A Seller's Paradise is a Buyer's Trap
WestySteve
Posts: 567 ✭✭✭
I wanted comments on this article. Tell me your thoughts...
I’ve been reading with interest the results of the 2012 Florida United Numismatists (FUN) auction. From the feedback that I’ve been getting from one of my favorite forum sites, Collector’s Universe, very high prices were made on much of the material. A high grade early cent even broke the $1 million mark. From the “buzz” before this auction, it’s no wonder that high prices were paid. So many were talking about bidding or attending the auctions. There were multiple ways to bid. And some very good material crossed the auction block. At the same time, I’ve been reading comments from some of the attendees that a few lackluster items crossed the auction block yielding higher prices than might have been warranted.
Based on this feedback, I can only imagine that the sellers are giddy with excitement about the auction results. Most times, sales are made to the satisfaction of both parties involved. The seller is happy with a good price, and the buyer purchased something rare or exciting that is seldom offered for sale so they are happy too. Sometimes paying top dollar is warranted. For example, for almost every news-worthy rarity sold…like items that you hear about in the mainstream media following the sale…a rarified price was likely paid for the era that it was purchased. For example, the high grade early cent that recently sold for $1 million may make the uninitiated wrinkle their brow and say, “those people have more money than sense”…HOWEVER, in 10 or 15 years, when that cent is sold for $2 million, those same uninitiated folks will likely comment on how "lucky" the seller was to sell their cent for so much money. Luck indeed!
So to be clear, for those items that exhibit (1.) Great rarity (2.) Unusually Original Condition and (3.) a High Degree of Popularity due to their “wow factor”will always be worth top dollar, or even more than top dollar depending on the time horizon of the buyer.
HOWEVER, what about the items that don’t meet this criteria in the same auction? Sometimes group-think prevails in auctions. A frenzy can set in. The spark of this frenzy might be the mere presence of these rare “first water” collectibles that everyone wants. Observing the auction is exciting and the attendees want to feel that excitement in their price range too. A well promoted auction doesn’t hurt in fanning the flames either. Sometimes, auction goers will get carried away in the excitement, or the competition to win the relatively few items available to a relatively overly-large group of bidders.
So ask yourselves these questions:
Would you rather sell an item in a well advertised, well attended auction, or a poorly advertised, lightly attended auction?
Put the shoe on the other foot…would you rather buy an item in a well advertised, well attended auction, or a poorly advertised, lightly attended auction?
The answers should be obvious. Yes...if the collectible you’re looking for can only be purchased in a heavily attended auction, then that is obviously where you will need to go. But should you buy a collectible in the highly attended, well advertised auction if you can get it elsewhere?
Probably not…but of course, it does depend on the price. In cases like these, the smart move is to decide on your bid before-hand and stick to it. If you walk away with nothing, you made the correct decision.
Do you want to make money buying and selling collectibles? There is a very popular television show on one of my favorite cable channels about a man who makes his living buying and selling classic cars. It’s a great show for car nuts like me. If you watch the show long enough, you’ll realize why the man is able to make a living following his passion. It is a simple formula: He tends to buy cars outright for prices below what he could buy them at auction, or he will attend smaller, lightly attended auctions for his purchases. But he only sells them at the larger auctions. I’m sure he’ll also sell them for full retail in his showroom too. And the difference between what he buys his cars for, and what he sells them for, is borne by the sellers who he buys from and the buyers who get caught up in a buying frenzy. Don’t be one of them.
Bottom line: Unless you collect first-water collectibles that can only be obtained from large auctions, be very, very, careful about what you pay for your more common items in a big and exciting auction. Realize that in a highly advertised and populated auction, you will be bidding against people who have a great, great, love for their collectibles and some of them do not have to worry so much about dropping large sums of money to pursue their passion. And they just might have auction fever! Instead, buy in locations where those people likely won’t be found.
I’ve been reading with interest the results of the 2012 Florida United Numismatists (FUN) auction. From the feedback that I’ve been getting from one of my favorite forum sites, Collector’s Universe, very high prices were made on much of the material. A high grade early cent even broke the $1 million mark. From the “buzz” before this auction, it’s no wonder that high prices were paid. So many were talking about bidding or attending the auctions. There were multiple ways to bid. And some very good material crossed the auction block. At the same time, I’ve been reading comments from some of the attendees that a few lackluster items crossed the auction block yielding higher prices than might have been warranted.
Based on this feedback, I can only imagine that the sellers are giddy with excitement about the auction results. Most times, sales are made to the satisfaction of both parties involved. The seller is happy with a good price, and the buyer purchased something rare or exciting that is seldom offered for sale so they are happy too. Sometimes paying top dollar is warranted. For example, for almost every news-worthy rarity sold…like items that you hear about in the mainstream media following the sale…a rarified price was likely paid for the era that it was purchased. For example, the high grade early cent that recently sold for $1 million may make the uninitiated wrinkle their brow and say, “those people have more money than sense”…HOWEVER, in 10 or 15 years, when that cent is sold for $2 million, those same uninitiated folks will likely comment on how "lucky" the seller was to sell their cent for so much money. Luck indeed!
So to be clear, for those items that exhibit (1.) Great rarity (2.) Unusually Original Condition and (3.) a High Degree of Popularity due to their “wow factor”will always be worth top dollar, or even more than top dollar depending on the time horizon of the buyer.
HOWEVER, what about the items that don’t meet this criteria in the same auction? Sometimes group-think prevails in auctions. A frenzy can set in. The spark of this frenzy might be the mere presence of these rare “first water” collectibles that everyone wants. Observing the auction is exciting and the attendees want to feel that excitement in their price range too. A well promoted auction doesn’t hurt in fanning the flames either. Sometimes, auction goers will get carried away in the excitement, or the competition to win the relatively few items available to a relatively overly-large group of bidders.
So ask yourselves these questions:
Would you rather sell an item in a well advertised, well attended auction, or a poorly advertised, lightly attended auction?
Put the shoe on the other foot…would you rather buy an item in a well advertised, well attended auction, or a poorly advertised, lightly attended auction?
The answers should be obvious. Yes...if the collectible you’re looking for can only be purchased in a heavily attended auction, then that is obviously where you will need to go. But should you buy a collectible in the highly attended, well advertised auction if you can get it elsewhere?
Probably not…but of course, it does depend on the price. In cases like these, the smart move is to decide on your bid before-hand and stick to it. If you walk away with nothing, you made the correct decision.
Do you want to make money buying and selling collectibles? There is a very popular television show on one of my favorite cable channels about a man who makes his living buying and selling classic cars. It’s a great show for car nuts like me. If you watch the show long enough, you’ll realize why the man is able to make a living following his passion. It is a simple formula: He tends to buy cars outright for prices below what he could buy them at auction, or he will attend smaller, lightly attended auctions for his purchases. But he only sells them at the larger auctions. I’m sure he’ll also sell them for full retail in his showroom too. And the difference between what he buys his cars for, and what he sells them for, is borne by the sellers who he buys from and the buyers who get caught up in a buying frenzy. Don’t be one of them.
Bottom line: Unless you collect first-water collectibles that can only be obtained from large auctions, be very, very, careful about what you pay for your more common items in a big and exciting auction. Realize that in a highly advertised and populated auction, you will be bidding against people who have a great, great, love for their collectibles and some of them do not have to worry so much about dropping large sums of money to pursue their passion. And they just might have auction fever! Instead, buy in locations where those people likely won’t be found.
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Comments
RMR: 'Wer, wenn ich schriee, hörte mich denn aus der Engel Ordnungen?'
CJ: 'No one!' [Ain't no angels in the coin biz]
Were you directing that at me? My experience is that I've been a coin collector for 37 years. A fascination with the coin market sparked a general interest in economics and markets, so I got an MBA which I don't use at all in my day job. I've learned alot from comparing and contrasting the different "rules" of different collectibles. There are certain common denominators that apply to virtually all collectibles. I am not a dealer, but I think a dealer would be making a mistake to bid on more common items in a "hot auction". They'd be wise to sell in one though.
That being said, your own experiences may be different from my perspective. From your ebay store, your business model is to sell high grade mint products. That doesn't fit squarely with the type of collectibles I'm writing about, as grade rarities on moderns are their own animal. For example, a highest price paid for an early copper would send shockwaves through the copper coin market, but a highest price paid for a MS70 U.S. Mint bullion coin wouldn't have the same effect.
I'd be very interested if you would outline your position instead of just state it. Make your case.
Steve
<< <i>I don't think that your analysis is all that relevant. Yes, auction fever can cause things to get out of hand. But...buying common coins at a big auction is frequently not the most cost-effective acquisition method for collectors. How often do genuinely rare coins appear at 'poorly advertised, lightly attended' auctions? There is a reason that consignors choose the big auction houses---they produce better results. There is a cost associated with attending out-of-town auctions, major or minor. Once in a while, a collector may get lucky at a small auction or estate sale (ditto regarding buying a nice coin for a bargain price via ebay), but I wouldn't view these as useful venues for acquiring nice collector coins. >>
Sonora...A fair assessment. I did qualify what I wrote saying that you have to go to the big auctions for the best material. I'm referring to the "less than the best but still pretty good" material here. And yes, you do have to get lucky, but I'm a big advocate of that. Meaning, I think it's wiser to save your money until you see something really great at a very good price and then pull the trigger. And try to put yourself in the position to make that happen.
Steve
I thoroughly agree with this statement. A very important lesson for every collector (of anything) to learn ASAP is patience. Impulse-buying frequently leads to disappointment.
The second lesson concerns the importance of quality vs. quantity.
RMR: 'Wer, wenn ich schriee, hörte mich denn aus der Engel Ordnungen?'
CJ: 'No one!' [Ain't no angels in the coin biz]
I think your analysis is right on. I think it will indeed transcend not just coin markets but most collectibles. The buying frenzy at FUN will be mirrored at art auctions, classic car auctions, etc., etc,. etc...
The bigger the venue the bigger the crowds, the deeper the pockets, and the stiffer the competition for nearly everything.
Well thought out....
BB
Successful BST xactions w/PCcoins, Drunner, Manofcoins, Rampage, docg, Poppee, RobKool, and MichealDixon.
The second lesson concerns the importance of quality vs. quantity.
Sonora THAT point is also one for the ages!!!
Successful BST xactions w/PCcoins, Drunner, Manofcoins, Rampage, docg, Poppee, RobKool, and MichealDixon.
So some sellers are very happy, some are sad, and most are happy that their coins sold for the amounts they should have.
I believe the lesson for collectors is: Don't chase any coin unless it is just about irreplaceable. Example: the 1802 half dime in PCGS G-6 that sold for $57,500 at the FUN auction. Obviously two bidders wanted this coin intensely, and there aren't any others available at this time, particularly ones that will make it into a graded holder.
Second lesson for collectors: If that same 1802 half dime were in some dealer's case for sale, before the auction result, it probably would have been significantly less than $57,500. So, if you were interested and the coin were cheaper, it would have been better to buy it from a dealer's stock than from the auction.
The OP stated,
<< <i>So to be clear, for those items that exhibit (1.) Great rarity (2.) Unusually Original Condition and (3.) a High Degree of Popularity due to their “wow factor”will always be worth top dollar, or even more than top dollar depending on the time horizon of the buyer.
HOWEVER, what about the items that don’t meet this criteria in the same auction? Sometimes group-think prevails in auctions. A frenzy can set in. The spark of this frenzy might be the mere presence of these rare “first water” collectibles that everyone wants. Observing the auction is exciting and the attendees want to feel that excitement in their price range too. A well promoted auction doesn’t hurt in fanning the flames either. Sometimes, auction goers will get carried away in the excitement, or the competition to win the relatively few items available to a relatively overly-large group of bidders. >>
The group-think and auction fever concept is IMO way overrated. Sure, in a sale like Eliasberg everyone wants to come away with something. But in my experience, a subpar coin in a major high-powered auction almost always sells for a sub-par price. And a really great coin can sell at a low price if everyone is focused somewhere else. At a recent big auction, I bought a coin for less than $1,000 that had been listed on a major dealer's website for $4,000. But it could just as easily gone well over $4,000.
Making money in this business is a lot more complicated than following simple rules like "always sell at big auctions", "always buy at small auctions", etc.
An authorized PCGS dealer, and a contributor to the Red Book.
<< <i>Regardless of what auction it is, it seems to me that some coins go for big money, some go cheap, and most go right about where they should.
Making money in this business is a lot more complicated than following simple rules like "always sell at big auctions", "always buy at small auctions", etc. >>
Great reply. Thanks for the input. If I made it seem simple, then I need to work on my writing. Blogging about this stuff requires the writer to speak in generalities. I definitely didn't want to convey that the SIZE of the auction was a big factor. My use of "big" has more to do with "well publicized". In fact, a small (in items) auction that is over-advertised can be a buyer's nightmare because everyone wants to buy something and there aren't many things to buy so they all fight it out.
I'm saying that the odds are better that you can get a A-, B+ or B material at a good price at a rural/less publicized forum than you can at a highly publicized well attended auction. But yes, this does not mean you put blinders on and follow this rule. I'm just saying that playing he odds makes sense and awareness of auction fever makes sense.
I think I need to re-write my blog a little bit. This was good.
Steve
(Just think of city streets clogged with a hundred thousand horses each generating 15 lbs of manure every day...)