Can best friends transact Silver bullion?
April 16, 2011 6:56 PM   Subscribe

A good friend of mine is in a reciprocal position to my position. He has a decent amount of old silver dollars that he would like to convert to cash and I am interested in accumulating Silver bullion...

This is my best friend (best men at each others weddings, need I say more?). He and his wife have a bunch of Silver dollars that were passed down to them by various family members (from both sides). I advised them to seek a good appraisal to find out if any of the coins have collectible value (premium) to their silver value. We are in exact opposite positions and I just want to come up with a fair way that benefits us both. He and his wife would like to convert these coins that have been gathering dust to cash and I am looking to accumulate bullion and I am a bit of a novice in the area as are they as sellers. Additionally, neither party has any urgency. If we could find a fair formula I expect we could transact $2000-$3000 per month. I know silver prices, gold prices, platinum prices, and pre-1965 90% silver (junk silver) Washington quarter prices. What I have never dealt in is Morgan and Peace dollars (also 90%, junk silver) but they seem to go at a substantial premium to quarters and dimes of the same silver content, probably because they were discontinued so long ago. Can anybody give me a fair formula for me to buy old silver dollars from my friend that doesn't screw either of us? My inclination is to let us both be screwed by dealers and not risk a single ding in our 30 year friendship. Maybe I just answered my own question?
posted by Rafaelloello to Work & Money (7 answers total) 1 user marked this as a favorite
The way my family always handled these kinds of issues was to agree ahead to pay whatever amount a mutually agreed upon third party appraiser (who knew nothing about our relationship or the transaction) valued the item(s). We split the cost of the appraisal. Sometimes we used a source, e.g., Kelly Blue Book figures for cars, etc. or had to give parameters (e.g., as if appraised for insurance, what you as a dealer would offer, etc.).

But maybe you did just answer your own question.
posted by carmicha at 7:24 PM on April 16, 2011

Best answer: If he sells to a dealer as bullion, it's spot minus a percentage. If you buy from a dealer, it's spot plus a percentage. I'd just use spot, or the median: (buy price - sell price) / 2 if that's different.

However, I wouldn't do this at all; if silver increases in value, he'll may be sad that you gained "at his expense" and if silver declines, you'll may be apt to to feel similarly. As you're friends, there's a temptation to think the gainer should throw back some of the gain to the "loser", which creates tension. (He's actually buying liquidity, even if he doesn't gain, but two years down the road, the liquidity is gone and your book gain isn't.)
posted by orthogonality at 7:40 PM on April 16, 2011 [3 favorites]

One way would be to split the difference between the buy/sell price of a dealer with publicly advertised real-time pricing (e.g. APMEX).

But between friends, a better way might be to trade at spot melt value AND make an agreement that he can buy back from you at spot value for some time into the future.
posted by FreedomTickler at 7:57 PM on April 16, 2011

Another way might be making an agreement that whoever comes out ahead in a year splits that year's aheadness 50-50 with the other.
posted by flabdablet at 8:13 PM on April 16, 2011

Response by poster: orthogonality is right. We've been friends since we were teenagers. He's a lawyer, I'm an engineer. We've been great friends since forever without ever having had or proposed a business or financial relationship. Probably a good choice to not fix what isn't broken.
posted by Rafaelloello at 8:23 PM on April 16, 2011 [3 favorites]

He could put them on eBay and you could bid on them like everyone else. You'll then pay market price, and he'll get market price. I sell silver on eBay and I have always gotten a decent price for it.
posted by brownrd at 8:49 PM on April 16, 2011

It's reasonably likely that you're correct that these coins have some value as collectibles exceeding their intrinsic value. Some coins are of course are particularly rare of course so there's really no way a "formula" can protect your friend from potentially being screwed: the collection has to be appraised or handled by a reputable dealer or auctioneer to determine it's value.

If your key financial goal is to invest in bullion, then your situation isn't really complimentary to your friend's. Investing in collectible coins and investing in metal bullion are very different things. And while you can easily enough look up in a book whether a coin is particularly rare/valuable or not, it's difficult for non-collectors to accurately judge condition which is critical to the value of collectible coins. So if you have reservations of just mixing this kind of investment/business stuff up with friendship there are very practical reasons to tell your friend you'll help him figure out how to get the best deal on his coins through the normal channels instead.

It is pretty easy to find reasonable advice online about selling coin collections. If the collection is possibly worth a lot - which I assume it is since you're talking about transacting thousands of dollars per month - it might be well worth it for your friend to seek a professional auctioneer. A reputable dealer would likely take a bigger cut than an auction but might make a faster, easier transaction. I personally don't think it's worth a amateur non-collector going to the work of trying to get better than a reputable dealer or auctioneer's price on a collection, unless he has a lot of time on his hands and wants to spend a lot of time squinting at things like miniscule arrow fletching under a magnifying glass, trying to figure out what hell the difference between G and VG is.
posted by nanojath at 9:52 PM on April 16, 2011

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