How do PCGS & NGC “Guarantee” their grading?

Log in or Sign up to hide this ad.

That is fascinating and educational, thank you for sharing!

 

I know from PCGS’ terms that they will only pay what a dealer would pay for the coin. So if you paid full blown retail for it because it was so nice, you will only get like 10-20% back of greysheet.

So why not pay out what the buyer paid for the coin? I guess it protects PCGS from cases where a buyer knowingly buys a certified counterfeit for oodles of money from a complicit seller (“split the profit”), thereby forcing PCGS to pay the extortionate price.

 

that has been tried, and failed, and prosecuted.

 

That may be in their terms so they are protected, but I know for a fact that they will pay what you paid for a coin if it is reasonable.

It's been a very long time since I submitted a coin for review, but I'm pretty sure the last time I did they just paid me the value I listed on the submission form.

And if you paid full blown retail because it was so nice, you'd probably not be submitting it for downgrade review.

 

I’m only talking about authenticity reviews. Not grade reviews.

 

And when they decide on a FMV it is a take it or leave it proposition. A few years ago on another forum a guy had a gripe about a NGC guarantee. He had, if I remember correctly, a 1932 polish 5 Zlotye. This is a rare coin that sells at auction in the five figure range. He had purchased it several years previously for around $23,000. It had been slabbed by NGC as an AU details. Several years later he went to sell it and got a buyer at $28,000. The buyer sent it back as an altered date. He posted pictures of the coin an the 2 had clearly been altered. So he sent it back to NGC under their guarantee and they agreed the date had been altered. The problem was that although this coinssells at 5 figures in the real world, the standard catalog showed it for $800 and that was what they offered as compensation. When he objected to that low figure, they washed their hands of him and he got nothing.

 

I have no knowledge of that transaction, but I cannot believe that either of the TPG would only offer $800 for a coin that had legitimate sales records of $20K+. This is especially true if there were multiple public sales records around a similar level. There is something missing from the story that was told.

The TPG also have access to dealers in all areas of coins. I'm sure they would reach out to some of them if there were that much of a dispute over the value of a coin.

 

I’d sue for damages

 

Exactly, if that is true - that NGC would only pay $800 for a coin the market valued at $20k plus because of some "catalog" price, then their "FMV" guarantee is worthless. I'd appreciate more details.

 

I wonder if the guarantee applies to coins that were straight-graded that should have actually gotten a details slab?

 

Yes, but not if it goes bad in the holder. NGC will now only guarantee copper coins for ten years. After that time you have to have them graded again to keep up the guarantee. I can see that for red copper because it's unstable, but for Brown copper, with proper storage, should be good for a lot more than most collectors' life spans.

 

PCGS Guarantee is here:
https://www.pcgs.com/guarantee#:~:t...f all U.S.,encapsulated by PCGS is guaranteed.

I'm not gonna dig for NGC but I assume it's something similar, in PCGS case, the important part is " PCGS shall pay the current market value for the coin in question at the originally assigned grade (in which case, PCGS shall become the owner of the coin), or at the owner of the coin's option, the difference between the current market value for the coin in question at the newly established grade and the current market value of the coin in question at the grade originally assigned (in which case, the coin at the newly established grade will be returned to the owner). PCGS will also refund the regrading fee and postage and insurance costs incurred by the coin owner in sending the coin to PCGS. IT IS UNDERSTOOD THAT PCGS WILL BE THE SOLE DETERMINER OF THE CURRENT MARKET VALUE OF THE COIN AND THAT CURRENT MARKET VALUE IS DEFINED AS DEALER REPLACEMENT VALUE, I.E. THE PRICE A DEALER WOULD MOST LIKELY HAVE TO PAY TO REPLACE THE COIN."

it's not retail, it's not wholesale or catalog or greysheet, it's what they determine it would cost a dealer to replace the coin with one at that same grade.

They aren't going to argue or haggle with you over it, if it's determined to be either counterfeit or overgraded or altered, they are going to offer to buy it for dealer cost of replacement regardless of what you paid for it, if you don't like the offer, go sue them in California, according to their guarantee because "THE PCGS GRADING GUARANTEE DOES NOT APPLY TO ANY CLAIMS BROUGHT OUTSIDE OF THE COURTS OF ORANGE COUNTY, CALIFORNIA".

They give a guarantee, it's up to their determination and discretion, and if it qualifies, they will make an offer, either you take it or you don't, and if you want to sue them over the guarantee, then you have to do it in California, because that's a condition of their guarantee.
At no point do you, the person using their service, have them in a difficult position or "over a barrel" so to speak, they have the hand in the relationship. They guarantee their grading and authentication, but on their own terms (and valuation on their own terms) and nobody else's terms. Take it or leave it.

 

I can't say if it has changed, but many years ago I had a discussion with the then-President of PCGS about this. It wasn't a Q&A at a coin show where others were listening. Just him & me having lunch. He was very clear that when they buy back coins they want to keep the collectors happy. They have even over-payed to make the collector whole. Dealers are another matter as they should know the price of coins.

The main reason I'm not worried about the "reasonableness" of their compensation is that the cost to them of paying a fair price is much less than the cost of their reputation. Could you imagine what it would do to their reputation if people thought they were only paying 70% of FMV? Or worse, $800 for a $20K+ coin!

PCGS used to post how much they paid out each month under their guarantee. I seem to recall it was around $100K. Of that amount, they recoup a lot by reselling the now-downgraded coins. So maybe 1% of their revenue goes to buying back mistakes. You think they'd risk that other 99% to save an extra few thousand dollars a month?

While I have heard the occasional stories about people getting lowball offers, I've heard way more stories of the TPG stepping up and paying fair for their mistakes. I suspect a lot (not all) of those "lowball offers" are from people who overvalue their coins.

 

Wouldn't their price guides constrain them, Doug? They're based on their market assessments. They're not going to say they're unfair market value.

 

The flip side you're not being told is, when they regrade an undergraded coin, you send them the check. Just kidding!

 

But doesn't their price guides put them in a pickle, is what I'm saying, when they can't stand behind them? They're their own representations of value. Forget what the coins actually sell for in the auctions, which are truer representations of fair market value, at any given point in time. Take PCGS. What are they representing goes into their price guides? Auctions. Actual live market data. As their price guide is being adjusted up or down from week to week even at times day to day, they're representing those aren't bullshit, but the professional appraisals of timely market composites. It's like the faith we have in the stock market. We buy and sell on those prices. These price guides are no different. They're stock markets for coins. They're purportedly tracking in real time the fair market value of coins. Think if PCGS represented otherwise. They'd be laughed out of the business like they're clowns. And therein lies the dilemma when the moment of truth arrives and the time comes to deliver on their bigshot guarantees they go on and on about to instill consumer confidence in their professionalism. Why trust them to market grade our coins if their market data is bullshit? Trust me, I'll market grade your coins. Why not, what's the difference? So there's what I'm saying. I want their price guide price. They represent that's the price? Deliver on that representation when the time to comes. Stand by your good word. Otherwise, you're edited. That's how I see it.