Making the grade, not making it up

In coins there are a few factors that help decide the value of a coin. The date and mint mark determine how many were made and the rarity factor, but the grade could be considered the most important. Modern coin grading is based on a 70 point scale, 1 being the lowest and 70 being the highest. In many cases one point higher in grading can increase a coins price by multiples.

Grading companies are an important factor in today's rare coin market. These companies offer a third party impartial opinion of a coin's grade. Since grading is subjective, having respected graders is paramount. These companies authenticate, grade and then encapsulate coins in tamper proof holders for a fee.

There are a host of grading companies in the market, but only a few stand out in the numismatic community. Professional Coin Grading Service (PCGS) and Numismatic Guarantee Corporation (NGC) are the most highly respected. What does that mean? Dealers in several major trading networks are willing to trade coins graded by these companies without even having to see them.

Why do PCGS and NGC command so much respect? Well, for one, they offer grade guarantees. If a coin is believed to be overstated one can return it to the grading company for a review. If after reviewing it they feel that the coin is over graded they will offer to buy it or lower the grade and pay the difference in price for the new lower grade.

There are a few other grading companies that have earned respect in the numismatic community, but there are many more that dealers are not willing to buy without making their own judgments. Some grading companies even vastly overstate grades so dramatically that some dealers are not even willing to make offers on them.

I have seen numerous coins that are graded as being worth thousands, but the true market grade would only have the coin being worth a few dollars.

The most heinous grade I saw was an 1886-O Morgan Dollar graded MS65DMPL by one of these "other" grading companies. If one were to value the coin based on their grade the coin would have been worth $250,000 at that time. What was the coin's real grade? An AU55 worth about $75 then.

Trying to buy a coin at a bargain price could be very costly. Look at the 1886-O I just described. If a person looked at the grade on that holder and figured it had to be close they could have been out many thousands of dollars.

Not all coins are worth the money to encapsulate them, but some are and having them graded before you buy them is important. Make sure the coin you are buying is graded by a reputable grading the company. The value of a coin can depend on it making the grade, but you want to make sure you aren't buying a coin where the company is making up the grade.

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