Insider's Tips for Buying and Selling Coins

Foreign Coin Collection
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Whether you are buying or selling coins, you can increase your advantage when negotiating with coin dealers by understanding how the coin market works behind the scenes. One of the biggest problems I see, as an observer of the coin collecting marketplace, is the wide gulf between what the average consumer expects from a coin dealer, and what the average coin dealer believes he should provide to the consumer. The majority of these differences boil down to trust.

The average consumer thinks he can trust the coin dealer to give him an honest appraisal and pay a fair price for the coins he is selling. The average dealer feels it is right to pay the lowest price he can for the coins, to maximize his profit, and that it is up to the consumer to do his homework. Fortunately, by finding this article, you will be on a much better footing when dealing with coin dealers.

coins and paper money
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Overview of the Coin Dealing Business

There are two major categories of coin dealers—the wholesaler and the retailer. The wholesaler aggressively seeks to bring new material into the marketplace, and often attends coin shows, local auctions, and runs advertising offering to buy coins. Most of this material is sold in bulk lots to retail-based dealers. In other words, they will buy coins from just about anybody but only sell their coins to other dealers. Unfortunately, these dealers must pay lower prices in order to make a profit on their sales.

The retail coin dealer gets most of his stock from the wholesalers. Although retail coin dealers may also attend coin shows and buy locally, most of his business income is from servicing a clientele of single-coin buyers. A dealer of this type is more likely to pay you higher prices for your coins since they don't have to pass through two sets of hands before being sold. But, be careful some local dealers are also often the worst of the cheats! This is because the larger dealers are more likely to belong to organizations that require them to subscribe to a Code of Ethics, such as the American Numismatic Association or the Professional Numismatists Guild. The number one consideration that anybody who buys or sells coins must consider is recourse. What kind of recourse do you have if things go bad?

This is not to say that all coin dealers are thieves and crooks. On the contrary. Vast majority of coin dealers hold up to a series of ethics and moralities in order to ensure their future business. However, it goes without saying, that there are a few bad apples that can destroy your trust in the coin collecting hobby.

Wholesale Coin Prices

One of the best ways to arm yourself against the savvy coin dealer is knowing the wholesale prices he pays for his coins. A very widely-used standard in U.S. coins is the Coin Dealer Newsletter, which is printed on grey paper and comes out weekly. People also referred to it as the "Grey Sheet," or "CDN."

Most professional coin dealers subscribe to this publication, which lists the wholesale values for every major type of U.S. coin and commemorative coins. It also carries prices for mint sets, slabbed coins, and banknotes called the "green sheet."

An important concept to remember when discussing Grey Sheet prices is that we are talking about the wholesale market. Two things characterize this market: (1) Most deals for bulk quantities, so the prices don't refer to single coins, and (2) Deals are minimal service transactions. You can't go up to a coin dealer who has to appraise and grade your collection for you and expect him to pay Grey Sheet "bid" prices. However, the Grey Sheet should give you a good idea of what your coins are worth in a general sense, so you don't sell a $1,000 coin for $200.

Coin Dealer Profit Margins

As a general rule, the more common a coin is, and the lower grade the coin is, the higher the profit margin (expressed as a percentage of the selling price) for the dealer must be. The reason for this is that low-grade, common coins are harder to sell. Another reason for this difference is dollar value. If a dealer buys a common date, heavily circulated 1940 Wheat Cent from you, he might pay you 2 cents for the coin and sell it for 5 cents, making a greater than 100% profit (but still only 3 cents). But if he buys a key date, heavily circulated coin, such as a 1931-S Wheat Cent in Good (G-4 grade), he might be able to pay you $50 for it, even though he will make only a 20% profit when he sells it for $60. The difference is that the key 1931-S coin is likely to sell much faster than the 1940 cent. Additionally, the dollar value involved much greater.

Another general rule of wholesale coin pricing is that the more valuable the coin is, the smaller the profit margin needs to be, percentage-wise. If a coin dealer buys a coin for $15,000 and quickly sells it for $16,000, he can land a thousand dollar profit. But, if this coin is tied up in his inventory for a long time before someone buys it, there is a large sum of money that is not earning him anything.

All told, the profit margins for coins are primarily determined by these three factors:

  • How quickly the coin can be resold (market demand)
  • How high the dollar value is (capital outlay)
  • The condition of the coin market overall (market dynamics)

Coin dealers must strike a balance between these factors to remain profitable.

Coin Dealers and Common Junk

One of the reasons there is such a disparity between what the average consumer expects, and what the coin dealer delivers when it comes to buying coins from the public is that coin dealers see vast amounts of common "junk." By "junk" I mean common date wheat pennies, circulated Buffalo Nickels and Mercury Dimes, worn Washington Quarters and circulated Franklin and Kennedy Halves.

People offer coin dealers so much of this type of material that many of them get tired of seeing it. They give such material the cursory once-over and offer low-ball prices for it based on long experience. Usually, people have already pulled out the more valuable coins, leaving the "junk." The customer feels that his coins haven't been given a fair appraisal. What if the dealer overlooked something rare? Shouldn't he look each coin up to be certain?

People who sell their coins to coin dealers often feel they have not been treated fairly. The dealer might stir his finger around a box or jar of coins for a minute or two and then make an offer that seems too low. Even worse are the cases where the dealer opens up the blue Whitman folders, takes a quick glance, and then offers $9 for the whole collection. How can he know what the coins are worth if he doesn't even look at each one first? Is he trying to rip me off?

The Realities of Selling Coins

As explained previously, coin dealers see a vast amount of what they commonly call "junk." Although these coins do have a value, they are so often seen for sale but are so hard to sell, that the coin dealer is reluctant to buy them. When someone brings in a large can of Wheat Cents, for example, most dealers will run their fingers through them to assess the range of dates and average quality of the coins. If they appear to be a run-of-the-mill common date, circulated Wheaties, the dealer will usually offer a flat rate for the lot. This price is based on his estimate of the weight, or he might run them through a coin counter. Whatever he does, he assuming two things:

  1. That any valuable dates have been removed from the lot already, and
  2. If the seller has not searched the coins, the valuable dates are so rare that odds have it none of the valuable coins will turn up in this lot.

Therefore, he pays a "worst case scenario" price for the coins. The same is true for most of the coins minted in the twentieth century, whether they are Buffalo nickels, Mercury dimes, Washington quarters, etc. Dealers will make a quick assessment of grade and dates and then make an offer based on the bulk price. Frequently, the price he offers is based on the bullion value of the coins. If the dealer should happen to find a rare coin in the batch, that's great, but most of the time he doesn't, and such coins are not worth the time it takes to check each one.

If you want to maximize the money the dealer will pay you for your coins; you'll need to sort them into batches and be sure to remove any coin worth ten times face value or more according to the Red Book. Depending on the coin type, there are several different ways to sort your coins to maximizing the price. For Wheat cents, sorting them by decades will help. On the average, wheat cents in the teens go for 15 to 18 cents each depending on average grade. Cents in the 1920's go for 10 to 12 plus; Cents in the 1930's go for 6 to 8 cents; and circulated cents in the 1940's and 1950's usually go for 2 cents each. Mixed, unsorted Wheaties go for 2 cents each, or maybe a little more if the dealer sees they contain early dates. By sorting them into decades, you've improved your profit margin. Further sorting, into individual years, can also help if you have enough to make full rolls.

Selling Coin Collections

If you have complete coin collections in folders or albums, it is best to leave them in the album. Keep in mind that dealers can often make really quick decisions about the value because they have been doing it for so long. For example, most dealers who buy coins see many blue Whitman folders every month. They can quickly glance at the coins in the folder and appraise the value of the collection based on which holes are empty. Without those few rare "key dates," the coins might as well be in a jar or shoe box, and the dealer gives you the price accordingly. If the coins he sees in the folder are of higher than normal grade, his offer should be higher, too, but most people feel slighted when coin dealers merely glance at their collections and then makes an offer.

The same principle applies to coins in other folders, such as Dansco albums and other types of coin folders and albums. It only takes a moment for someone who has the key dates memorized to check to see if they're in your collection.

Selling Coins in Slabs and 2x2's

If the coins are encapsulated in slabs, they are usually worth more than the same coin that would be in a 2 x 2 cardboard holder. How much more depends on the quality of the slab. If it is a PCGS or NGC slab, the coin should trade very near the Grey Sheet price, since these prices are for "sight unseen" coins which tend to be among the lowest examples in that grade. If the slab is ANACS or ICG, it is still pretty solid, but not worth as much as the top tier PCGS and NGC slabbed coins.

If the coin is in any other slab than these, it is usually worth about the same amount than if it was in a 2x2. The best way to maximize profits for non-premium slabbed coins and 2x2's is to consult the Grey Sheet and try to get near the "bid" price for your coins. Knowing the values ahead of time is the key, but remember that the dealer needs room to make a profit.

Edited by: James Bucki