NumisMedia

NumisMedia Article Archives

Informative and educational articles from some of the hobby's leading numismatists

NUMISMEDIA IS SPONSORED BY

Back to the NumisMedia Home Page


Valuation of a Coin Collection
In The Estate of a Decedent and Elsewhere


by David L. Ganz

Column 10 - January 20, 2000
Law and Coins David L. Ganz

1394 Third Avenue
New York, N.Y. 10021

Phone: (212) 517 5500   Fax: (212) 772 2720

DavidLGanz@aol.com

See the Ganz Hollinger & Towe Web Page

See The 90 Second Lawyer's Home Page

David L. Ganz Biography
         A recent Internet newsgroup post sets the stage:

         "Hi. My name is Jim. This is my first post to this group. I know nothing about coins and have no interest in collecting them. Nor do I wish to spend a lot of time educating myself regarding values. I inherited a very eclectic collection of coins from my father. I would like to get the most money for them with the least amount of personal "coin education." My questions are these:

         1. If the appraiser is a potential buyer, how do I go about getting the collection appraised without worrying that the appraiser is low-balling me with the idea that he/she might get me to sell to them;

         2. If the appraiser is not a potential buyer but charges for the appraisal based upon a percentage of the appraised value, how do I go about getting the collection appraised without worrying that the appraiser is jacking up the value to increase their percentage?"

         The responses over the Internet in the newsgroup follow (extracts in part):

         Matt writes: "the best answer to both of your questions is: get the most "coin education" that you can. But, barring that, I'd think you'd have to find someone you trust."

         Alan adds "My advice is before you pay for an appraisal, get several different free appraisals from different dealers. You might try a coin show - check the newspaper ads. You didn't tell us how the coins were collected, whether any have been graded by PCGS, NGC or others. If you have such graded coins, then check eBay for current bids and prices on completed auctions. Perhaps your father indicated the grades (condition) of the coins and you can use that info also. Nothing beats learning for yourself. Good luck."

         Bill writes: "The majority of dealers and appraisers are honest people. However, there are some sharks out there. There are also opportunists who sense a strong desire to sell and make a low-ball offer. I see this as part of the bargaining process. Another thing to keep in mind, is that wholesale offers may be about 50% of the retail price, especially with, as you described it, "a very eclectic collection of coins." In my opinion, an appraisal without an offer to buy, will not help in selling your coins."

         Al doesn't even bother with valuation of the holding and simply responds: "You may think about "consignment"."

         David Ryan's response is a critical one, particularly of Jim's unwillingness to learn anything about the valuation process, or how to sell coins. "Would you sell your car or your house that way?" he asks.

         Jim has now taken these responses in and has become annoyed. His response to the query about selling his house the same way that he is approaching coins is to say: "Yes, I would. You see:

         1. With the house, I'd sell through a licensed real estate agent that is subject to state and industry regulation and oversight, who has a fiduciary obligation owed to me and who provides me with a comparison of recent and similar area sales. Apparently, from the responses I've received to my post, there is no such thing in the coin business."

         Jim has perhaps simplified the issue - because there are lawsuits every year against real estate professionals who don't act that way - but his point is an interesting one to explore further. He then continues:

         "2. As to the car, I'd go to my bank, plug the information into their blue book computer database and presto! I'd have a value that would serve as a starting point for negotiation. Apparently, from the responses I've received to my post, there are books but no such computer databases."

         Jim is wrong about this, too; NumisMedia has such a database, and the various coin periodicals publish pricing guidelines. There are even books that compile auction sale records - but this misses the entire point.

         Jim concludes: "So, the answer to your question is "Yes. While I know nothing about real estate or car values and have no interest in collecting either, and while I don't wish to spend a lot of time educating myself regarding their values, I would get the most money for them with the least amount of personal car or house education. I might be able to get more with extensive personal education but then, that was not my stated goal, was it?"

         Bill now takes offense, complains that there is no mention of a single coin in the collection, advises that there are some on-line price guides, and then adds: "You touched on a sensitive point with me - that the coin "hobby" often involves a lot of work just to avoid being taken to the cleaners."

         A new reader, Carl LaMonica, Sr., interposes some knowledge: "Jim, there is a Blue Book that has what dealers might pay for coins. In a fluctuating and speculative market such as coins it would be just a guide. You have to excuse some people as they can be hysterical and a little arrogant with no finesse at all when someone else shows little interest or logic in their chosen hobby or area of interest."

         Carl continues, "It is quite often that very attitude that drives other new people away, but they are way too self-righteous and opinionated to understand their own rudeness?"

         He then goes on to suggest http://www.numismedia.com/rarecoinprices/fmv.shtml Fair Market Value Prices, with which readers should be very familiar. Carl's conclusion: "If you want, you could browse through the above site. Good luck on dumping the coin collection for a fair price."

         Appreciating the value of the site, but the inutility of utilizing something unless a user knows how to grade coins, David Ryan writes back: "A site, as well as any book, is going to be worse than useless to anyone who is not going to take the time to learn to properly 'grade' the coins. Ultimately, he is going to make himself take some time to grade and market the coins, or he's going to take whatever some dealer offers and they all offer about the same. Education is the only way to know if you've got a good deal."

         Mark, jumping in, offers a new direction: "Just a suggestion, walk into a coin shop and say you want to sell them. Go to several shops and get several offers. Dealers are always looking for new inventory. While this is not an "Official appraisal" it is a consensus of what local dealers would be willing to pay you for them...You can always take the best offer."

         Jay Jackson then responded: "Your suggestion, while possibly a tactic often used, happens to be a gripe nearly every coin dealer has. Essentially, you are proposing that Jim perform a mobile auction using the dealers as the bidders. While I am not a dealer, I've been collecting/dabbling/buying'n'selling numisma for 41 years so I've plenty of time to have gotten to know many dealers. The problem is that a dealer has to take his own time to look over the items and make an offer based on the market and the dealer's own expenses of operation...all for naught even if Jim says, 'Thank you for your time' and walks out the door."

         He continues: "If Jim has no interest in the coins save what amount of $$$ they will [usually, quickly] generate for him, then he should announce up front that he is merely seeking an appraisal and is willing to pay for the appraisal. Or, even better, Jim should educate himself as to what he has. This means buying books on grading as well as price guides."

         Finally, Jay concludes that if Jim "is really lazy and uninterested in numismatics, then maybe he should seek out an auction house specializing in Numismatics. Any of the numismatic publications will have ads from these organizations and then he can REALLY know what these coins are worth."

         Drew tends to disagree. "The cost of evaluating collections for a potential purchase is "more than" built into the coin dealer's cost of doing business. Just as a potential purchaser of a new car often shops from dealer to dealer, not only for the lowest price on the car, as well as the highest price on trade in -- shopping coin dealers for the best price when buying or selling is no different."

         An anonymous contributor from Mindspring.com adds his perspective, which comes from experience as a collector, and also as a seller of coins. "As some others have stated, one of the best ways is to shop your collection around to several different coin shops. I worked in a coin shop for quite a few years (quite a few years ago) and it was a common occurrence for people to walk in with a shoebox full of coins looking for an idea of the value. While it might take a few minutes to go over a lot of coins I never minded making the time investment as I was getting an opportunity to make an offer on items that I might be interested in."

         The writer continues: "If the box full of stuff is of no interest and no immediate value to me, I'd be happy to tell you that there is nothing here that I would be interested in. If I saw something that I was interested in I'd make you an offer, either on an individual piece or on the whole collection; but bottom line is, it doesn't take long to come up with a price/offer. If you don't want to take the offer, and no dealer expects to be able to buy 100 percent of the coins that walk through the door, that's fine, but unless it's something I really want the offer disappears when you walk out the door. None of this 'you offered me X three weeks ago on these 5,000 Lincoln cents, I'd like to sell them now for that price', if you walk out and come back 3 weeks later we start all over. Market prices change, contents of your box change."

         Mike Dworetsky had a slightly different perspective, one gained by watching and considering the events in another industry. "I watched a jeweler giving someone an appraisal for a gold/diamond ring the other day as I was getting a new watch battery fitted."

         He continues: "The appraisal was given for insurance purposes, and the question was asked what price would be likely if the ring was for sale. The dealer explained that the insurance appraisal was £4000, but that if the customer wanted to sell it, the best he could offer was £1500 cash. Or he could take it 'on consignment' meaning that he would put it on display with a price tag of £3000 and take a percentage of the sale if and when the ring sells. And if it doesn't sell, he might take a best offer as agent for the seller."

         Mike accurately notes that "There is always a substantial difference in the two amounts. One is meant to make it possible to replace like with like, which could take a lot of time and effort at full retail prices. The other is based on the dealer's estimate of his ability to dispose of the coins at a reasonable profit without holding the stock for years."

         Significantly, Mike recognizes that dealers are in business to make money. He writes: "You could try asking for an insurance appraisal of the whole collection. You would have to pay a percentage but the advice should be honest. Let's face it, you are paying for someone else's time, shop rent, and expertise. You certainly could not expect to receive the insurance-appraised amount for the coins if you sold them to a dealer. It is important not to let on that you are thinking of selling. If the collection turns out to have good rarities and is high valued, try an auction house that regularly deals in coins. Do not put them on the Internet unless you know what you are selling. You may discover that the collection isn't of high value in which case you might try to locate your local coin club and sell them through a members' auction."

         Mike's financial advice on this: "Expect a dealer to offer perhaps 1/2 to 1/3 of catalogue retail value, but this could vary with the value and salability of the coins."

         After considering all this, Jim responds with a "thank you ALL for responding and giving me the benefit of your expertise. It has truly been helpful. I've decided to leave the collection in trust for my children to be. Again, thanks." They will face the identical issues that he did.

         Clearly, one of the most vexing issues that an estate can have -- especially a substantial one -- is how to value a coin collection, or, indeed, since most people collect more than one type of area, the collectible assets in the estate of a decedent.

         When the estate is substantial -- a gross estate of more than $675,000 ($600,000 for earlier years before 2000) -- or if the collection itself is substantial (which the Internal Revenue Service figures at a mere $3,000 or more) - one must come to grips with the issue.

         Where the estate is not a taxable one, at least on the federal level, there is typically little need for concern. However, it doesn't take a lot to be required to file an estate tax return. A house, a vacation home, a nice car, some death benefits from the business, and a life insurance policy can easily put, even the estate of someone who has done little planning, over the top and into the world of estate taxes.

         It remains for another day to offer counsel as to how such an estate can be planned and what post-mortem steps can be taken to minimize the taxes that have to be paid. However, what is germane is how the collectibles in the estate are valued.

         Valuation is a thorny issue because, as even the IRS concedes, it is hardly an exact science. As Jim and his Internet friends note, there is more than one way to value an asset - and that puts a prospective seller, or the Estate, in a tough situation.

         In fact, unless the asset in question is pure bullion pieces (such as maple leafs or krugerrands, even if by date) where the price can easily be examined on the date of death, there will be an inevitable problem, though one which taxpayers can use to their advantage.

         The problem that Jim and his colleagues write about with such intensity is the second half of the problem; the first part is in the inheritance itself, and how to value the coin collection that is part of the estate of the decedent.

         Just how to value collectibles depends on the expert whose services are employed. An expert is almost always needed, except when the executor or other party administering the estate is himself knowledgeable about the collectible field.

         Even then, it is preferable to have an independent expert review and examine a collection, and make a preliminary determination as to value, condition, and the likelihood that the collectible item is or is not taxable.

         An outside independent expert who charges a predictable fee is usually best, because they are bound to be objective. The fee should either be fixed or on an hourly basis, but never as a percentage of the amount finally determined. Most appraisal societies believe that is unethical. The IRS will recognize most appraisals done on other bases.

         The "free" appraisal that many of the writers in the Internet article take note of is worth precisely what is paid for it; it does have a significant value, at least at the start. However, where an executor, spouse or beneficiary genuinely has no idea of what it was that the decedent collected, what is it worth?

         Then, a trip to a local dealer - starting off with the caveat that you are asking for a look-see at minimal cost - may be very worthwhile.

         Appraisals in and of themselves can give valuations on several different methods:

  • Liquidation value. This is a "blow out" price where the seller is trying to sell the material, almost regardless of price. It typically is the lowest appraised value. Not typically used in an estate appraisal, it can be under certain circumstances.
  • Replacement cost: This is a typical "insurance" appraisal technique and determines what it would cost, as of a particular point in time, to obtain an identical item. It's difficult where unique items are involved, but analogies can be drawn.
  • Fair Market Value: What a theoretical willing and knowledgeable buyer would pay a theoretical, willing and knowledgeable seller is the fair market value of the item.

             There are no easy answers to this compelling and time-consuming question, but it is one that faces every executor whose decedent was a former collector. As is true of everything in this area, proceed with caution. Haste can make waste and loss of money in the process.


  • Law and Coins Law and Coins Law and Coins - Current Article

    David L. Ganz Biography

    Law and Coins Article Archive

    Copyright 2000 by David L Ganz, all rights reserved.

    The publisher is not rendering legal or accounting advice and recommends
    that if you seek such advice that you do so from a competent professional.






    Search NumisMedia

    Keyword search all of our past and present numismatic articles

    Custom Search






    Brought to you by

    E-mail questions & comments to numismedia@yahoo.com
    Copyright © 2024 Numismatic Interactive Network, LLC
    All Rights Reserved. Terms of Use - About Us - Help Center








    NumisMedia

    Monthly

    Archive


    NumisMedia Monthly Archive

    Our monthly article detailing specific areas of numismatics for dealers, collectors, and investors of U.S. Rare Coins






    [Most Recent Quotes from www.kitco.com]


    Best Kept Secret of Coin Dealers

    eBay US Coins