This post is inspired by last week’s entry about coin shops and paper money. We said that if someone providing value advice isn’t also offering to buy whatever you are looking to sell then you need to consider discounting his or her value information. We aren’t saying the information is 100% wrong, it just isn’t actionable. Allow me to explain. Any collector or dealer dreads the following statements when negotiating a buying price with a seller:
“Well a buddy of mine…”
“I was looking on eBay…”
“I saw in a book that…”
All of these statements signal that the seller has unrealistic or completely incorrect notions about how to value his or her item.
You have no idea how often people value something based purely on what their “buddy” says it should be worth. Their friend used to collect Susan B Anthony dollars in the 80s and now he is supposed to be an expert on what rare paper money should be worth in 2013? That isn’t likely. Furthermore, most buddy-specialists like this want to be the hero. They are going to tell you that whatever you have is worth twice as much as what you have been offered.
Even worse than the friend advisers are the people who try to research and value their paper money based on what similar items are available for on ebay at Buy It Now prices. I could write a book about why this is a bad idea, but let me hit the main talking points. First off, anyone can list anything on ebay at any price they want to. I can list my 2007 Camry for $50,000 on ebay. That doesn’t mean that it is worth $50,000. Furthermore, the fact alone that it is still available for sale means that the market has decided it isn’t worth that much money. People also get caught up in trying to compare apples to oranges. It is not unusual for someone to see a registry quality note on ebay and then think that their circulated VG note should be worth the same amount of money. Sadly, it doesn’t work like that.
The last frustrating thing about dealing with an overly ambitious seller is the people who always quote the “book”. Books are great at establishing the relative rarity of something. However, if you rely purely on book values then you will sell everything too cheap or price it too high and never sell it. Book values are often 50-100% too high. This happens because the authors are trying to push or lead the market. The authors usually have a large financial position in their collections. Obviously they want their investment to gain value, so they keep increasing book values. Don’t be surprised if a dealer tells you to “sell it to the book” if you start quoting book prices that are way too high. That is a snarky way to say that the book itself isn’t cutting a check for anything.
So this all leads back to the title of the blog, is the high number always right? Let’s look at my 2007 Camry again. Carmax offers $6,000 for it. The blue book value is $8,500. I can find one on ebay for as high as $11,000. And my buddy says that Carmax makes 100% on everything so the car should be worth $12,000. What is the real value? Based on the information above, I would expect the value to be somewhere north of $6,000, but probably not by much. Carmax is obviously an industry leader and they are putting their money behind their offer. No one else is taking any risk by making an offer.
So my thesis here is that when taking offers on a bank note or collection, consider your value sources carefully. If three different dealers offered $400, $475, and $525 then the value is likely somewhere in that neighborhood, despite the fact that you can find other sources who would like to convince you otherwise. Everything is just noise until someone puts their own money on the line. So, is the high number always right? No the high “number” is not always right. The high OFFER can often be right, but trying to chase down the high PRICE or NUMBER provided by an incorrect source will likely be completely fruitless.