Dichotomy - Problem Coins vs. Non Problem Coins & Their Affect on Market Prices & Availability

I've seen it time and time again. I see it when collectors offer me coins to buy. I see it at shows looking through dealer inventories. I see it on eBay. I see it in droves at every large auction while viewing lots. There are problem coins everywhere and outnumber the non-problem coins at least 2-1.

By problem coins I am referring to subpar quality coins for the assigned grades, coins that have been doctored, and coins that just have a myriad of problems. The vast majority being coins that are overgraded. I know grading is subjective but in many cases, it's obvious even to a lamen when a coin is overgraded. When you get into the realm of AU58 or MS63, that's more subjective than an someone assigning a grade of MS63 to a coin that is barely an MS61 and technically an MS60 which is an all too common occurrence. Problem coins include overgraded coins but the moment they are put into a holder much higher than the actual grade, nobody will touch them so they become problem coins. While they might be nice for an MS63, they certainly aren't gems and since the seller will expect gem money (because of the grade on the holder) and would never sell the coin for true MS63 money, it'll either get overpaid for, rot in inventory, or get wholesaled to a price buyer who will then start the crap cycle over again looking for the next bargain hunter.

By non-problem coins I am pointing to the accurately graded, undergraded, and problem free coins on the market and they are getting scarcer by the day. As collectors are noticing stabilizing prices they just aren't letting their collections go and therefore holding back from putting their coins out on the market. On the other hand, the problem coins will be shoveled back into the market by collectors gaining knowledge about the area they are collecting in and doing a little housecleaning letting go the overgraded and problem coins and replacing them with quality non-problem coins. The softening of prices for low-quality coins and it's consideration in price guides has also made collectors reluctant to release their treasures when such a negative impact is affecting the prices of properly graded coins. This would also explain the near 2-1 ratio of problem coins to non problem coins on the market.

Market prices are heavily affected by these problem coins circulating through the market tiers. The pricing differences between low-end and high-end for the same grade can be staggering especially where the spread is significant.

Just look at the average price differences between these 1885-CC Deep Mirror Prooflike Morgans in MS66 from the Heritage Website:

Previous Prices from Heritage Auctions - This data is 3 years old.

This is only one example but there are thousands out there in almost every tier of the market. This example is especially good because it illustrates both the fluctuations in pricing compared with the differences in buyer confidence with both PCGS and NGC and speaks volumes in terms of the current state of the market. Take note of the price in the lower grade of MS65 and compare with the prices realized. The low end coins sell for closer to next down and don't even come close to value associated with the grade on the slab as indicated by the price guide information. This is what the low-end and problem coins sell for as opposed to the high-end examples which you can plainly see sell for a much higher price. (take note of this when buying because when you buy the bargain, expect the same performance when you go to sell. What goes around comes around.)

So, what is the coin you are thinking about buying really worth? Is it high-end or low end? How accurate is the pricing information available? All of these questions should be able to be answered by whom you are purchasing from. One screw up could end up costing thousands because of the price fluctuations between different examples of the same date-mm coin in the same grade, even by the same service.

The PCGS price guide indicates a value of $11,000 for this coin but the average price realized in the last 5 heritage auctions indicate $7,600 which is where the numismedia wholesale price is set at. Even the average of the two PCGS coins sold via heritage in the list above average out to over 12k. So why is the PCGS price guide stating 11k? Most likely to take into account the lower end examples that are also selling out there in PCGS holders.

Since there is no set-in-stone price guide for coins, don't rely on just pricing data to make your purchasing decision. Take into account the most important thing, THE COIN ITSELF and get as many opinions on it as possible from reliable sources before just jumping in and relying on the slab label and the assigned grade to dictate the price you would consider paying. The market is split between these two types of coins. Given the historical $$ track record of problem coins, I find it wise to be on the other end of the spectrum and pay more for high-end examples instead of hunting the bargains and getting frustrated at the quality recieved and the numerous headaches when trying to sell just to break even. You'll find yourself whining a whole lot less if you don't settle for mediocre and low quality coins, even if they are a "bargain".