If you bid at auction and do not have an agent, you are at a huge disadvantage. There is a possibility the lots you win will not be high quality, desirable coins and that, ultimately, you will not be doing yourself any favors "saving money" by not using an agent. Before we get started, let me disclose that this article is somewhat of a plug for my services as an agent but, I hope, not a shameless one. I consider myself to be an extremely good auction representative but I am also busy enough that I am not beating the bushes looking for many more collectors to bid for.
Let's also get some terminology straight for collectors who might be new or unfamiliar with the world of auctions. Coin auctions are held both live and on-line. Live bidders are able to examine the coins in person and have the advantage of knowing who is bidding on which coins. In my opinion, these two factors are critical. If you collect coins that are very rare or somewhat esoteric, the chances are good that auctions will be a major source of your purchases.
Auction representation generally works as follows. You decide there is a lot (or lots) in auction that interests you. You call your representative as early as possible and discuss them. He views the coin(s) in person. Then you set a limit on what you are willing to pay. Your representative then (hopefully) buys the coin for you. After you pay him the hammer price plus the auction company's 15% bidder's charge, as well as a pre-determined representation fee, your agent sends you the coin. Hopefully, you are happy and repeat the process.
Why should you pay someone to bid for you? This is a good question which requires a multi-stage answer.
1. You Can't Compete With The Professionals: There are only a handful of collectors who are so knowledgeable that they can go to an auction and compete against specialized dealers. Doesn't it make sense to hire your competition to work for you?
2. You Can't Grade Coins Based On Images: While digital photography on coin auction websites has improved dramatically in recent years, do you feel safe bidding on an expensive or important coin based solely on an image? It is my contention that if you or your representative don't view a coin in person then you can't really figure what it's worth.
3. You Have A Real Life: Let's say you are a busy professional who lives in Cleveland and there are coins in an auction in Los Angeles. Are you willing to be away from the office for three days in order to examine and bid on coins? Not to mention the expenses you will incur in getting to the auction, dining out and staying at a nice hotel. Most times, it is cheaper to hire someone to do the work for you!
4. You Should Stay Anonymous: If a dealer sees you bidding on certain items at auction, you might be revealing more about what coins you need than you should. This is another reason it makes sense to hire someone you trust to be your representative.
Assuming that you are now convinced that hiring an auction representative makes sense, the next step is to determine who to hire. There are a few parameters that make sense to follow:
1. Find A Dealer Who Attends All Major Auctions: It doesn't make sense to hire a dealer to bid for you who rarely, if ever, goes to auctions. Even if this person is knowledgeable and trustworthy (see below) he will be of little use to you if he is not "in the loop" as far as coin auctions go.
2. Hire A Dealer Who Is Knowledgeable: Don't hire a Buffalo Nickel specialist to bid on Dahlonega gold dollars and vice-versa. It makes sense to hire the smartest, best-connected person you can find.
3. Hire A Dealer Without Conflicts: How many other people is a dealer bidding for in an auction? How many other people are bidding on a coin you really want? Ask these questions before the sale begins and make certain everything is clear and to your satisfaction.
4. Check The Dealer's Reputation: Ask the auction company if they know the dealer and if they have had any bad experiences with him. Post a message on the PCGS or NGC message boards about a dealer and ask any collectors if they have had good or bad experiences with this dealer as an agent representative.
5. Hire A Dealer Who Can Buy What You Collect: Even if the dealer you buy from is a nice guy, he may be in over his head bidding on expensive coins. Check his website and see what kind of coins he sells. If you are thinking about buying a $50,000 piece of Proof gold, hire a dealer who has experience with coins like this.
There are a few other points to consider in choosing an auction representative that you may wish to consider. The first is what to pay the person. A fairly standard rule is that an agent charges 5% to bid at a coin auction. Don't try to negotiate a better deal unless you are bidding on an extremely expensive coin.
Give the dealer explicit instructions on how much you want to bid. I am aware of at least a few situations where an agent was told "just buy the coin" and he proceeded to pay way, way over market value based on these vague instructions. Be careful that you are not hiring an agent who wants to set record prices to "show off" to his other clients or to the other dealers attending the sale.
Agent sales are not approvals and the collector should realize that he does not have the option of returning a coin to an agent if he does not like it. While this should not scare off any potential bidding, it does demonstrate the need for a relationship with someone whose eye you trust. In twenty years of auction representation, I have never had a problem with my describing a coin. But I have heard my share of horror stories from dealers and collectors alike and would caution anyone involved in this process to approach it with careful consideration.