Problem Coins?

What's your opinion on problem coins? I'm referring to coins that exhibit one of many different problems that severely detract from its value (or for many, its collectibility). Problems, of course, include holes, scratches, bends, cleaning, etc.

I'm a fan of problem coins, to an extent, mainly because they allow me to buy a coin that would otherwise be way out of my budget. For example, in the past week I've purchased an 1806 half and an 1875-CC twenty-cent piece for less than $150.00 combined. The Twenty-cent piece had been cleaned and had a few nicks on the reverse, but otherwise would grade F-VF (partial liberty on shield). The 1806 half is in VG 8-10 condition and scratches on both the obverse and reverse. The scratches are severe enough to prevent it from being a candidate for grading, but it's easily a $275.00 coin that I paid less than $100.00 for. It has no holes, which to me is the worst problem a coin can have.

What's your take? Would you invest in a problem coin for the mere fact that, given its problems, it's still a rare piece of history?

 

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I am one of the ones that say giving any type of grade to most problem coins is cheating the new collector in most cases. Most dealers when you go to sell them back will only pay melt for them. So why pay more than melt for them anytime.

 

So, in your opinion, a 1796 half dollar with a deep scratch is worth only melt? An otherwise $20,000 coin--one of only 3,918 minted, is reduced to $14.00 in silver because of a problem like that?

Also, I don't ever buy from or sell to dealers. It may just be my experience, but every single coin dealer I've ever been to (which is only about 4 different ones) has overpriced their coins and has low-balled me on coins I wanted to sell. It's to be expected, though, because if they bought and sold at fair value, they wouldn't make any money.

 

Not most. It's "all" dealers.

Problem coins are called that because they are a problem to sell them.

 

Wow, I'm surprised. In that case, if anyone has any rare coin with a problem, please message me and I'll pay you 10% over melt for them.

 

Buying and selling coins involves a relationship between a buyer and a seller.

In some cases these relationships are mature, have been going on for years, there is a history there.
In other cases, the coins walk in off the street by some unknown wanting a quick $$$ for the stash.

Chances are, you're somewhere in the middle with a coin dealer in your area.


Given those relationships, the best you can do, as a collector trying to get money out of his collection, is to put your coins up for auction. That takes time and the auction house gets a cut of both sides of that deal.



In the end, a "problem coin" is a problem to sell. There is something "wrong" with it that will make a buyer turn and run. Collectors want problem-FREE high grade coins. That's what sells. That's where the money is made.

If you want to collect "problem coins," you should find good deals out there. I saw a type set where all the coins had holes in them. Pretty nifty looking. Not my cup of tea.

 

OK if you really think that problem coins are your thing go for it. Even the ultra rare coins like you mentioned do not move very well. I know I won't be putting them in my collection.
My comment is really for the coins that most collectors can afford and in most cases are not nearly as rare as most sellers want you to believe.

 

Thanks for the reply. I know that problem common coins are a no-go and would not appeal to most (any?) collectors, but that's why I asked about rare problem coins. I simply can not believe that, given the opportunity, any coin collector would pass up a extremely rare, valuable coin because it has a problem, given that the price was so low that it made it a no-brainer. That's my question here. I realize that you wouldn't want to have a 1921 Morgan with a hole in it--obviously. But at what point does it become "worth it" to invest in a problem coin with a very low mintage or otherwise extremely high value?

Would you pay 5% of the normal value of a particular coin for an example that had a problem? That's where my question regarding the 1796 half came from. To immediately declare that no problem coin is worth investing in and that its value is only melt is broadly jumping the gun, to say the least, in my opinion. I simply cannot believe that every collector thinks that way. At what point do you say, "ok, I realize this coin has a deep scratch and wouldn't pass grading at X grader, but I simply cannot pass it up at $xxx"? Is that number 5% of the problem-free counterpart value? 10, 15, 20%? How would you decide the value of a problem coin compared to a comparable-conditioned (minus the "problem") problem-free coin? I know that PCGS and NGC will now slab problem coins, albeit without a grade and a strictly-details only label. Is that, in some way, acknowledgement that problem coins do have at least some collector desirability (aside from a way to make more money, heh)? I realize most long-time collectors who have thousands and thousands of dollars to spend on coins will scoff at the idea, but is it a feasible investment to make for the future? Assume a coin with a mintage of 5,000 is worth $10,000 for an AU55 and a few hundred as a problem coin today. In 50 or 75 years when the AU55 example is at $17,500, would that problem coin have increased in value at all, or would it have remained forever stagnant as a problem coin?

Just something to think about and discuss.

 

Since you used the word investment you put a slightly different slant on the discussion. I will throw this curve back at you. Do you want your investments to be in counterfiet rare coins that have been made to look like problem coins to hide the fact they are fakes?

 

I have more than a few problem coins, most of them are common dates. To me, every coin deserves a home. I understand that a lot of collectors shun problem coins, and because of that dealers tend to offer very low on them. As long as person understands how problem coins are priced (very low wholesale, often near the no-problem retail ask), problem coins are fine. The mistake is paying too much for them. Another analogy is adopting a puppy, some folks will choose a happy, healthy puppy, others are drawn to the injured or shy puppy. There isn't a right or wrong answer, just understand what you are getting into.

 

A local dealer had a 2 dollar battleship note sitting in his case for the last year. It was priced at less than half friedberg, problems, stained, obvious old tape, I like the battleship notes, but even at the deep discount I did not like it that much.

Then again when I first got started I picked up a flying eagle cent, it had a scratch across the obverse, otherwise it would have been an ef, that scratch did not bother me as muchas the heavily soiled note did.

I guess that not all problems are created equal.

 

This is one of My misfit coins which is a nice way to describe the problem coins you are talking about.



Since this is copper, melt doesn't apply. But this is not considered collectable by some. However, there are only about 50 total of the variety. The details grade is a conservative 15 which would be in a tie for about 10th in the CC. However, the coin was cut. This may be even more severe than a holed coin. I knocked it down two full grades because of this. Perhaps it is too little or perhaps too much. In any event, it is still a worthy coin for my collection. A problem free coin would go for about $6000. I have it priced as a $750 coin and think it's worth twice that.

I do not ever consider it's value to be totally compromised to that of junk at under $100. I do think it has reduced value, but as you said. It is an affordable rarity and well worth having to those of us with modest means.

Just for grins, those of you who can't stand problem coins are asked to assign a value that you would:

A offer for this and
B offer to sell this for if it were yours to sell.

 

Touché! I had never considered that, but it certainly appears to be a distinct possibility. Wouldn't that be covered, however, by the fact that PCGS and NGC will authenticate and slab problem coins now?

 

Excellent example. Even with damage as significant as that cut, that coin is a beautiful coin to me. I realize it's value is severely diminished, but as others mentioned previously, so long as you realize what you're getting into from the get-go, I see it as a good investment and an interesting piece of a collection.

I'll post some photos of my problem coins, some of which have very modest damage, but were priced as if they had the center drilled out. I think it's this imbalance of pricing among problem coins that made me start the thread, as these differences in prices are obviously a result of different collectors valuing the coins differently. I know I've said it a few times already, but to me, having of a coin that has a mintage of 5,000 is powerful even if it's damaged. Sure, I'd love to have a problem-free example, but when I could never afford such, a problem example is a good alternative.

Also, addressing an earlier question as to investing in rare problem coins vs. less-rare problem-free coins, let me ask this:

Which coin's value is likely to increase more (% wise) over the next 25 years--an 1801 draped bust half, mintage 30,289 in VG8 (~$1,500) with a deep scratch, or an 1854-O seated half, mintage 5,240,000 in AU50 (~$325) with no problems at all? Assume each coin can be had for $250.00 from a dealer. This is of course a quick example with two coins I chose mainly due to their differences in mintage.

Really great replies here so far! Thanks.

 

The reason dealers will only pay melt for them isn't because the coins aren't valuable. It's because dealers think they can get away with this sort of unethical behavior.

 

I got myself a holed 1854-O Seated Liberty Half for melt value a few weeks ago. Does that count? I'll post pictures when I get the chance

 

since i mostly specialize in large cents problems are pretty normal the earlier you get. theres some problems that annoy me and others that dont. natural damage such as porosity, verdigris and corrosion isnt that big a problem for me. things such as rim bumps, scratches, dents, cleaning and counterstamps do bother me somewhat but i still have a few coins with these types of problems.

 

I'm with you, AthensHunter. Some of my favorite coins are what are being called "problems" here. My otherwise MS 1857 FE Cent has a small gouge on the reverse, my 1850 Dollar has initials lightly scratched on the obverse field.

I think that some here are showing their biases by the terminology they're using. Specifically they speak of future value, of investment value or some such term that shows they're more concerned about what they can get out of their collection than just collecting and enjoying it.

I've been able to get gold at spot from dealers who have a "problem" gold coin that would otherwise be sold to a refiner at a discount. Win-win for both of us.

 

From a purely economic viewpoint, every product has a value. It is governed by supply and demand, Problem coins are difficult to move because they are in less demand, not because the coin has no value. If any coin does not move, it is because it is priced above it's value or is poorly marketed (Marketing is simply maximizing potential demand). This applies to every item in a coin store or any other store of any type for that matter.

Since investment involves getting a return greater than cost, you can profit from either or both a greater margin (buy/sell spread) or a rising underlying value due to rising demand. I hear you saying that the smaller investment in problem coins is more likely to change for the better because the market for these coins is likely to rise and increase demand.

This has not been true historically, since the best coins have increased in value disproportionately. However, most trends will eventually end. There an argument for both a continuation of the trend and for it to bounce back. Your choice. However, you sound like me...a collector at heart who hopes his heart doesn't hurt him financially over time rather than an investor. If you buy them at prices near current values, I believe there is little downside risk to damaged coins (active verdigris and corrosion is a different story). They are just unlikely to give you as great a return as undamaged with the long term trend.

Problem coins are subject to the wide fluctuations of a niche market. A few people can greatly affect pricing. Toned coins are an example. Once considered a detriment, the chemical damage is now considered secondary to a coin's aesthetic appeal by enough collectors that it now commands huge premiums. This may happen to damaged and problem coins at some point as it has with counter-marked coins. There is a cap to this which is set by better coins; however, since there is no secondary source of value over the problem free coin such as toning or counter-marks.