The most frequently asked question of a numismatist or coin dealer is "How much is this coin worth?" The answer depends upon which side of the bargaining table you are sitting on. In other words, it will be worth one amount if you are buying the coin, and a different amount if you are selling it. Of course, all coin collectors want to make wise investments when purchasing coins. Therefore, understanding how the coin market works and the terminology used is important.
There is a big difference between the price of a coin and the value of a coin. Although you often see these words used interchangeably, it is important that you understand the different concepts represented by each term. Otherwise, you will be very disappointed and become frustrated when buying and selling coins.
Remember, a coin dealer cannot contact the United States Mint in order more 1909 pennies. The only way to acquire 1909 Lincoln pennies for his inventory is to purchase them from customers that walk into his store. Additionally, he is in business to make a profit. Therefore he must buy the coins at a particular value and sell them at a higher price in order to make a profit.
The "Price" of a Coin
This is pretty straightforward. The "price" of a coin is merely the amount that it would sell for on the open market, otherwise known as its "retail price." Coin prices are set by many different factors, including the type and grade of the coin, its rarity and desirability, and to some extent its availability in the marketplace. The most frequently used price guide to U.S. coins is the Red Book.
A price list is a list of coins from a dealer's inventory that they have for sale at a given price. It is an offer from a dealer to sell your coin at that particular price.
The "Value" of a Coin
Here's where it gets a little complicated. When you want to establish what your coin collection is worth today if you wanted to sell it, you are establishing its value. The amount of money you can sell your coins for (its "value") is significantly less than its purchase "price" if you had to replace your coins by purchasing them from a coin dealer. Dealers need to make a profit to stay in business, so when you go to sell your collection, you're not going to get those nice, high Red Book prices. The Red Book prices are retail amounts.
Consider the Blue Book
There is another book, known as the Blue Book, (formally titled "Handbook of United States Coins"), which is the most widely used guide to wholesale coin values. These are the average values a coin dealer will offer to pay you for your coin collection. They typically run between 50% and 75% of what the exact same coins would sell for at the retail price. Coins that derive most of their value from bullion (such as common-date American Eagles and Double Eagles) will get you more (75% to 85% or so) because most of their value is based on the gold itself, rather than the rarity of the coin.
Appraising Your Collection for Insurance Purposes
The one time when it is correct to use the "price" or retail value to determine what your collection is worth, is when you want to establish its value for insurance purposes. In this case, you want to purchase insurance to cover the replacement cost of your coin collection. Since you'd have to pay the Red Book (retail) price to replace them, this is the coin value listing you should use for insurance purposes.
Always Be Realistic About Prices and Values
There is nothing more satisfying to a collector than to pluck a coin worth $100 in the Red Book out a dealer's $10 pick-bin. And in this case, you've probably done very well, because it's likely the dealer overlooked something here. But the more typical case is finding lots of $20 Red Book priced coins the $10 bin. This is because the dealer is probably overstocked in this material, and would be happy to get his cash back to make more marketable purchases.
Be careful that you don't get carried away thinking you're getting bargains in cases like this, because the amount you can sell the coin for, its value to you, is about what you paid for it. In other words, don't deceive yourself into thinking that the value of a given coin is equivalent to the price you paid for it.
Consider getting yourself a copy of the Blue Book so that you can get a realistic handle on how much you can actually sell your coin collection for today if you really needed to. This book would also be appropriate to use if you need to determine the value of a coin collection that you inherited.