This is a question that is often raised both by clients and in general inquiries directed to The Right Note. We have assisted many clients in selling collections in Australia and internationally.
As with all investment opportunities a well planned exit strategy is equally important as an entry strategy.
ENTRY INTO THE MARKET
Your entry into the Australian rare banknote market should be based on your understanding of the market, and your financial budget over a 1-3 year period; this period should be seen as a minimum investment period. The Right Note recommends an investment period of 5-10 years which gives your investment time to grow and mature. This will optimise your capital return when the time comes to sell.
EXIT FROM THE MARKET
When the time comes for you to decide you would like to commence the sale of your banknote investment/collection portfolio, in whole or in part, this needs to be planned in such a manner to take into account the current state of the numismatics market at the time of sale.
Is it a Vendors or Purchasers market? Finally the general state of the economy at the time of sale needs to be taken into account.
The Right Note always recommends that you contact a reputable banknote dealer who has an understanding of current market conditions, one who has a knowledge of current selling and buying prices, and who may offer you an estimate of the price you can expect to achieve on the sale of your collection.
A professional dealer will be able to give you an in-depth look at your options on selling your collection to optimise your nett return.
THE SALE OF YOUR COLLECTION
There are a number of options you should think about when selling your banknote collection, although the same criteria apply when selling coins, stamps and general numismatics.
The Right Note has listed all the available methods of sale that are currently available to you. We give you the advantages and disadvantages of each system of sale. Sale recommendations are offered to clients in this article which include vendor costs, sale or purchase price, clearance rate, grading of your collection and finally the method that will be best suited when it is time for you to sell, with that system that will offer you the possible return on your investment.
The Right Note have listed the available systems of sale in the order that, in our opinion, offers you the best nett returns, the least outlay, and the potential to sell the majority of your collection in the shortest period of time.
PREFERRED METHODS OF SELLING YOUR COLLECTION
Consigning all or part of your rare banknote portfolio to a reputable and established dealer, with a proven track record in the selling of client consignment stock, is the best and most cost effective method of selling your portfolio.
Establish contact with a dealer who can prove their capability of grading, pricing and finally selling your portfolio in a reasonable amount of time, depending on current economic circumstances and the state of the banknote market.
In choosing a dealer you will need to establish the dealers reputation and client base. Is this national or international? Is the dealers commission to sell your portfolio negotiable? What is the method the dealer will employ to sell your portfolio? Is this on line, directly to the dealers client base, by phone, or mail out.
An average dealer commission should be in the range of 7.5%-10% for each and every banknote sold; this commission will depend on the amount of work required by the dealer to get your portfolio to market for example preparing photography for sale on line if the dealer has an online shop, mail outs, emails phone calls to prospective purchasers in turn appealing to the largest possible client purchase base.
A sale price should be negotiated between the vendor and dealer that will reflect the true market value of the banknotes, the current state of the market with a price acceptable to the vendor, and in turn a price that will enable the dealer to sell your portfolio. Overpricing of banknotes is a certain way of ensuring your portfolio will not sell until the market catches up with your asking price. Always be guided by the dealers selling recommendations.
SELLING TO A DEALER
When selling your rare banknote portfolio to a dealer there are a number of important factors that you will need to establish with the dealer, to optimise your financial return.
When selling contact a number of dealers to establish your possible selling price. Are the grades of the banknotes as described when you originally bought the banknotes. This has the potential to lower your asking price if your portfolio was originally over-graded when purchased, or if the condition of your portfolio has deteriorated whilst in your possession.
Reputable dealers will have the facility of receiving scanned copies of the banknotes you propose to sell by email or in spreadsheet form. With this information the dealer will give you a price that he is prepared to pay, together with the terms and conditions of payment.
The sale of your portfolio to a dealer will depend on the type, quality, quantity and whether your banknotes are in demand at the time of sale.
A dealer does not want to hold banknotes for any considerable amount of time, this adds to the dealer©s costs when in storage and needlessly ties up capital that can be used in purchasing rare and in demand banknotes that may come up for sale. This factor will affect the price offered to purchase your portfolio.
A dealer relies, as with any business, on his ability to make a profit taking into account traditional business and government costs including payment of GST on all sales. He also has to cover marketing, sales and administration costs.
A dealer may offer you a sale price dependant on all of the above factors of 50%-25% below any listed Recommended Retail price*
A dealer may purchase your portfolio outright, or under normal business circumstance the dealer will seek to make a number of time payments to you, based on his current stock-holding, and whether the banknotes being purchased are a duplication of his current inventory. If the rare banknote dealer is unknown to you, it is best to release only part of your portfolio. We do not recommend that you release your full portfolio until a repayment schedule that has been agreed upon by both parties is met by the parties.
When you know and trust the dealer who is purchasing your portfolio, he may request receiving the portfolio prior to the completion of payment, to facilitate the sale of the banknotes. If you proceed with this method, ensure you receive notification in writing from the dealer that he is in possession of your portfolio, and that these banknotes remain your property until paid in full. Ensure that the banknotes are itemised by serial numbers, and the dealer gives you a statement of account as each payment is made to you.
SALES AT AUCTION
There are a number of rare banknote dealers in Australasia that offer the services of selling your portfolio at Auction. This method of selling is expensive for both the vendor and purchaser, adding unnecessary costs to the vendor and purchaser alike.
In addition to the sometimes excessive cost of clearing your portfolio in this manner, there are other matters for your consideration which include the sometimes low clearance rate at auction. There is the potential to under-grade banknotes, and also to offer low reserves to ensure that where possible banknotes will sell at well below their market value as opposed to the recommended retail price. This gives the auction house an opportunity to clear your banknotes, but severely impairs your financial return and on many occasions results in all or part of your portfolio being returned.
Charges for sale at auction can average out for the vendor between 15%-20% per item sale, unless the vendor is able to negotiate a lower rate with the auction house. This may be possible depending on the rarity, quality and total financial value of your portfolio.
Charges to the purchaser can average out to between 13-19% per item sale; this adds an artificial price of up to 19% on the market value of the banknote sold that may take years to regain the true market value to the purchasers portfolio.
Auctions are only recommended when other options of selling are not suited to your needs. When your portfolio is large in quantity and an auction gives you the best chance of clearing your portfolio, the vendor charges may not be as important to you, as the sale of the majority of your portfolio at 1 or 2 auctions.
When selecting an auctioneer ask for references, clearance rates, the pass in rate of previous auctions, and the fees and commissions charged. Find out if these charges are negotiable, and when can you expect payment. Thirty days should be the accepted time to settle your payment. All unsold banknotes should be returned to you within 14 days of the auction.
Before choosing an auctioneer, consult with two to three, establish auction dates in the period you are thinking of selling, and choose an auctioneer that suits your specific needs that has a high clearance rate of stock, and settles accounts within the nominated period. Most importantly choose an auctioneer that you feel will act in your best interests at all times.
ESTABLISHING A SELLING PRICE FOR YOUR BANKNOTE
When arriving at a selling price for your portfolio, the best place to start is to consult a reputable banknote dealer who can assist you in determining current market prices, market trends, and what areas of banknote investing “are hot & what are not.” A reputable dealer will be able to grade of your portfolio give you a suggested selling price for your portfolio.
Once you are in receipt of this critical information you can make an informed judgement as to your preferred method of selling.
There are Banknote & Coin Catalogues available to the general public that deal with prices in Australia and internationally; these catalogues are issued either yearly, or as demand requires the publisher to issue a new catalogue.
These catalogues should be used in conjunction with your dealers professional opinion on prices and sale of your portfolio.
Catalogue prices are a GUIDE only. They do not truly reflect current prices, movement in market trends, as the publications are circulated 1-3 years behind current market activity; therefore they never reflect today’s market.
There is no substitution for the top quality professional advice that you will receive from an established and reputable dealer.
Having read this article you are now in a position to gauge the method of sales, possible nett capital returns and expectations in the sale of your portfolio.
THE RIGHT NOTE, WAS ESTABLISHED IN 1995. AS AUSTRALIA’S PREMIER RARE BANKNOTE SPECIALIST WE OFFER A RANGE OF SERVICES THAT ARE SECOND TO NONE.
Copyright: RE Fahy Pty Ltd Trading As The Right Note. 2013.