| Author |
 Replies: 15 / Views: 1,800 |
|
|
Pillar of the Community
United States
1767 Posts |
What is the Difference Between a Coin's Price and its Value? from Susan Headley Newsletter Price and Value are Not the Same ThingThere is a big difference between the price of a coin, and the value of a coin. Although you often see these words used interchangeably, it is important that you understand the different concepts represented by each. The "Price" of a Coin is How Much it Would Cost You to Buy it From a DealerThis is pretty straightforward. The " price" of a coin is merely the amount that it would sell for on the open market, otherwise known as its " retail price." Coin prices are set by many different factors, including the type and grade of the coin, its rarity and desirability, and to some extent its availability in the marketplace. The most frequently used price guide to U.S. coins is the Red Book. The "Value" of a Coin is How Much You Can Sell it for TodayHere's where it gets a little complicated. When you want to establish what your coin collection is worth today if you wanted to sell it, you are establishing its value. The amount you can sell your coins for its " value" is considerably less than its " price" if you had to replace them. Dealers need to make a profit to stay in business, so when you go to sell your collection, you're not going to get those nice, high Red Book prices. The Red Book prices are retail amounts. Consider the Blue BookThere is another book, known as the Blue Book, (formally titled "Handbook of United States coins"), which is the most widely used guide to wholesale coin values. These are the values a coin dealer will offer to pay you for your collection. They typically run about half of what the coins retail for. Coins which derive most of their value from bullion (such as common-date American Eagles and Double Eagles) will get you more (75% to 85% or so) because most of their value is based on the gold itself, rather than the rarity of the coin. Appraising Your Collection for Insurance PurposesThe one time when it is correct to use the "Price" metric to determine what your collection is worth, is when you are establishing its value for insurance purposes. In this case, you want to insure the replacement cost of your coins. Since you'd have to pay the Red Book (retail) price to replace them, this is the metric you should use. Always be Realistic About Prices and ValuesThere is nothing more satisfying to a collector than to pluck a coin worth $100 in the Red Book out a dealer's $10 pick bin. And in this case, you've probably done very well, because it's likely the dealer overlooked something here. But the more typical case is finding lots of $20 Red Book priced coins the $10 bin. This is because the dealer is probably overstocked in this material, and would be happy to get his cash back to make more marketable purchases. Be careful that you don't get carried away thinking you're getting bargains in cases like this, because the amount you can sell the coin for, its value to you, is about what you paid for it. In other words, don't deceive yourself into thinking that the value of a given coin is equivalent to the price you paid for it. Consider getting yourself a copy of the Blue Book so that you can get a realistic handle on how much you can actually sell your coin collection for today if you really needed to. Happy reading, mila_
|
|
|
|
Valued Member
United States
52 Posts |
Thanks for the post Mila. This is a topic I definately needed to gain some knowledge on.
|
|
Pillar of the Community
United States
1203 Posts |
Coin price (apples) vs. Coin value (oranges)
One doesn't have a great deal to do with the other!
|
|
Pillar of the Community
United States
751 Posts |
I have to say that I have a few problems with Susan's missive. She defined her terms--price and value--and then went on to explain the difference between the two concepts. I suppose that is how they teach it. Unfortunately, she co-opted two words loaded with connotations. And I for one am unwilling to let her take two rather rich words and strip them of their meaning. Why not use wholesale and retail? Or buy and sell prices? To imply that the "value" of a coin is what a dealer is willing to pay you when you walk into his store suggests, well, a certain naivete in addition to liberal use of the language. Finally, I recognize that she is writing for a different audience than the dedicated coin collector (jeez, I hope that's true), but I object to her citing two annual publications as appropriate arbiters of "price" and "value" respectively. There are whole threads here explaining that serious coin collectors do not use the Red Book as a price guide. And I'm not certain I know of anyone who uses the blue book at all. I have read a few of Susan's pieces and am generally supportive. I just think she could have done a lot better with this one. |
|
Bedrock of the Community
United States
20753 Posts |
Interesting for sure. However, many other things to consider. For one thing LOCATION. This matters since a coins value or price may well depend on where you are on this planet. for example the cost of a certain coin being sold in a large city area may greatly differ from a small town area. Also, value and price via the internet takes on an entirely new concept since with ebay for example a coin is worth what someone will pay for it regardless of Red or Blue Books, Grey sheets, etc. Also, on ebay eveyone selling is a dealer also regarless of if they are or aren't. Then there is things like compitition where at large coin shows similar coins can vary in value, price, etc depending on how many are for sale and how many people are there to purchase them. In my area there are so many outlets to sell coins that anyone that wants to sell off a collection may have so many ways that the words value and price is of no importance. Then there is presentation of a coin. For example a proof set could be worth $20 but if each coin is put into a 2x2 and put up for sale at a flea market, coin show, coin store, ebay, etc. the individual selling price would be greatly different than the set. As to the Red Book lately it has become a joke for pricing anyway and the Blue Book is almost next to useless which is why it just dosen't sell. |
|
Moderator
 United States
6563 Posts |
Nice Piece I wish that I could have seen it a few months ago. Too busy trying to buy stuff to resale it. I get most things on ebay for about 50% of the "price" and now I can only sell it for what I bought it. Alas no profit but at least no loss. |
|
Pillar of the Community
United States
764 Posts |
but when I find the total value of my collection using a Red Book, it makes me feel special! =] |
|
Pillar of the Community
United States
1984 Posts |
Thanks for posting the article. I must admit I too feel uneasy with Susan's notions of "price" and "value." I have to agree with texasmick that the word "value" especially is just too loaded to support being used without caveat. Maybe if the terms had been "price vs. worth" we wouldn't be quite as hampered by the vocabulary aspect. Maybe. For insurance purposes the value of your collection should probably exceed the current Red Book guesstimates because acquisition time/expense also has a "value." Not everyone is going to sell their coins to a dealer. There are many other ways to sell your coins. What the article basically says to me is, "Don't buy from a dealer, and don't sell to a dealer, because like a crooked accountant a dealer keeps two sets of books, a Red One titled What to Charge the Fools, and a Blue One titled What to Pay the Suckers." Just today my local dealer remarked--and this weeks CDN appears to agree--that dealers are having a tough time sourcing new material. I know demand is a factor. I also wonder if vastly different notions of "price," "value," and "worth," are part of the reason why dealers have been having such a hard time locating quality material to buy. |
|
Pillar of the Community
United States
1173 Posts |
I agree that the choice of terms is fraught with opportunities for misunderstanding, but in the final analysis, the value (or price) of a coin is determined by two factors: 1. what the owner is willing to sell it for, and 2. what the buyer is willing to pay. When the two numbers coincide, a transaction occurs. Right now we seem to be in a rapidly appreciating market for key coins and high grade common dates...but there is nothing to guarantee that the market won't turn around and head south...either in one series or across the board. In addition, that "scarce" coin that commands a high price today may become "common" tomorrow with the uncovering of a hoard and its subsequent movement to market. That doesn't happen too often, thank goodness, but it's always a possibility, and more likely, I would think, for recent coinage than for older coins. Still...there might be three or four rolls of uncirculated 1955 double dies sitting out there in some old great grandma's dresser drawer that her husband got at the bank and never opened. Very unlikely, but possible... We've all seen the prices on certain varieties of Washington dollars fluctuate wildly on ebay. For any given transaction, a price/value was established...but it may not have been reflective of what the market, as a whole, would place on that or a similar coin. I'm glad I'm not a coin dealer...it seems a risky business. As a collector, I can allow my emotions to dictate price of any given coin, so long as it fits my budget. As a dealer, I would have to take emotion out of the equation, and view every transaction purely as a business deal. How boring! |
|
Pillar of the Community
United States
1283 Posts |
From what I've seen and experienced: RedBook is a very (loose) guide to coin values "prices" or whatever you want to call it. Even "greysheet" can deviate from the norm as far as wholesale goes. Most dealers realize if they offer HALF the retail value on nice saleable coins the seller would sooner post them on ebay. |
|
Pillar of the Community
United States
1984 Posts |
Sometimes you'll be lucky to get offered half of the retail value/price of coins from a dealer. Depending on who you are and how much they think you know about coins, you might not even get half of wholesale for a grade lower than the coin you have. Trust me, I went to a dealer yesterday. He must have thought I was a total moron (and I would be the first to admit if I were). I know what my coins "value" are in any market you care to discuss. The dealer was awful and just low-balled the hell out of me. I sold him maybe a tenth of the coins I was willing to part with. I didn't get insulted, I just said, "OK." As I was leaving he asked if I was sure he couldn't part me from any more of my coins.
I almost said, "Maybe, if you didn't just try to low-ball the heck out of me," but I just said, "No thanks, not today." We both knew what was going on.
Although "dealers need to make a profit to stay in business" some simply don't deserve to stay business if they can't or won't figure out how business works in the 21st century.
Since I had paid silver bullion prices for some of the coins I had brought with me, I sold him a few of those for lunch money, as well as a couple of others that were parts of sets that I purchased to obtain other coins or were problem coins or represented a profit for me. I sold maybe 20 coins and walked out with $185 dollars. If I had been offered a more realistic "value" it could have led to this dealer acquiring some of my better coins in the future.
No chance of that now.
Edited by halfabustisbetter
05/03/2007 08:55 am
|
|
Pillar of the Community
Australia
1091 Posts |
If the purpose of the article is to let everyone know that there is a difference between 'price' and 'value' then the article has done a good job in a few words.
Value is an individual assessment. I have coins that are high value to me that no one else would think are worth any value. As I'm sure to have some coins I consider worthless, that other collectors may be willing to pay a price for.
I disagree with this quote
"The "Value" of a Coin is How Much You Can Sell it for Today"
I would say
The 'Value" of a coin is How Much it means to you.
None of my coins are priceless; an offer of a million dollars and it's sold. LOL
|
|
New Member
Australia
4 Posts |
Hi All I would like to add my Two Cents (no pun intended, I'm sure that's over used on this forum). I always found a disconnect between the printed value of a coin and when I came to sell it. In particular on ebay. So my self and others started collecting passed auction results for the purpose of analysis e.g. determining trends, price movement, relationships with metal prices, the impact of different grading companies on price and other statistical methods. We found that of course there are issues that greatly effect a price of a coin (for resale), but generally coins values (large volume sales in particular) moved in proportion with the base metal price. We saw there was a delay of up to a month for major changes in base metal prices filtering into the coin price. This is very reassuring when treating coin collections as a portfolio. To test out my idea (i want to hear feedback on it so I can fine tune my modelling), jump onto my web site (coins.gpanalysis.com) and check some of the high volume sales (e.g. Morgan 1881-S), overlaying the silver price in the graphing tool. Anyway these days I rely less and less on printed guides and more on analysis on past realized sales purchases that result in the best future returns. Simon |
|
Pillar of the Community
United States
1283 Posts |
Simon,
I can see how the melt value of many gold coins can dramatically change the overall value. But silver? Unless they're well worn common dates, most silver coins are worth waaaay over melt value. Have you really noticed a difference in silver coins with the price of silver?
|
|
New Member
Australia
4 Posts |
Hi USArmyParatrooper
I agree 100% with the comment that silver coins are worth way more that the melt value. No question there. What I was referring to is the proportional value.
We have noticed as sliver prices go up (say 10% over a period), the corresponding value of a silver coin will increase by around the same percentage. Sometimes with a delay.
This generalization relates primarily to high volume traded coins (and is more visible in gold coins).
For example, on my site, check the Morgan 1881 65 Grade. Overlay the silver metal prices and remove the extreme values (there is a $6,325 and $2,300 priced coins sold in 07). Then adjust the time period to something more recent (Nov 05 to today). The resulting graph shows a match in terms of growth of the coins realized price against the increase in silver price.
Simon
|
|
Pillar of the Community
Australia
652 Posts |
ValueI had been searching for particular errors on a 1985 $1 coin. I had searched many thousands of coins and found 3. Another forum member had searched over a 1,000,000 coins and hadn't found 1! In my opinion the coins are harder to find than a 2000 $1 mule, of which I have 5 and the friend has over a dozen. The mule is valued at approximately $400 in circulated condition (far more unc) and it is estimated that there are perhaps 6000 of them. I only know about 6 or so collectors that have one of the 1985 errors. It is therefore my opinion that the 1985 error is harder to find and should therefore command a value at least that of the mule. I understand that I am not necessarily comparing apples with apples, and that in this instance I am simply comparing scarcity/availability of two items. PriceI watched two 1985 errors when they were sold on ebay. They went for around $45 each. To me that is the difference between value and price. The errors are far more valuable to me than the price others were prepared to sell and buy them for. I should have bough the two coins as they would have represented great value (to me) 
|
| |
Replies: 15 / Views: 1,800 |
|
Posted 05/01/2007 10:14 pm
