Hypothetical: How do you handle high prices?
RYK
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A collector is browsing coins online and runs across a group of attractive rare coins in a dealer's inventory, and he would like to purchase one or two from the group. The collector, doing a minimal amount of research, identifies the coins as a group that sold several months ago in a major public auction. The seller is offering the coins at a mark-up of 50-100% over the recent (within the last six months) auction prices, in a market niche that has been fairly flat over the last several years. If you were the collector, how would you handle this scenario?
Considerations include:
1. Passing because the prices are too high
2. Offering a slightly lower price, perhaps 10% back of what they are asking, despite that these prices are substantially higher than any published or realized price (After all, we must help our dealer brethren make their Porsche payments!
)
3. Offering a lower price, perhaps 10-20% over the recent selling price. (After all, our dealer friends are entitled to make a profit.)
4. Offering a much lower price, at or near the recent selling price. (Screw the dealer and his profits!)
5. Other
Considerations include:
1. Passing because the prices are too high
2. Offering a slightly lower price, perhaps 10% back of what they are asking, despite that these prices are substantially higher than any published or realized price (After all, we must help our dealer brethren make their Porsche payments!
)3. Offering a lower price, perhaps 10-20% over the recent selling price. (After all, our dealer friends are entitled to make a profit.)
4. Offering a much lower price, at or near the recent selling price. (Screw the dealer and his profits!)
5. Other
0
Comments
Worry is the interest you pay on a debt you may not owe.
"Paper money eventually returns to its intrinsic value---zero."----Voltaire
"Everything you say should be true, but not everything true should be said."----Voltaire
If I had to pick one of the choices below, I would probably try for #3, but after I heard the explanation above.
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)
<< <i>Offering a lower price, perhaps 10-20% over the recent selling price. (After all, our dealer friends are entitled to make a profit.) >>
If they didn't take my offer I'd walk away and watch them sit in his inventory and collect dust.
<< <i>I would call the dealer and ask him about his Excessive Markup™. If the market has been truly flat for these coins, then there had better be a good reason for a 50-100% markup on the coins. Maybe there is a good explanation for it, which, as a collector of the series, I would like to hear for future reference.
If I had to pick one of the choices below, I would probably try for #3, but after I heard the explanation above. >>
My experience with calling dealers out on high prices is very limited, but from what I have learned, the range of answers can very from lies to honest and reasonable explanations, none of which are constructive in one's effort to buy the coin.
I think that many times, when you see the coin months later after the auction for sale, the coin has passed through one or more additional parties. Imagine if a coin sold at auction for $1000 to a dealer. A dealer wholesales the coin to another dealer for $1100. A collector buys the coin from the dealer for $1350. The collector then consigns the coin to a dealer for sale and both expect to make a 10% or so profit on the coin, so it gets priced at $1650. Voila! A 65% mark-up over the auction price, and no one has really made a killing on the coin.
<< <i>
<< <i>I would call the dealer and ask him about his Excessive Markup™. If the market has been truly flat for these coins, then there had better be a good reason for a 50-100% markup on the coins. Maybe there is a good explanation for it, which, as a collector of the series, I would like to hear for future reference.
If I had to pick one of the choices below, I would probably try for #3, but after I heard the explanation above. >>
My experience with calling dealers out on high prices is very limited, but from what I have learned, the range of answers can very from lies to honest and reasonable explanations, none of which are constructive in one's effort to buy the coin.
I think that many times, when you see the coin months later after the auction for sale, the coin has passed through one or more additional parties. Imagine if a coin sold at auction for $1000 to a dealer. A dealer wholesales the coin to another dealer for $1100. A collector buys the coin from the dealer for $1350. The collector then consigns the coin to a dealer for sale and both expect to make a 10% or so profit on the coin, so it gets priced at $1650. Voila! A 65% mark-up over the auction price, and no one has really made a killing on the coin. >>
Then that might be the answer. You then have to decide whether you want to pay for all of that flipping, that had to have happened for a reason.
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)
The more I snoop around, the more I find how much dealers mark up their inventory. The heritage archives are a powerful tool. I have noticed several dears that mark coins up 50% and, like Clad said, I watch these coins rot in inventory.
<< <i>
<< <i>I would call the dealer and ask him about his Excessive Markup™. If the market has been truly flat for these coins, then there had better be a good reason for a 50-100% markup on the coins. Maybe there is a good explanation for it, which, as a collector of the series, I would like to hear for future reference.
If I had to pick one of the choices below, I would probably try for #3, but after I heard the explanation above. >>
My experience with calling dealers out on high prices is very limited, but from what I have learned, the range of answers can very from lies to honest and reasonable explanations, none of which are constructive in one's effort to buy the coin.
I think that many times, when you see the coin months later after the auction for sale, the coin has passed through one or more additional parties. Imagine if a coin sold at auction for $1000 to a dealer. A dealer wholesales the coin to another dealer for $1100. A collector buys the coin from the dealer for $1350. The collector then consigns the coin to a dealer for sale and both expect to make a 10% or so profit on the coin, so it gets priced at $1650. Voila! A 65% mark-up over the auction price, and no one has really made a killing on the coin. >>
This is certainly an explanation and probably the case, more often than not. However, my two recent egregious examples, the auction ended only a few weeks before said coin hit the dealer's online inventory.
<< <i>Good point. I assumed in your hypothetical that I had watched the coin move from auction directly into the dealer's inventory. I disagree with Dr. Longacre's advice to inquire about the excessive mark-up, because I can't see how the answer would affect my valuation of the coin. An offer 10-20% above the amount realized at auction carries the silent message that you've researched the coin and that you're willing to be fair. There's no need for extra words. >>
I agree with your disagreement. More importantly, though, should we bestow an honorary Doctorate of Message Board Numismatics (D.M.B.N.) on Longacre, to make his title official?
He'll be able to bestow his own title after just 253 more posts. There are a lot of possibilities here.
I know I couldn't afford to do that, but if the coin is rare enough, then you could think about it.
Its funny. A lot of the stuff that is in ebay stores, are coins that were bought on Heritage, and put on ebay for about 1.5x the price paid on heritage. When I look on Heritage for reference, I have many times found the SAME coin thats being offered on ebay! I was outbid on 3-4 toned Morgans last night, and I can bet they will be on ebay for 2 to 3x the original sold price.
AJ
Edit to say: when you say to these dealers, that the same type/grade/year coin sold for this much on Heritage, they dealer will say "it was probably a lower quality coin, mine is much better" (which is why its $200 more). Pass.
PCGS Registries
Box of 20
SeaEagleCoins: 11/14/54-4/5/12. Miss you Larry!
<< <i>-- "More importantly, though, should we bestow an honorary Doctorate of Message Board Numismatics (D.M.B.N.) on Longacre, to make his title official?" --
He'll be able to bestow his own title after just 253 more posts. There are a lot of possibilities here. >>
Those last 253 are killing me....
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)
1) Believes the series as a whole is undervalued at the current market price.
2) Likes the coin in relation to others of the date so much that he thinks it deserves a premium.
3) Likes the coin so much he doesn't care if he sells it or not. If he can't get his price, he would just assume keep it.
4) Took the coin on consignment and his customer believes one of the three above.
To answer your question, I'd shoot the guy an offer of what I believe the coin is worth to me. Maybe a little lower to allow for some haggle room.
<< <i>Sic Laura on him.
There's more than jest in that statement. I've asked Trusted Dealers™ to negotiate and to buy on my behalf when I expect that a seller with an overpriced coin will be intractable with me. In each case, a deal was reached that made everyone happy.
sellers a favor by purchasing something.
MANY dealers have plenty of cash. If they cannot at
least double their money on a retail-sale, they can
simply wait for the right retail-buyer to come along.
The dealer may place the price and wait for someone who does not know better.
The dealer having the set the price, will accept a reasonable offer.
The dealer has the coin consigned from a collector or other dealer.
The dealer is sitting flush with cash and is willing to wait for the market to catch up.
The dealer bought the coin for the "shock" value, and really could care less if it sells.
The dealer bought the coin to help sell other coins in their inventory.
There are loads of reasons as to why a dealer will assign a specific price to a coin listed in their inventory. Very few are not willing to listen to reasonable offers based on their final cost of the coin. With that being said, just because the coin auctioned recently, doesn't mean the dealer listing it actually owns it. There are plenty of rare coins that the owners have partnered with others to make the deal.
In honor of the memory of Cpl. Michael E. Thompson
If their markups are that excessive, they are not interested in what you or I would consider to be a reasonable offer. I've routinely seen nice material immediately marked up to 50% over the selling price at a major auction. And these are coins, that while nice, are slow sellers.
What these dealers do is try to find a sucker. They keep the coin at this price for three, maybe six months. If they don't find a sucker, they'll put the coin in a major auction reserving it for in essence the same asking price. If they don't find a sucker, shortly thereafter, they'll sell the coin to a wholesaler at a lower price. You or I will never see the coin, until it resurfaces in the new buyer's inventory, usually at 10% less than the old price.
Remember, coin purchases are discretionary. You don't have to buy anything. Unless you're someone like TDN, if for whatever reason a coin you like is too expensive, or otherwise unavailable, wait. Another one will turn up eventually.
I've walked out of shows with plenty of money available for coin purchases, but didn't buy anything because I either did not like the material, or thought various dealers wanted too much for a coin / or coins that interested me. Last year, I bought all of TWO coins. That's okay. I made some investments, made a nice trip to Mexico, fixed the house, etc., etc.
"Seu cabra da peste,
"Sou Mangueira......."
<< <i>3. Offering a lower price, perhaps 10-20% over the recent selling price. (After all, our dealer friends are entitled to make a profit.) >>
That would be my option.
Just ensure you can tell which are mistakes are which are not.
I like ElContador's buying of just 2 pieces in the last year. That's also a sign of market pricing that is just not comfortable any more.
In 2001-2003 you could have a field day buying nice coins. Not so much today.
Choices: A. $1,200 - Paid $1,000 + 20%. (But remember that he/she would have made $600 at the $3,000 buy price.)
B. $1,600 - Paid $1,000 + $600 markup on the original $3,000
C. $3,600 - His/her estimate of market value before the auction
D. $3,000 - His/her revised estimate of market value after the auction
E. Some other number
AND most importantly, why did you choose this selling price?
An authorized PCGS dealer, and a contributor to the Red Book.
With the information age on us, the most recent purchase price at public sale affects the next transaction, and a dealer is almost forced to pass along some of the benefit of a good deal (and, as Roadrunner explained, it can also make it easier for a dealer to shrug off a mistake).
i would then procede to bid in the same auctions as the dealers do
and try to capture coins for my collection before the dealer does.
I guess this way you would pay a stiff price but would be below the
hypothetical dealer price if you would have bought from him after
the auction.
all this assumes you can grade and get to visit the coins in person
before the hammer falls. i guess.
if you have more knowledge in your chosen series then the dealer,
you should feel comfortable pushing up his bids and maybe winning
it.