Investing in Gold: Online auctions may not bring the best price for coins

Over the last two decades, the Internet has spurred a new craze: online auctions. But, there are advantages to doing business the old-fashioned way with an established business.

At first, the Internet auctions were a tough place to sell coins as there were very few bidders. Then a tidal wave ensued and the number of people buying and selling online flooded in.

Just as a tidal wave is indiscriminate, so was this new phenomenon. Not only did it sweep in good buyers and sellers, but also an ever-growing unethical element. Online auctions have morphed into not only a new selling ground, but also the devil's playground for those looking to make a quick buck. Counterfeits, over-graded or over-stated coins, stolen goods, and people selling things that they will never deliver are some of the pitfalls that have been spawned in this anonymous venue.

So what does this mean for a seller today? A few years ago people were selling anything and everything for good money online, but as buyers have encountered bad deals they are now being cautious. Established companies are doing fine online as the reputation they hold assures buyers of good deals. For the individual, it means that the person bidding on your item has no idea who you are or whether you are trustworthy. Hence, most buyers take the stance, "If I get it for a good (safe) price I'll buy it. But if not, I'll let it go." Selling to a buyer with this mentality is usually selling at a deep discount.

Also, an individual may not know how to describe an item they are selling properly. Many of the expensive coins have special attributes that set them apart from the rest of the coins around them. If a person does not include these attributes in the description, how will the buyer know it is worth more?

My favorite example happened a few years ago. A smaller dealer bought a coin in an online auction for $1,000 from an individual. The dealer's asking price was $1,500, so I bought it. I in turn sold the coin for $4,500. If the individual had brought the coin to me, I would have offered $3,500-$4,000 outright. Selling online was not that person's best move.

Online auctions rarely bring extra money for coins. Transactions require a seller and a buyer. Auctions require a seller and two willing buyers. In rare cases where a coin is hard to locate this can be good for the seller, but in most cases buyers will not increase their bid prices but rather wait for another one to come along.

Online auctions have created an outlet for those willing to work hard and to take the bad with the good. In some cases online auctions can be beneficial. In many cases taking what people are willing to bid is like watching your coin being swept away by a receding tide.

• Allen Rowe is the owner of Northern Nevada Coin in Carson City.