Do dealers have an obligation to walk away from a sale that is not in the seller’s interest?
Longacre
Posts: 16,717 ✭✭✭
Suppose that a dealer, called Dealer D, has helped Collector C build a mighty fine collection over a period of many years. Collector C has used Dealer D exclusively for building this collection, and Dealer D is the leading dealer in the coins in question. Because Dealer D worked with Collector C for so long, Dealer D knows that Collector C was one coin shy of a complete set about two years ago, and although a few examples of the one remaining coin have came on the market in the past two years, Dealer D advised Collector C to wait for a nicer example. Let’s suppose the fair market value of the collection is $5 million. The collection is very nice, but it is somewhat esoteric.
Collector C tells Dealer D that he wants to sell his collection. Collector C does not give a reason for wanting to sell, but somewhat hints that he would like the use the cash proceeds for other interests (but Collector C is not desperate). Dealer D has been in the numismatic world for many decades, and knows that selling the collection now will not result in the best prices. In fact, Collector C will actually lose money on many of the coins. Had Collector C sold a year or two ago, the market would have been much better and Collector C would have made a nice profit overall.
Suppose that Dealer D usually gets a 10% commission. If the collection is sold today, Dealer D would stand to make $500,000. However, Collector C would lose $1 million in total as a result of the down market.
(1) In this circumstance, does Dealer D have any obligation to counsel Collector C to not sell the collection at this time?
(2) Should Dealer D be honest and say “I am the only one who wins if you sell today. Why don’t you wait a few years when the market is better and sell then?”
(3) Because Dealer D knew Collector C was one coin away from completing his collection two years ago, and advised against buying the last coin on multiple occasions, should Dealer D cut his commission substantially to try to offset some of Collector C’s losses?
(4) Should Dealer D just flat out refuse to handle the sale because the market is so bad, even if he knows that Collector C might go to another dealer or an auction house (similar to a lawyer refusing to take a case because it is a sure loser, and sometimes it is better for another lawyer to make a fool of himself by bringing the suit)?
Collector C tells Dealer D that he wants to sell his collection. Collector C does not give a reason for wanting to sell, but somewhat hints that he would like the use the cash proceeds for other interests (but Collector C is not desperate). Dealer D has been in the numismatic world for many decades, and knows that selling the collection now will not result in the best prices. In fact, Collector C will actually lose money on many of the coins. Had Collector C sold a year or two ago, the market would have been much better and Collector C would have made a nice profit overall.
Suppose that Dealer D usually gets a 10% commission. If the collection is sold today, Dealer D would stand to make $500,000. However, Collector C would lose $1 million in total as a result of the down market.
(1) In this circumstance, does Dealer D have any obligation to counsel Collector C to not sell the collection at this time?
(2) Should Dealer D be honest and say “I am the only one who wins if you sell today. Why don’t you wait a few years when the market is better and sell then?”
(3) Because Dealer D knew Collector C was one coin away from completing his collection two years ago, and advised against buying the last coin on multiple occasions, should Dealer D cut his commission substantially to try to offset some of Collector C’s losses?
(4) Should Dealer D just flat out refuse to handle the sale because the market is so bad, even if he knows that Collector C might go to another dealer or an auction house (similar to a lawyer refusing to take a case because it is a sure loser, and sometimes it is better for another lawyer to make a fool of himself by bringing the suit)?
Always took candy from strangers
Didn't wanna get me no trade
Never want to be like papa
Working for the boss every night and day
--"Happy", by the Rolling Stones (1972)
Didn't wanna get me no trade
Never want to be like papa
Working for the boss every night and day
--"Happy", by the Rolling Stones (1972)
0
Comments
In such a situation, I would hope that a dealer would give me his opinion and then do what I desire.
<< <i>My head hurts reading that!
In such a situation, I would hope that a dealer would give me his opinion and then do what I desire. >>
Hard to argue with TDN on this one. I've had the same thing happen recently, with people wanting to sell proof and mint sets. The recent thread on this topic pointed out that the big marketers of these are full up and thus the market prices (if you're selling) are way down. So I told the people the true state of the market, and let them decide what to do.
An authorized PCGS dealer, and a contributor to the Red Book.
Way too much reading, but I would suggest following the Platinum Rule: "Treat others the way they wish to be treated." This phrase usually resolves all my moral quandries.
<< <i>My head hurts reading that!
In such a situation, I would hope that a dealer would give me his opinion and then do what I desire. >>
Yea, verily.
Sometimes people want to do what you think is not in their best interests. After you give your opinion, let your customers make the final decision. At least you have spoken your piece and warned against the sale.
What happens if they take your advice and the market completely tanks? Then you'll have your customers reminding you of your mistake.
Obscurum per obscurius
We knew a dealer that placed a $1000 a month ad in the Yellow Pages, but felt an ethical need to tell people who brought in good coin collections to shop them around to all the other dealers in town, including those who had the free one line listings in the phone book, because he wanted to make sure that they got the best offer. He was basically paying $1000 a month to prescreen the best coins for his competition. He is no longer in business.
FrederickCoinClub