Overgraded PCGS coins -- Submit for downgrade, or not?
supercoin
Posts: 2,323 ✭
I recently purchased several collections, and am now the proud owner of several more overgraded PCGS coins. That's not really a criticism of PCGS, it happens with all services to one degree or another. Overgraded coins are an inevitable result of an imperfect process.
I have dutifully submitted what I considered "important" coins for downgrade in the past, such as the PR70 Ike mentioned recently, and PCGS has stood behind their grading guarantee admirably.
However, especially from a dealer's standpoint... downgrading a coin is inconvenient, costs money (e.g. shipping costs), results in sometimes substantial lost resale profit, and ties up capital for a significant time.
So from a practical standpoint as a dealer, it's far better to just resell them at a "bargain" price (hopefully, with their flaws described), and move on.
My motivations in the past for turning them in for downgrade were philosophical. However, I've recently questioned some of my reasoning behind that.
I'd be curious to hear others' arguments pro or con... downgrade or resell?
I have dutifully submitted what I considered "important" coins for downgrade in the past, such as the PR70 Ike mentioned recently, and PCGS has stood behind their grading guarantee admirably.
However, especially from a dealer's standpoint... downgrading a coin is inconvenient, costs money (e.g. shipping costs), results in sometimes substantial lost resale profit, and ties up capital for a significant time.
So from a practical standpoint as a dealer, it's far better to just resell them at a "bargain" price (hopefully, with their flaws described), and move on.
My motivations in the past for turning them in for downgrade were philosophical. However, I've recently questioned some of my reasoning behind that.
I'd be curious to hear others' arguments pro or con... downgrade or resell?
0
Comments
That being said, I would resell the coins noting the fact that you believe they are slightly overgraded. As you pointed out, its not that easy to downgrade a coin. In the end, PCGS might still disagree with you on whether the coin should be downgraded.
keoj
Greg
So can you really sell an overgraded coin for a profit? I mean can you sell an overgraded coin for a profit AND describe it correctly as overgraded? If so I want to find out where you guys buy your coins! Or maybe I can just offer crazy low prices for whole colletions and take my lumps on a coin here and there while making it up on the rest?
I've just taken another good look at my Jefferson PR 70s. I sent two more in. As to other grades I couldn't really tell if they are overgraded or not. But a 70 that has a visible flaw can't be a real 70 so that seems pretty clear.
When I buy certified coins, I mainly buy PCGS. I would like to know that I can trust the grade on a sight unseen purchase and not have to worry about the hassels associated with returning a coin.
Tad,
You post pictures of your coins with excellent descriptions. I would never hesitate purchasing a coin from you but I can't say the same for other dealers. If you sell these coins they will be out there in the market and someone will eventually get stuck with these overgraded coins. They will also have to deal with the quandary, sell and take the easy way out or face a possible loss of time and money and correct the situation permanently. I think if more people returned coins to PCGS for Grade Guarantee, we would stop seeing grading flucuations every few years. PCGS would be forced to be more conisistent to avoid buying back all the coins that were overgraded during the "loose grading periods"
As a dealer bidding for a collection, I would bid based on the coins I see. If I see an overgraded coin, I would bid a little lower so that the PCGS refund amount would cover costs and give me a small profit. I think this would be the best service to the market, and still make it worth your while to do the deal. I also have no moral objection to selling a properly described overgraded coin at a discount.
Greg
I guess it depends on the kind of coins that you got. If you are talking a common date MS-66 state quarter that looks like a 65, a simple description that mentions that PCGS must have been really generous would suffice. If you are talking a MS-70 commem with a huge tick, that needs to go back and get downgraded.
Keith
I just can't be bothered removing overgraded coins from the marketplace. When PCGS starts offering a refund on grading fees for all the BS undergrades that they have given me, then maybe I'll consider resubmitting coins for downgrade. Until then, screw them! Let them do their own work.
PCGS has basically been so arrogant and act like they are right and they can grade better than us little people, so if they say a coin with a giant scratch on the cheek is MS68, then who am I to complain?
Go BIG or GO HOME. ©Bill
Cameron Kiefer
peacockcoins
For the sake of argument, let's assume I've got expertise in my field and am not sending in borderline cases, so getting a downgrade is easily accomplished. The more difficult part is establishing how much of a refund PCGS should give me.
For example, I often will buy (sight-unseen) a collection for a lump sum because a collector wants to sell them all at once. Often I will pay "too much" for the common/lower-grade coins in the set in order to get a scarce date/grade or two, that is I take the junk to get the gems.
When one of those gems turns out to be a lemon, how do I make the case to PCGS how much I should be reimbursed? Should they eat my losses on the "junk" coins?
And, as a dealer highly dependent on PCGS, do I really want to continually get in arguments with them about how much money they should give me? They do stand behind their guarantee admirably, but at the same time they don't exactly give you a pat on the back and a gold star for costing them a couple grand.
But the general question is what I am more interested in... (next post)
BUT, is that really the "right thing"?
Consider a PR70 Ike, whose value is highly dependent on the label, and is eagerly sought by registry collectors.
If that ugly PR70 Ike is being sold for thousands of dollars, advertised as "pop 19", should I be glad that I helped reduce that pop from 21 to 19? What if I woke up one day with a vision, and was inspired to go on an Ike crusade -- buying every PR70 I could find and downgrading them all at great expense in time and money. Let's say I succeeded in reducing that pop from 19 to a mere 5 coins.
Now, do you suppose the owner of that same ugly Ike would be inspired to downgrade his coin too, or would he advertise it for sale as a rare "pop 5" coin? What do you think that "pop 5" coin would then sell for?
From a selfish standpoint, that seems like a flow of money from my pocket to someone else's, with no benefit to me.
Ok, suppose that in addition to that crusading vision, I was a rich philanthropist, money didn't matter. I was simply trying to make the collecting world a better place.
Would I have really helped? I'm not so sure. Reducing the pop from 19 to 5 on that coin has made any remaining clunkers far more expensive -- in other words, some naive collector may get stuck with a $10,000 mistake instead of a $2000 mistake.
How about the other side, from a collectors' standpoint...
Let's say you're a registry collector -- if you had an overgraded coin in your collection without a chance to buy a replacement, would you turn it in for a regrade? Would you still do it if that caused you to slip a spot in the ranking? Still saying yes?
Or assume you're a collector who owns one of those PR70 Ikes. I'm out there reducing the population like a madman, continually increasing the value of your coin as the populations decline. Would you throw yours in too, or go along for the ride? If I was your accountant, I know what I'd advise! The last guy to "do the right thing" is the big winner.
So, the more I've thought about it...
From a practical standpoint the case against regrading is pretty strong.
Even from a high-minded ethical standpoint, I'm less sure than I was. It seems like "good" sellers get hurt, "bad" sellers profit, and naive collectors aren't protected either way.
In other words, business as usual.
Cameron Kiefer
> results in sometimes substantial lost resale profit
I thought someone said that PCGS would reimburse coin buyers
according to prices paid or Market Prices.
How could you lose resale profit if they will reimburse
market prices?
Let me know,
-Keith H
If it's OK with you, let's limit your discussion to the "easier question" of where you have an obvious, no questions asked, problem, such as a PR70 with an obvious scratch or mark. To this point, I have taken the "high road" in most cases and simply given them back to PCGS for "modest" credit. For example, when I returned a 1961 Proof Quarter in PCGS-PR70 I recall asking them for $200 grading fee credit. It's obviously worth much more than that. As I recall, the PR70 Botanical only cost PCGS $400-$450 when I returned it, etc., etc., etc. On the hand, does taking the "high road" build respect with PCGS and intangible credit such as when Tad was able to convince PCGS to add the wide rim SBA as a variety, or, on rare occasion, where I must have a coin "rushed through" the system, a better chance someone will listen to my request- I believe so.
Forum members may recall I recently got in that modern Wash Quarter collection including 20+ PR70DCAM coins. I identified one coin that has a noticeable problem (a small scratch under 10x power) from among the 20+ PR70DCAM coins. I expect to likely be returning it to PCGS in the near future (I was very pleased that the other 20 or so PR70s were very nice overall).
Now, the PR70 situation is a very different situation I believe from the situation where I think a PCGS-MS66 Wash quarter is really an MS65 in my book. I agree with gmarguli on this point. Who am I to tell (3) of the finest graders in the world they messed up because "little old me" thinks they did? I would generally only submit a mint state coin back to PCGS for review where it was a "no question" 2 full grades overgraded in my book and, I would make darn sure I was right so that my credibility would not be lost on the next encounter. I didn't follow my own advice recently and presented an MS68 state quarter I thought was only an average quality MS67 for PCGS to consider. They concluded the coin was fine as an MS68. I was probably wrong for presenting that coin to them in the firstplace. I will not do it again, even if I think the coin is a point lower because I realize that the issue is a "grey area" and it really comes off wrong when I am debating over a 1 point difference. Instead, I will just sell the coin as a problem coin and mention it is not the kind of quality you expect from me and price it very low.
Conclusion: Where a coin is "black and white" overgraded (e.g. PR70 with a noticeable scratch) it should go back to PCGS or NGC whether it is easier to "blow it out" to a collector or not. Where the coin is at least 2 MS grades off, it should probably go to PCGS, where you want to take the "high road". Anything less than 2 grades, I see not problem selling the coin with a reference to "below average quality" or something like that. This is not "etched in stone", but a pretty good guideline I believe. What do you guys think?
Probably not impossible, but not really something I'd prefer to get into an argument with PCGS about. In the past I have only asked for my purchase price back, which they have done.
But again, even asking for purchase price doesn't work well when I'm buying a whole collection -- especially when it's all mixed in with common stuff I didn't really want.
Mitch, those sound like reasonable guidelines for determining whether a coin is a downgrade candidate or not, but doesn't anser the "why" question.
Can you (or anyone) provide a reason why it is the "high road" to turn those coins in, at least with coins like low-pop PR70s? That was my previous assumption as well, which I am now questioning for the reasons I outlined above, especially given current (sometimes registry-driven) market dynamics.
By the way, I can think of one elegant solution, to the "bad days" PR70s at least, that truly is a "high road" solution. But since corporations are not ruled by that sort of sentiment, it ain't gonna happen.
The high road to me would be to send it in for a downgrade. You can't control what someone else will do with his overgraded coin. Speculators would love to buy them at a discount and hype them on eBay for a quick buck. You can't stop them from doing that with other peoples' coins, but you can keep one more overgraded coin in your possession from going back on the market.
On the other hand, collectors should learn to grade and not merely rely on a slab insert for direction. We can't make the world 100% safe for them.
Obscurum per obscurius
Your point also doesn't the diminishing-population problem. If I downgrade that low-pop PR70, it makes it that much more lucrative for the guy with one of the remaining overgraded coins to sell his.
Heads he wins, tails I lose.
a grade guarantee to be taking the high road. (I guess I'd
consider that silly
If you do it because you think you will get some future
benefit from PCGS then I wouldn't consider that taking
the high road either. Just an educated business decision.
> Can you (or anyone) provide a reason why it is the "high road" to turn those coins in
I liken it to picking up a piece of trash you see blowing down
the street. You are improving the community/environment you
live/work in. (Of course if there was a fee for me to clean
up my town I wouldn't do that either
So what's to keep a dealer from telling PCGS that he paid
whatever his estimate of the coin's value is?
-Keith
Anyone who knowingly forwards on a mechanical
error is perpetuating an error as well and as such can be held
responsible/liable for that action.
In other words, if you knowingly include yourself in the chain of sale of a coin, don't underestimate the risk that the ultimate buyer may have his claim against YOU and possibly not PCGS. Food for thought
But grading is highly subjective, so I do not see PCGS coming back and saying "We graded the coin wrong, but you are responsible because you should have caught it."
There is a difference between a mechanical error and a coin that was graded using a standard that has changed.
Maybe that's true? But, I've got to believe some, if not most of those other PR70 coins are true 70's. If not then the whole PR70 Ike market is pointless and once the word gets out, REAL Ike collectors would more than likely shun all these coins rather than spend thousands to obtain them.
And, if I'm wrong on ALL the above, then shame on that collector who doesn't care- who really is just buying the insert! It's a false prop that once his set is seen by others will become glaringly apparent how transparent that collector is.
peacockcoins
What's the definition of "mechanical error"?
-Keith H
Let's assume for sake of argument Supercoin is fed up with dealing with PCGS and their slow processing (as he puts it) of a horrible PR70 coin, which he is trying to return for a refund. The coin has ticks all on the reverse because by accident a "sealer" dropped it on the floor after grading and didn't tell anyone, picked it up off the floor and slabbed it. Now, Supercoin sells it for TOP DOLLAR to an unsuspecting collector. Supercoin breaks all records and gets $5000 for the coin from the (idiot) collector.
Question: Should this be Supercoin's problem, or PCGS' problem when the (idiot) collector comes back asking for a $5000 payoff? Is this a "mechanical error" or does it fall under some other category granting immunity to the grading company where a dealer sells an OBVIOUS mistake in grade? Interesting.
I would think a mechanical error is when a coin is graded one thing, and the actual person who places the coin in a holder puts something else on it. Even then, they would have to show that the dealer intentionally sold this. Also, what if the coin had been bought and sold a few times since PCGS graded it? The person who should carry the financial burden would be the first person who received it, but they are well back in the chain. What dealer is going to eat a coin when they were not responsible for the error?
Even in your example, unless PCGS delivered the coin to Supercoin, hard to place the blame on him. He is buying and then selling a coin that was guaranteed to be what it says by the company who certified it.
Edited to also add. You are saying that if PCGS damages a coin, then the coin dealer should eat the cost of the coin?
In any case I want to be perfectly clear -- PCGS has stood behind their grading guarantee in my experience. This is a key ingredient that people who criticize "buying plastic" often forget -- quality plastic comes with a quality guarantee.
Mitch, where did you find that quote of PCGS' policy, and is it a recent quote? I hadn't seen the part about "passing it along", and don't ever recall signing something like that. I certainly can't see how they'd enforce that, particularly on someone who is not nor ever has been a PCGS club member or dealer. If someone buys a coin on the open market and passes it along, they aren't signing PCGS paperwork along the way.
Presumably they'd have a stronger case against submitters, who currently sign this when submitting coins:
"Customer must inspect all coins immediately upon receipt and PCGS disclaims any liability for damage or discrepancies (such as errors pertaining to the description of the coin) unless reported to PCGS within five (5) days of Customer's receipt of the coin(s). Customer agrees to return any incorrectly described coin to PCGS upon request for correction and agress to indemnify and hold PCGS harmless from any and all losses and / or claims caused by the circulation or sale of incorrectly described coin."
This replaces the old statement which was similar but said "obvious mechanical errors pertaining to the description of the coin". The new statement also adds that magic "indemnify and hold harmless" stuff.
Note that neither statement says anything about grade, and it would look pretty silly if it did. They can't very well ask to take good money to professionaly grade your coin, then require you to hold them harmless if they grade it wrong.
So I can't see how PCGS would have any recourse (other than suspension of grading priviliges) if someone were to sell an overgraded coin, whether they submitted it themselves or not.
Mitch, I also have to give you a hard time about this -- it's interesting that your $5000 sight-unseen offers for quarters always mention that it can't be a "mechanical error" yet you don't seem to be able to define that term yourself.
Nothing, though of course you're going to have to justify it, it's not Who Wants to be a Millionaire. Please appreciate that if you're a dealer whose livelihood depends greatly on your relationship with PCGS, that's just not going to be a fun discussion for you to have.
Regarding "cleaning up the streets", I agree with that (literally and figuratively) but again it's not quite the same. That is, would you rather have 19 old newspapers laying around your sidewalk (relatively cheap overgraded Ikes), or 5 steaming lumps of doggy doo (really expensive overgraded Ikes)?
Tad: You haven't been paying attention: It's now $6,000 through 2/15/02
Unfortunately, that's exactly what I am assuming, based on what I know of a sample of those coins, and based on the cold hard population numbers over time.
PCGS has always maintained publicly (to the best of my knowledge) that they just grade 'em as they see them, no standards have changed since their inception.
But look, PCGS had graded a total of one PCGS PR70 Ike, a 1978-S, since their inception. Then somewhere in early 1998, during a surge in other PR70 populations, one more, a 72-S. Then at the end of 1998, 30 more 72-S and 74-S, all within ONE submission. And then since then, zero more.
Submission rates did not rise dramatically to explain any of this. So was it a dramatic increase in submission pre-screening by submitters? For the 30 in one submission in particular, that explanation would fit only if that was a fantastic meticulously selected hoard. Unfortunately, this is not the case either, as among those 30 coins are at least several glaringly overgraded (by today's standards) examples.
Also consider today's submissions of 2001 dated coins -- even though the quality of many of these issues (Sac dollars are one exception) is far superior to most older coins, they are getting PR70 rates at only a tiny fraction that older coins receive during the "bad time".
This cannot be explained away simply by saying the submissions are lower quality due to many more inexperienced submitters today, because even in absolute terms, the overall quantities per date are much lower. With the fantastic prices PR70s reach today, surely dealers who made PR70s before would be making them in similar or higher quantities today, if they could.
So, the bottom line is that PCGS standards did change (loosened) and later changed again (tightened). Any other explanation simply defies credibility.
Again, this phenomenon does not apply just to Ikes -- that one bulk Ike submission happens to be an instance I know about that hilights the problem dramatically. But PCGS PR70 rates rose sharply across the board during that same period.
----------
Which brings me nicely to this point: There *IS* an elegant solution that solves the PR70 problem specifically, and it is this:
1. PCGS admits they made a mistake with older PR70s. "We were sniffing glue at the time", or "Our Y2K computer preparation accidentally added 1 to all our PR grades", or whatever the reason is.
2. PCGS announces that if you want to take advantage of an older-holder PR70 grade guarantee, you have six months to send it in for review.
3. Coins reviewed during that period will either be downgraded and money refunded, or encapsulated in a visually distinct new holder and guaranteed to today's PR70 standards.
4. After the six month period, PCGS will no longer assume liability for an old-holder PR70.
5. Old-holder PR70 coins will no longer qualify for inclusion in the PCGS set registry.
This is, of course, a very expensive proposition for PCGS, so it's purely academic. But you have to admit it would sure clean up the neighborhood in a hurry!
PCGS has stood behind their grading guarantee admirably in my experience, including PR70 coins.
Given the phenomenal prices of some PR70 coins versus the tiny amount of money PCGS made in grading them, that is no small statement.
This past September I thought I would submit two coins for review (overgraded), one for designation review (the '56 Proof I've B*tched about), and a coin of the quarter.
Coordinated everything, included a letter of explanation trying to clear the waters for a smooth transition. So, PCGS knows I have a few problem coins coming. I'm sure
I guess realistically, the USPS just goofed, but I sure was disenfranchised losing that half; I haven't sent in another submission since.
So anyway, I tried to do the right thing and had to settle for a postal claim. Not very encouraging, hmmmmm!
BTW, you've all heard about the ANACS shipment to the FUN show that disappeared, huh? Think it was the latest CW.
Seems with so many new collectors, so many holiday hires, the Anthrax scare and who knows what else, shipping coins had become a hit or miss prospect for both the mailers and the AHEM, deliverers?????
Of course, most of these people cannot grade to begin with, which is why they choose to get a coin in a PCGS holder. How can one of these people even consider a coin to be wrongly graded?
(This is a serious question to this thought of disputing an overgrading. Many feel they were slighted when sending coins in to be graded, not many would feel that any grade is too much.)
Super - I am not doubting your statement that no Ike 70s may be real. I think many of my Jeffersons might be plausable 70s. I suspect some Roosey's might be plausable 70s.
I sent in an obvious mistake and kept the rest. So the overall quality of the Jefferson 70s improves.
Whether your Jeffersons or someone else's Roosevelts would regrade PR70 today, even if they deserved it, is a completely different question.
The cold hard facts -- both in percentages and absolute numbers -- of 70s graded today versus the past puts the odds against squarely against it. Crack a few out and find out.
Look, I'm not meaning any offense to any PR70 collectors -- I sell these PR70s after all -- it's just my honest assesment of the situation.
My experience in looking at these coins and submitting them backs up my opinions, but I'm not even asking you to believe any of that -- just look at the hard data yourself and see if you can come up with an alternate explanation.
Last call for someone to convince me the world is a better place if I send in my PR70s for regrade!
As it is, I think I'm going to simply ask myself this practical (and selfish) question for each PR70 I come across:
Considering all time and cost factors, would I make more money reselling this coin, honestly described, or is it so bad that I would make more money sending it to PCGS for a regrade at an easily supportable market value?
Then I'll donate the extra money to help save the rain forests -- thus making the world a better place after all.
Any serious collector soon learns which dealers don't care which are the accurately graded coins and which aren't. So, for a dealer who wants to keep his customer base intact, the three choices are
(a) Advertise the coin as overgraded and swallow your loss
(b) Send it in for reslabbing
(c) Off-load it in the wholesale market