise, you will become frustrated when you are unsuccessful, and bid too much just to get in on the action. If you do not establish firm bidding limits before the sale, you run the risk of letting your emotions take over. I know this is fact because I have been guilty of the offense on many occasions!
Another idea that might helpful is to use the services of a seasoned professional to assist you in the bidding process. For a fee of only about 5%, many dealers will examine lots, help with pricing, and actually execute your bids. The small fee could save you lots of money by avoiding the mistakes inexperienced collectors sometimes make.
Many professional and seasoned collectors now place their bids on the internet well in advance. Sitting in an auction room for hours can be a lot of work and requires tons of patience. A recent Baltimore auction of Colonial coins ran well past 3 am. Years ago, most dealers would never have given an auction house the limit of what they would pay for a coin. They would have been concerned about the auction house making sure they paid their limit or close to it. That is no longer a concern for most buyers. The auction houses long ago figured out that running an honest and fully transparent sale was in their best interests. I bid on coins and currency on the internet quite often and I’m usually successful at levels well below my limits.
After the sale has concluded, you will then need to visit lot pick-up the next day to claim your coins. Make sure to bring your bidding information and double check the invoices. Auctions can be hectic, and mistakes do happen. As noted above, if you have been approved, you will be able to write a check or sign for your lots. Again, do this in advance to speed up the process and avoid embarrassment. Years ago, many auction houses just gave bidders the nod when it came to credit. Now, it is much more like dealing with a bank. A typical sale will see tens of millions of dollars trading hands, and the auction houses are much more careful.
Good luck in the next sale, and enjoy this incredible, educational opportunity. Maybe someday, you will be sitting in the auction room, watching your collection sell!