Just Ask John: Determining Coin Value

Every week we get emails from our clients asking our fearless leader John Brush for his knowledge and opinions on a wide range of issues within the coin industry. Last week, John shared a few tips on how we are adapting as a company to the lack of coin shows! This week John addresses how we determine the value of a coin and how we come up with our listed price.

I am a collector, not an investor.  I never buy a coin based upon expectation of future profit, although at some point profit might be realized if I trade up.  I sold all but my gem coins before law school in the late 80s (no coin was 3rd party graded), then started collecting again several years ago.  My love of coins has not changed, but everything else about collecting has (along with my budget).

That said, I love the hunt for the best graded type coins for the money, and the entry price when I bid/buy is important to me.  With limited time, and a dizzying array of “bid” or price sources, I have come to rely on your auction listings that show: “DLRC estimate v. CDN/CPG” pricing guides.  The values almost never match, and often DLRC is slightly higher (or lower), which really intrigues me - often a terrific coin at a slightly higher (or lower) entry price, which could impact my bid decision on a coin offered by DLRC even after I study the actual coin offered.

Could you please explain what criteria you (or DLRC staff) use to set the “DLRC” valuation for auction pieces?  Is it the coin, the strike, the overall appeal, the current trend for type, the overall market activity for that type coin at the moment, prior auction prices, the grade assigned for the piece, or some combination?  Any information on this question will be of great value for me.  Thank you.
- S.W. of Philadelphia, PA

S.W.,

Thank you for the email and the detailed question. This is a topic that’s brought to us quite frequently, so I figure it’s worth trying to tackle here. The DLRC Estimate is a complex calculation of several different values that we use. There’s no published guide for these values, rather it’s a conglomeration of different price guides and a thought process that we go through on Every. Single. Coin. And, as no coin is exactly alike, if you’re looking at two different 1881-S $1 NGC MS65, the values are likely to vary.

So, I’ll answer in two different parts.

Part 1: How do we price coins?
The system at DLRC is that 95-99% of the coins that we offer through the website go to one of our auctions first. The “price” isn’t that important in this part of the process, however, if the coin goes unsold in the auction, it will list directly on the website with a retail price and the ability for a customer to make their own offer. The price that is reflected here is a combination of several different price guides. We typically use the PCGS Price Guide, the CPG (Collector’s Price Guide), the NGC Price Guide (sometimes), the wholesale Greysheet, recent Auction Prices Realized as well as several proprietary dealer trading networks that we belong to that have posted buy and sell prices. Lastly, there is a thriving dealer-to-dealer component in the coin market that exists between several different websites, social media outlets, and message boards. We monitor all these venues to better understand the market and often use it to source coins. The coin show wholesale market is normally a factor but obviously, it doesn’t really apply at this time. One thing that I ALWAYS try to ignore in these calculations is whatever our cost was, which allows for independence in the pricing. When you buy a LOT of coins, you obviously make a mistake or two, and I’m no exception. However, if there’s a coin we got a good deal on, we’ll typically discount the price as we prefer to pass this along to the collector.

Part 2: How do we establish a price when buying coins?
This question is even a bit harder to answer as it involves a lot of judgment calls. There are many ways that dealers present their coins and their pricing which makes a big difference in how evaluate a coin we are interested in purchasing.

1. Easy Wholesale: They price each of the coins. You can buy them or not, but the prices are the prices. There’s typically no room there and the more you buy from them, the earlier you get to look at their coins. We prefer the this process as it’s quick, easy, and often productive. And if the dealer prices his coins too aggressively, we don’t waste a ton of time trying to negotiate.

2. Average Wholesale: They put a price on the coin, but there’s some room in their pricing. Most folks do this, but it takes more time. In many cases it’s because the actual coin owners aren’t selling the coins and there’s a salesman involved who is hoping for a bit more than the minimum that they’ll actually take. There’s a lot of gamesmanship here between dealers, but it’s a popular way to sell coins, though sometimes unnecessarily time-consuming.

3. Ridiculous Wholesale: There are some dealers - who typically deal in more expensive coins - that start the pricing at $50,000 but in the end can be negotiated down to $25,000. It’s hard to believe, but they are out there. I’m generally a patient person (when it doesn’t come to my kids apparently), but I don’t have patience for that. I avoid. Or tell them to price the coins at their absolute best price before I review. Usually, I don't bother with these dealers.

4. Middle-man Wholesale:

a. Focus on Quantity: There are several different versions of these. Some take coins from MANY smaller dealers and have 5-6 boxes of coins to sell. These guys have material priced all over the board from fair prices to sometimes way inflated. These guys can take a lot of time to work with as there’s a lot of quantity and the prices are inconsistent, but they typically have a wide variety of material and if you’re willing to do the work and have patience, it’s worthwhile.

b. Focus on Quality: These guys take a few expensive coins from dealers and try to walk them across the entire bourse floor at a major show (or make phone calls). It’s the ideal way to overly market a coin and to remove the freshness of it, and it’s also a high mark-up business. This is the process by which some dealers decide to ask for more than they can typically get for the coin, so it’s all about a higher mark-up and trying to get the coin to sell somehow! Typically we don't do much business with these types of dealers unless they have an item we REALLY need.

There are other variations as well in the wholesale market, but this is a good overview. As you can see, our approach with all these folks varies, but in general, we LOVE working with the easy wholesale. It’s simple, productive, and efficient. Average Wholesale is also not a terrible format. We’d prefer it to be a bit easier with pricing, but in general you can typically find some interesting coins at prices that are mutually agreeable. It takes some time, but it’s generally worth the effort.

When evaluating what we want to pay for a coin, we use all the same price guides, auction prices, and wholesale knowledge. However, we also must look at each coin with the different views of what we can do with the coin. Typically this can be broken down into two categories, coins that we’d “retail” (which simply means list on our website publicly) and coins that should be wholesaled (coins we’d be embarrassed to offer so they go to a dealer).

1. Retail: These three factors are of the utmost importance when buying: If the coin is eye-appealing, quality is acceptable, and it’s desirable by a collector. When we know we need a coin to fill a gap in our inventory or meet the demand of our clients, we’re willing to pay more for it. However, if the coin doesn’t check each of these boxes, the values will be completely different. This is the primary reason why we can’t make offers on coins without having them in-hand to evaluate. We could give you a range that’s as wide as the Grand Canyon, but it doesn’t really serve either of us. We’d rather be able to pay you a bit more for the coin or cover the return shipping than to mislead a collector. Overall, there’s a lot of “art” and subjectivity involved with establishing prices here, but we try to be respectful of everyone’s time and start off the offer with a fair number and keep the haggling to a minimum.

2. Wholesale: In general, if the coin doesn’t check all the above boxes or if the coin is a “3-star” in our eyes, we aren’t going to want to pass it along to a collector. So, we’re going to make an offer on it that’s in-line with the wholesale market on the coin. When valuing coins for the wholesale market, it’s a much more rigid formulaic price. It’s kind of like buying a stock as there’s a buy and sell price on it, but there’s not much creativity involved.

Whew! Thanks for hanging in there; I hope you found this post enlightening! The inevitable follow-up is: "which price guides are more accurate for certain types of coins?" If there is interest in pursuing that topic, I’ll give it a shot, but that’s another post for another day.

Numismatically Yours,
John Brush

Do you have a topic about DLRC, the coin industry, or the collecting hobby that you want John to tackle? Email your question to coingroup@davidlawrence.com and it might be featured in a future edition of “Just Ask John!”