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Law and Coins
AN EXTENSIVE LOOK AT THE LAWS
THAT GOVERN OUR NUMISMATIC
COMMUNITY AND OTHER TOPICS
OF INTEREST
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What Do I Need to Do When I Sell My Coins
by David L. Ganz
Column 13 - July 27, 2000
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Every collector must one day face the challenge of selling off some, or all, of his/her collection. Even great collectors, like the late John Jay Pittman, must cope with this issue -- though in his case, through advance planning, the actual work was done by heirs. The same was true of Louis Eliasberg, and even individuals whose collecting pleasure was such that they declined to dispose of coins during their lifetime.
In deciding to sell off, trade, or dispose of a collection of a lifetime, important decisions have to be made that have significant implications to every collector. These involve estate taxes, capital gains taxes, capital losses, timing, and a potential host of other issues.
This is, and continues to be, true, regardless of talk that Congress will abolish the capital gains tax (typically, they don't eliminate it, they just equalize it with the regular rate of taxation - so it can be changed back later)
There is no one answer that is right for everyone. The late Bob Medlar, one-time ANA governor, and Texas dealer, told me that the collector who refused to buy, sell or trade simply did not acknowledge the mistakes that crop up along the way.
"Of course I've sold coins and currency," Medlar said. "Usually, they were my mistakes," the coins that looked better than they were, the currency that didn't appear to be creased, but had been starched instead.
What to do with the collection of a lifetime, or even a short time? For some collectors, outright, immediate sale is appropriate. Usually, this is the case where the overall collection is less than $10,000 in value. But even here, there are important concerns that must be addressed.
Sometimes, particularly if some of the material is esoteric, or of a type that is difficult to grade, the question may arise as to whether you can get more from an outright sale or by consigning the goods to a part-time, or full-time dealer to offer for sale. Auctions are another alternative.
For a modest collection, the issues that must be dealt with often include the measure of security that will be offered to you if payment, in full, is not received at the time that the collection is delivered over to the re-seller.
Suppose you have collected Indian head and flying eagle cents, and that the centerpiece of your collection is an 1856 flying eagle cent, a neat, rare coin with only about 1,000 pieces known -- with most of the collection being in x.f./a.u. to uncirculated, with an occasional proof (including the 1856 cent, as all are).
There's nothing to say that you can't dispose of the collection through several different ways; the 1856 cent could be auctioned separately, or perhaps the entire set could be put up for sale on the bidding block.
The late Abe Kosoff loved to start his auction sales with an 1856 flying eagle cent, because he said it attracted bidders and interest. (Whether it was the Adolphe Menjou sale in 1950, or the Alex Shuford sale in 1968, that was his signature -- the way he started).
But you could also decide that you want to offer it to a dealer on consignment -- to either take a percentage of the selling price, or to offer the dealer a commission on the price that it is sold for.
Sometimes, depending on the condition of a piece, or many pieces, there are other considerations. An example of this is in the 2000 ANA Convention sale of Bowers & Merena Galleries which has grouped together older proof sets (from 1859 to the 1880's) into several lots - apparently because some of the coins were cleaned or otherwise problematical. (Mintages are still scarce).
Regardless of the method that you employ, remember that virtually every term or condition is subject to negotiation. Just because a dealer says that the commission rate is 10% doesn't mean that you can't request a lower rate of, say, 8% if circumstances warrant.
(The secret that many coin market insiders know is that on very high ticket items offered for auction as individual lots, it is not uncommon to negotiate very low commission rates -- sometimes even including for the seller a portion of the buyer's premium).
It was reported widely in the numismatic press that some high ticket items have very modest commissions; an 1804 silver dollar, for example, draws the crowd - and it costs just as much to print a one page description of the 1804 dollar as to do the same on an 1856 flying eagle cent.
Your own financial security ought to be the paramount concern in handling any sale or re-sale. Here are some handy tips of things that you ought to consider or bargain for.
Request a written receipt detailing any coins that are consigned.
If you have any doubts about the financial ability of the recipient to make periodic payments, ask that a promissory note be signed (if a fixed amount is agreed to), a chattel mortgage executed, and a uniform commercial code (UCC) financing statement signed and filed.
Negotiate the rate of commission. Low-volume items deserve a higher rate of commission than a higher-priced item. Don't be afraid to ask, "Can I get a better commission rate?"
If you need funds, ask about an advance -- but don't neglect to negotiate the terms. All advances typically require interest until repaid at the time of the sale. But terms can be varied.
If you're uncertain about the grade on a coin, ask whether it makes sense to have a grading service encapsulate it. Sometimes, that can substantially enhance the value.
If you need to have coins "slabbed", sometimes the dealer selling for you will pay for the cost. Sometimes it's yours. Negotiate!
Don't sign a "net sale" agreement that allows your seller to keep all profit above a certain level; if you've misevaluated the coins, you can lose a substantial amount of the up-side of your collection.
Do your own estimates on pricing before setting minimums. A good preliminary guide is NumisMedia's Fair Market Value Guide.
If you decide to auction, agree on a buy-in fee if the minimums aren't reached. Be realistic on the buy-back levels, and negotiate for a fair buy-in fee.
Read your contracts or agreements carefully. See if there is a provision that you might find hard to live with if it had to be enforced by its printed word -- not the handshake deal that preceded it.
Consider asking the merchant to insert an arbitration clause that says "Any claim or controversy that arises out of this agreement shall be settled by binding arbitration under the rules of the American Arbitration Association," or those of the Professional Numismatists Guild, if you are comfortable with that approach. That can be a real money-saver.
Above all, remember that you are but a temporary custodian of your coin collection; there will be another temporary custodian along shortly.
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David L. Ganz
