First of all, let me define what kind of coin price catalog we are discussing here. The types of coin catalogs we are referring to go by names such as the "Red Book," "Black Book," "Coin Trends," monthly newsstand magazines that list coin prices, and other assorted books and publications (including Web sites) that offer general interest aggregate coin prices. I am not referring to the coin auction catalogs that individual companies such as Heritage, Bowers & Merena, Legend Numismatics, and other similar dealers publish.
I also want to clarify that I am not questioning the motives of the publishers, editors, or dealers who contribute to these aggregate coin price catalogs. I have no doubt at all that the vast majority of them operate in good faith when they contribute to, and compile, coin price catalogs.
However, market forces quickly render these catalogs obsolete, and here's why: The coin market is a free market, capitalist system, where supply and demand drive the prices. In order to do a higher volume business, aggressive dealers lower their coin prices to below catalog levels. More aggressive competitors lower their prices a bit further, and soon we have the actual selling prices running anywhere from 5% to 20% below "book value."
But there's more to this system than just this! When coin selling prices dip below the catalog value, a self-reinforcing system develops, where the coin buying customer is thrilled because he thinks he got a great deal when he bought his coin below catalog value! Of course, the opposite feeling ensues when a customer finds that he "overpaid" for his coin. Therefore, there is a subtle, but very real subconscious incentive for the dealers who contribute to aggregate coin price catalogs to price the coins at the high end for these guides.
How Coin Price Catalogs Mislead Most CollectorsWhere most coin collectors go astray, when using these aggregate coin price catalogs, is in applying the prices in the catalogs to their own holdings. When most collectors appraise their own collections, the appraisal value they have in mind is the amount of money for which they could sell their coin collection today if they had to. They don't think things all the way through, and fail to take into consideration that in order for coin dealers to make a profit, they cannot afford to pay coin catalog prices (or even 20% below most coin catalog prices!) The fatal flaw in the coin collector's logic is failing to consider the difference between coin prices and coin values. (Coin prices are what the coins cost to buy; coin values are what the coin would sell for today to a dealer.)
How to do an Accurate Appraisal Using Coin CatalogsIn order to get an accurate appraisal of how much your coin collection is actually worth if you had to sell it today, you need to ignore sources like the aggregate coin price catalogs mentioned above, (or if you do use them, discount the prices by about 25% for key coins and about 60% for all others; for coins that trade around bullion value use 90% of bullion value although many dealers will pay 95% for gold, take this as a bonus if they do.)
If the purpose of your coin appraisal is to determine a value for insurance purposes, then by all means use the aggregate coin price catalogs, since you are looking at the replacement prices here, not the selling values.
If you want to do an appraisal of your coin collection, and do it for the purpose of getting a realistic idea of what you could sell it for today to a coin dealer, the Blue Book Handbook of United States Coins will provide a very low-cost, decent rough guesstimate that will be much closer to true than the aggregate price catalogs noted above. To do it right, you should get copies of current issues of Coin World and Numismatic News, which are both weekly trade papers for the coin collecting community. Don't use any "official" price guides in these newspapers, though. Use the dealer "coin buying" ads at the back of the magazine, usually in or near the classified section. Some dealers publish very comprehensive "buying" prices in these magazines that reflect actual prices they are paying today.
If you plan to sell your coin collection, and want to make sure you get the top possible dollar, get a set of recent issues of the Coin Dealer Newsletter, (called the "CDN" or "greysheet" in the trade.) This is the closest thing to the gospel for coin dealer buying and selling prices and values, and is published weekly, but most collectors can't just assume dealers will pay them these prices. The prices in the CDN are dealer-to-dealer prices, and as such, assume that the coins are very accurately graded by expert professionals, that the coins are organized to industry standards, and that the transaction can take place fairly quickly. If you're a collector who must also rely on the buying dealer to help you arrive at the correct grades, or you have a lot of mixed low-grade material (such as jars of circulated wheat pennies, etc.,) then use the CDN as a guideline only, so that you are informed about what your coins are worth, but don't insist on being paid full CDN "bid" (buying offer) prices if you need "service," too.
Of course, if you have a coin collection worth more than $25,000 or so, some or all of your collection might be best sold via professional auction (not eBay!) This is why there is no substitute for developing a rapport with a few coin dealers that you deal with regularly, (rather than flying solo in online auctions.) The extra bit you pay to buy from, say, a PNG coin dealer is well worth the guarantees and benefits of the relationship.
Buy the Blue Book below cover price!