Is Dealer Loyalty a Double Edged Sword?

AnkurJ · April 21, 2011 10:54AM

In one case, you can get first crack at coins you want or that are on your want list. But it seems some dealers who have strong followings have significant markups on their coins. I understand that PQ coins will have PQ prices, but it seems to me that when those collectors try to resell, they will have a hard time and find they are buried. For some collectors who have tunnel vision, and will only deal with certain people...will they wake up one day and realize they have been overpaying all this time?

An example is a coin I was looking at on a dealers site that I liked, and needed for my collection. The coin was a PCGS XF and CAC'd, but was priced at AU55+ money. I understand the coin was PQ, but I didn't want to be buried in the coin. When I saw that coins in XF had recently sold at auction for significantly less ($4-$500 less), I decided to pass.

Thoughts? Keep the snide remarks to a minimum please.

AJ

ANACONDA · April 21, 2011 10:56AM

More is better in many things....dealers that work for you is one of them.

TONEDDOLLARS · April 21, 2011 10:56AM

As my friend Lloyd says" Great coins are not cheap and cheap coins are not great" I think this says it all

llafoe · April 21, 2011 10:57AM

I think Occam's Razor is a Double Edged Sword of sorts...

P.S. This isn't a snide remark!

RYK · April 21, 2011 11:00AM

If you are a price buyer, you go where the price is best. If you are a quality buyer, you go where the quality is best. The quality sellers are the ones who typically pay the best prices when it is time to sell. That's how they get the quality coins. The price buyers pay the least, and that is why they can charge less. Decide what kind of coins you want in your collection (low price or high quality) and have fun with it.

RYK · April 21, 2011 11:01AM

Oh, BTW, this discussion has little to do with dealer loyalty, so you might want to change the thread title.

AnkurJ · April 21, 2011 11:01AM

<< As my friend Lloyd says" Great coins are not cheap and cheap coins are not great" I think this says it all >>

Agreed. But that doesnt mean you should buy great coins at great prices blindly no? Shouldnt you shop around?

An example of a coin I BOUGHT. Bought a 1815/2 Bust Half PCGS VF30 from a dealer I never dealt with. Dealer 2 had a PCGS VF20 on his site for $700 MORE than what I paid for the VF30. If I was blindly loyal to dealer 2, I would have a very difficult time getting my money back when the time came to resell correct?

Great coins aren't cheap, but to buy them blindly is not a smart thing in my book.

RYK · April 21, 2011 11:04AM

<< 

<< As my friend Lloyd says" Great coins are not cheap and cheap coins are not great" I think this says it all >>

Agreed. But that doesnt mean you should buy great coins at great prices blindly no? Shouldnt you shop around?

An example of a coin I BOUGHT. Bought a 1815/2 Bust Half PCGS VF30 from a dealer I never dealt with. Dealer 2 had a PCGS VF20 on his site for $700 MORE than what I paid for the VF30. If I was blindly loyal to dealer 2, I would have a very difficult time getting my money back when the time came to resell correct?

Great coins aren't cheap, but to buy them blindly is not a smart thing in my book. >>

If price and grade are the only considerations, you are correct. Some folks, like myself, like to look at the coin. I know it's kinda nutty and all...

TONEDDOLLARS · April 21, 2011 11:08AM

No one said to just pay up blindly, but if the coin speaks to you

messydesk · April 21, 2011 11:11AM

There's a difference between dealer loyalty and blindly refusing to shop around.

If one shops around, one will realize when it may be worth spending some extra money at a dealer with the more expensive coin. It may also be the case that that dealer will offer you a future buyback price of a small percentage below what they plan on selling it for. After all, it was a nice, handpicked coin, and there's no reason they wouldn't want to sell it again. That's also worth something. The people getting burned by high prices for the stuff they buy are the people that aren't looking around to see that they aren't getting an increase in value for their money spent.

Sonorandesertrat · April 21, 2011 11:29AM

If price and grade are the only considerations, you are correct. Some folks, like myself, like to look at the coin. I know it's kinda nutty and all...

>>

DaveG · April 21, 2011 11:43AM

What messydesk said.

Also, what you apparently didn't learn from your example is why the CAC'd PCGS XF coin was being offered at AU55+ money. Was it perhaps nicer than the examples that had sold at auction for less? If you didn't have the opportunity to compare the coins in hand, how would you know? Perhaps the dealer who is offering the XF coin for AU55+ money did see the coins in hand.

One of the things you're paying for (when you establish a relationship with a dealer) is the quality of that relationship. If you develop a high quality relationship, you may be able to sell your coins back to him for more money because he knows the quality of the coins he sold to you and knows who to sell your coins to when it's time for you to sell. Also, if he knows you well, he may offer you a coin that you'd really love to own (instead of offering that coin to someone else).

If you're buying MS-63 Morgans, by all means shop around. When you're buying rare coins, the quality of your relationships matter.

Unknown · April 21, 2011 11:47AM

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BigMoose · April 21, 2011 12:01PM

RYK, you just made the post of the year in my opinion.

jayPem · April 21, 2011 12:06PM

whatever motivates the OP , best price/ best quality, I think he is observing that many coins are marked way up, and often the
quality is no better than pieces that can be found closer to earth.
Just because you pay more, doesn't always mean you are going to get more.

RYK · April 21, 2011 12:08PM

<< RYK, you just made the post of the year in my opinion. >>

I have an annoying habit of doing that.

(Or, as my 8th grade history teacher, Mr. O'Neill, would say, "If you throw enough crap against the wall, some of it will stick.")

JCMhouston · April 21, 2011 12:13PM

And sometimes the dealer just likes to have a really high markup so they can get that new place in the Hamptons.

airplanenut · April 21, 2011 12:14PM

<< An example of a coin I BOUGHT. Bought a 1815/2 Bust Half PCGS VF30 from a dealer I never dealt with. Dealer 2 had a PCGS VF20 on his site for $700 MORE than what I paid for the VF30. If I was blindly loyal to dealer 2, I would have a very difficult time getting my money back when the time came to resell correct? >>

Which COIN was better? You only mentioned what the label said.

Coins911 · April 21, 2011 12:17PM

I have dealty with a certain small dealer and he has always treated me fair but we are in no way exclusive

MidLifeCrisis · April 21, 2011 12:19PM

<< An example is a coin I was looking at on a dealers site that I liked, and needed for my collection. The coin was a PCGS XF and CAC'd, but was priced at AU55+ money. >>

Send me a PM with a link to the coin, then I'll tell you my answer. Or I might just buy the coin.

questor54 · April 21, 2011 12:24PM

Buy what pleases you for a price that seems fair to you. I don't think any dealer expects an exclusive relationship.

COALPORTER · April 21, 2011 12:29PM

I look at it this way - you goto a store and buy a product to use or injoy, but you don't expect to resell it the next day for more money.
So, why should rare coins be an exception? Name how many products you can buy, say at mall store, and then resell for what you paid or even more. Now, you would not say the store is overpriceing just because you can't resell it for a profit. Why would you expect a dealer to leave something on the table for you? Sounds like a poor business practice to me. Wouldn't it make since that the guy you try to sell to says the same about you? (That is, you are overpriced and not worth being loyal to.)

AnkurJ · April 21, 2011 12:44PM

<< 

<< An example of a coin I BOUGHT. Bought a 1815/2 Bust Half PCGS VF30 from a dealer I never dealt with. Dealer 2 had a PCGS VF20 on his site for $700 MORE than what I paid for the VF30. If I was blindly loyal to dealer 2, I would have a very difficult time getting my money back when the time came to resell correct? >>

Which COIN was better? You only mentioned what the label said. >>

Mine has a more original look, and it stickered as well (I know that is meaningless to some). The other had dipped out striped surfaces.

RYK · April 21, 2011 12:47PM

I am not sure I would be loyal to a dealer who sold me this one!

Moldnut · April 21, 2011 12:55PM

Some dealers, it seems, every coin is said to be "PQ" with a price to match. Yeah Right.......

Walkerguy21D · April 21, 2011 12:57PM

<< look at it this way - you goto a store and buy a product to use or injoy, but you don't expect to resell it the next day for more money.
So, why should rare coins be an exception? Name how many products you can buy, say at mall store, and then resell for what you paid or even more. Now, you would not say the store is overpriceing just because you can't resell it for a profit. Why would you expect a dealer to leave something on the table for you? >>

Kind of an apples and oranges comparison here - I agree you can't go into a Zales jewelry store, pay their inflated price for a piece of jewelry, and resell it for a profit immediately, or maybe even ever.
But I buy coins from dealers all the time and resell them for a profit, sometimes at the same show, to other dealers, within a few minutes. I've also sold coins to dealers on this forum, who mark them up and resell them to other members of the forum. Did I 'leave something on the table'? Maybe, but I made my margin and turned the coin. It's where you buy the coin on the pyramid that determines if you are buried in it or not.
Buy the best VALUE for your money, and buy the best that you UNDERSTAND - not simply the best you can afford.

AnkurJ · April 21, 2011 1:20PM

<< And sometimes the dealer just likes to have a really high markup so they can get that new place in the Hamptons. >>

Or pay for staying in 4 star hotels, eating at fancy restaurants etc while attending national conventions.

AnkurJ · April 21, 2011 1:26PM

<< I am not sure I would be loyal to a dealer who sold me this one!

>>

Well I sold that coin for about a $400 profit, so no problem with that one. So to you Ryk I say:

joebb21 · April 21, 2011 1:28PM

Paying up for a pq coin as the OP admits is normal and when looking for such pieces- going to be a requirement.
If a coin is priced to high, then just pass and move on. If the same quality coin cannot be bought for less than the original coins asking price- perhaps it was not as expensive as you thought.

16DMERC · April 21, 2011 1:41PM

Most not all...by any means....have about a 5 to 20% markup on coins, usually closer to the 5...as far as dealers go. As far as I know, and dealers I know, we a lot of times pay premiums for pq coins, sometimes more than collectors would. Simply beccause not only are we watching the market, most of us are "collectors" too...meaning we will pay more for a coin that "speaks" to us. Because of that with any given coin, some dealers might price it more, because they paid just as much as the collector would.... I think most dealers are not out to screw you, they just have as much in the coin as you would pay....this does not include telemarketers and the 20x face dealers that are out there.....jake

pennyannie · April 21, 2011 1:48PM

Paying up for a common PQ coin is a mistake. Dealers rarely pay more for that PQ coin. If all the guides show that 600 dollar coin usually sells for 300 bucks you will be buried. If the asking price is 600 and you feel that you could sell that same coin to another collector or dealer for 600 dollars tommorow go for it. If you have to look far into the future to realize the price your odds are already stacked against you.

I have found that being in a dealers good graces can be a bad thing, shure you may get first shot at a new coin at a inflated price, start passing on those offerings and your name is removed from the list. Keep buying and you stay at the head of the list.

MikeInFL · April 21, 2011 1:48PM

Ankur, For the collector, dealer loyalty, when misplaced or overvalued, can be a very expensive proposition in the coin game and is rarely rewarded, IMO. There are, of course, exceptions to this generalization. In my travels in the coin game, limited as they are, I can think of two...Mike

TomB · April 21, 2011 2:10PM

Loyalty toward supporting a specific dealer may come about not only because the dealer produces inventory that matches the qualities that one values, but might also arise because of the quality of the service that the dealer offers his/her clients as well as the character of the dealer in question. These latter two categories might fall under the header of "intangibles" and the last category might only be seen in times of unusual stress, but they can be vitally important.

Justacommeman · April 21, 2011 2:14PM

<< Loyalty toward supporting a specific dealer may come about not only because the dealer produces inventory that matches the qualities that one values, but might also arise because of the quality of the service that the dealer offers his/her clients as well as the character of the dealer in question. These latter two categories might fall under the header of "intangibles" and the last category might only be seen in times of unusual stress, but they can be vitally important. >>

Bingo

bestclser1 · April 21, 2011 2:21PM

Coin must be seen,and i have always been taught to be VERY picky.

PerryHall · April 21, 2011 11:05PM

I think many of you are missing Ankur's point. We all like PQ choice coins with tons of eye appeal but if you don't look around you may overpay for those coins. Yes, you really can overpay for a PQ choice coins and be buried in them.

crypto79 · April 21, 2011 11:29PM

<< << And sometimes the dealer just likes to have a really high markup so they can get that new place in the Hamptons. >>

Or pay for staying in 4 star hotels, eating at fancy restaurants etc while attending national conventions.

**************************************************************************************************************

<< I am not sure I would be loyal to a dealer who sold me this one!

>>

Well I sold that coin for about a $400 profit, so no problem with that one. So to you Ryk I say:

>>

I can't believe you posted those two post right after each other Ankur, you slam dealers for being greedy and then you brag about taking 40% profit on a junky coin that will absolutely entomb someone in. All the while starting a thread talking about being careful that you are going to a dealer who wants to help you make a collection and not just profit themselves. It is getting deep in the forum.

RYK · April 21, 2011 11:40PM

<< I think many of you are missing Ankur's point. We all like PQ choice coins with tons of eye appeal but if you don't look around you may overpay for those coins. Yes, you really can overpay for a PQ choice coins and be buried in them. >>

There are two issues that appear to be jumbled in the OP:

1. Whether one should pay more for nicer coins.

2. Whether there is value in having a relationship with a dealer.

Given some of the "great deals" that I have seen shown here over the years, I will stand by my statement that, over the course of time, you get what you pay for. Sure, a great buy falls into everyone's lap every now and then, but if you are a price buyer, your collection will reflect it. I say that especially to the folks who try to squeeze the last dollar out of every deal (you know who you are) because many dealers won't take your calls or emails. I also gave the example of the "great deal" the OP purchased several months ago and was very happy with it, only to become dissatisfied with it and dump it later.

In life, relationships are what makes the word go around--family relationships, business relationships, and even coin hobby relationships. Having excellent relationships with a handful of dealers has made my coin experience more enjoyable and has given me access to opportunities (both buying and selling) that would otherwise not be available to me. On any given purchase, sometimes I may pay a bit more, but over the course of time, I am receiving excellent service and value (and quality), getting strong money and interest when it comes time to sell, growing as a collector, and having a good time.

RYK · April 21, 2011 11:42PM

<< 

<< << And sometimes the dealer just likes to have a really high markup so they can get that new place in the Hamptons. >>

Or pay for staying in 4 star hotels, eating at fancy restaurants etc while attending national conventions.

**************************************************************************************************************

<< I am not sure I would be loyal to a dealer who sold me this one!

>>

Well I sold that coin for about a $400 profit, so no problem with that one. So to you Ryk I say:

>>

I can't believe you posted those two post right after each other Ankur, you slam dealers for being greedy and then you brag about taking 40% profit on a junky coin that will absolutely entomb someone in. All the while starting a thread talking about being careful that you are going to a dealer who wants to help you make a collection and not just profit themselves. It is getting deep in the forum. >>

I suspect the veracity of that statement, so I simply ignored it. Plus, per the OP's request, I am doing my best to hold back and keep the snide remarks to a minimum. If you want to know what I really think, PM me.

crypto79 · April 21, 2011 11:44PM

<< 1. Whether one should pay more for nicer coins.

>>

I think that it is always easier to find someone to dig you out when you get burried if the coin is nice. As you never really know how deep you are in it till you look up and try to get out.

AnkurJ · April 22, 2011 12:19AM

"I can't believe you posted those two post right after each other Ankur, you slam dealers for being greedy and then you brag about taking 40% profit on a junky coin that will absolutely entomb someone in. All the while starting a thread talking about being careful that you are going to a dealer who wants to help you make a collection and not just profit themselves. It is getting deep in the forum."

I recieved an offer from a collector for this coin for that amount, and I agreed to it. So sue me. I never set the price at that for what its worth.

AnkurJ · April 22, 2011 2:48AM

<< I think many of you are missing Ankur's point. We all like PQ choice coins with tons of eye appeal but if you don't look around you may overpay for those coins. Yes, you really can overpay for a PQ choice coins and be buried in them. >>

Thank You Perry!

TPRC · April 22, 2011 3:42AM

<< I think many of you are missing Ankur's point. We all like PQ choice coins with tons of eye appeal but if you don't look around you may overpay for those coins. Yes, you really can overpay for a PQ choice coins and be buried in them. >>

I struggle with this dilemma all the time. As I age/mature, including in my collecting interests, I find myself gravitating toward PQ coins and their dealers, and paying for it, mostly because these are the types of coins that keep me interested in my collection, because they are less commonly found elsewhere, and because there is usually value in it. But I keep looking because sometimes I find that real PQ coin at a great price. Often I find a lower grade coin, still quite nice and original, at a much lower price, which is still a good deal in my book, and once in a while, I simply make a poor decision, essentially "giving back" part of what I gained by diligently searching for value. It's all part of the fun of collecting if you have the time and desire. I'll pay for quality but I have a hard time enjoying a coin, even a PQ coin, that I know I'm buried in and will never get out of!

questor54 · April 22, 2011 4:06AM

With counterfeits and coin doctors being around, the quality of the dealer is at least as important to me as the quality of the coin.

I have had excellent experience with the BST sellers on this forum. And, if I am going to buy a 'serious' coin (to me that is a couple of grand or more) or ANY gold coin, I go to my short list of dealers and auction houses.

The first step in getting out of a hole is to stop digging.

CoinJunkie · April 22, 2011 4:14AM

<< I think many of you are missing Ankur's point. We all like PQ choice coins with tons of eye appeal but if you don't look around you may overpay for those coins. Yes, you really can overpay for a PQ choice coins and be buried in them. >>

"Burial" is not so much an issue if the PQ choice coin is one of the cornerstones of your long term
holdings. It all comes down to cases. As to paying up with a dealer in return for first shot on future
offerings, do it if you feel the price is justified and you can trust the dealer to actually give you first
shot. It seems potentially more important for those playing in the deep end of the pool, where the
"opportunities" are fewer and farther between. To those of us who fall more into the category of
hobbyists, I think it rarely makes sense from a cost/benefit standpoint. YMMV.

Pistareen · April 22, 2011 5:45AM

The title of this thread reminds me of the Seinfeld about cheating on your barber.

Of course, as noted, the thread isn't really about dealer loyalty (though that might be an interesting thread topic someday).

By way of response, I'll just relate this recent experience.

At a recent show, an individual I never met before brought me a handful of coins hoping to sell them. He had bought them years before when he was an active collector; now he wasn't, and he wanted to put the money into a non-numismatic hobby. He seemed like a reasonable guy -- and somehow figured that I was too -- and indicated that I knew the market better than he did at this point, so if I could just make a fair offer, that would be great.

About 20 years ago, he'd bought the coins from a well-known dealer (no longer with us) who was known for carrying exclusively nice stuff, coins of hand-selected quality for color, surface, etc. I knew that dealer back then, and I never bought a thing from him. I always went by his case to look, but I always thought his coins were WAY too expensive. But I never saw an ugly coin in his case.

He also bought coins from another dealer (alive, but no longer active) who was known for being a nice guy, pricing coins fairly, and having "something for everyone."

I reviewed the group, gave him numbers at which I could make some money, he looked shocked to the point of being speechless, and then accepted. My numbers were way in excess of what he expected on the pieces he bought from the one dealer, and just about what he paid for the pieces from the other dealer. Which dealer was which?

On the pieces from the expensive dealer who only handled choice material (not just nice, or high grade, CHOICE -- there's a distinction), he realized a substantial profit, and a good interaction when he went to sell them because the person to whom he offered them (i.e. me) was genuinely excited to have the chance to buy them. And I was happy to pay up for them.

The pieces from the other dealer were, in general, problem coins (a little cleaned, a bit corroded, a trifle dull) that I ended up paying him just about what he paid for them two decades ago. I bought them because they were part of the deal, and was only satisfied with them because I bought them "cheap."

So I've owned these coins a little while now. I've sold several from one dealer, and still have every single one from the other dealer.

Which dealer was which?

(PS -- this is a true story, though it's tailor made for this thread.)

RYK · April 22, 2011 6:11AM

So I've owned these coins a little while now. I've sold several from one dealer, and still have every single one from the other dealer.

PM enthusiastically sent re: "One dealer's" coins!

A friend brought his gold coin collection with him to Baltimore last spring. It fit into a PCGS blue box, with perhaps a little room to spare. The coins ranged in value from around $300-$20,000. We had a little show-and-tell, and at the end of it, I would have purchased his entire box from him, if I could. All of the coins were purchased from the usual household names of high end dealers, and every coin was outstanding for what it was. He probably did not get many bargains, if any, but he will have no problem selling the coins for strong money, if he ever chooses to do so.

AnkurJ · April 22, 2011 7:41AM

So would you say that if you are in it for the long hold, its ok to overpay to an extent for PQ coins? As they will always be considered PQ and keep going up/hold their value?

What scares me sometimes about overpaying for toners (like Monster toned Morgans for 10-20x sheet), is what if one day people start to dislike toning? Then what? The most I have paid for a toned Morgan to date is $300 which is about 5x sheet. Those monsters are mighty tempting though.

EVillageProwler · April 22, 2011 8:11AM

<< So would you say that if you are in it for the long hold, its ok to overpay to an extent for PQ coins? As they will always be considered PQ and keep going up/hold their value?

What scares me sometimes about overpaying for toners (like Monster toned Morgans for 10-20x sheet), is what if one day people start to dislike toning? Then what? The most I have paid for a toned Morgan to date is $300 which is about 5x sheet. Those monsters are mighty tempting though. >>

AnkurJ,

Your word choice troubles me. "Overpay" is a negative word. No one likes to overpay. However, is it really over paying if that is pretty much what that quality of PQ-ness is bringing for that type of coin on the open market? You need to focus less on the price based on some insert and more on value based on that specific coin. To tie in the thread title, this is where some degree of dealer loyalty can benefit. Actually, your choice of "loyalty" is also questionable. I recommend using "relationship". If you develop a truly sincere relationship with a dealer who is knowledgeable (within your collecting interests) and ethical, then he should be able to advise you on what is prevailing FMV for PQ material.

How do you build a relationship with a dealer? It depends on the dealer, but there are some obvious commonalities. This can be another good thread topic.

EVP

Elcontador · April 22, 2011 8:26AM

What you must do is educate yourself regarding what constitutes choice versus nice for the grade on a particular coin which interests you, and what sort of price spread is involved.

I think anyone is making a mistake by thinking that one particular dealer only carries choice material. Different dealers have more knowledge in different areas, and different dealers come across different coins in various deals. Legend carries some very nice material, but I am sure they get some so-so coins in order to make a deal happen.

And there are some specialists. I would see Rick Snow about a nice IHC before going to anyone else. I'd go to Gus Tiso about a nice Morgan.

As Ankur pointed out, it's one thing to buy a choice popular 19th century type coin, and quite another to pay 20 times sheet for a spectacularly toned coin, or to pay very strong money for a choice esoteric coin, like a 2 Cent Piece or a Trime.

pennyannie · April 22, 2011 1:26PM

Overpay?? That is where you write a check for a coin that sells for 1/2 price the next day. Overpay?? You hope that 5 years from now you can break even in a perfect world.

Is Dealer Loyalty a Double Edged Sword?

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