The Demand for Low-Grade Notes

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One of the most significant changes in the market that I've noticed over the last several years has been the steadily growing demand for low-grade notes, and I mean really low-grade notes, e.g. notes with large corners missing, large internal holes, ragged/gnawed edges, heavily taped with permanent brown stains, surface design losses resulting from careless tape removal, etc., etc.

I'm continually amazed at some of the seemingly(?) high prices routinely being paid on eBay for severely defective notes, even notes that aren't so rare. Am I missing something here??

I've attached a scan of a representative low-grade note that sold on eBay awhile back (Dominion Bank $50 1901). It sold for US$494 and there were three different bidders above the $400 level.

{http://images.andale.com/f2/115/106/3433819/2007/5/28/Dominion_50.JPG}

Hey Ottawa

I was the buyer of this note. Recently received in the mail and I was quite pleased with it. True it is more than heavily circulated but the number of known remaining examples made this purchase what it was. Correct me if I am wrong but I believe this is only the 4th 1901 $50 from the Dominion Bank to have surfaced. It must also have been known by others as the prices did go much higher than I had anticipated. I have been pondering getting some restoration work done on this note. Undecided yet on if it will be kept in my collection or re-auctioned?

Lower graded notes of the scarcer varieties should serve as more than just fillers. Many chartered note are extremely rare and even tough they surface once in a while most collectors will never see them. Personally I was 10X happier finding this note than spending that money on a Finer 1925 Dominion Bank $50.

Yes, I realize it's a scarce note, as revealed by the Charlton catalogue ($400 in Good) --- congratulations on reeling it in against strong opposition!.

The question I should really have asked in my original post is the following: "At what grade does a rare note become essentially worthless, or worth only its face value?"

About a year ago I auctioned on eBay a fragment from an issued example of the ultra-rare Union Bank of Newfoundland $50 1889 note. It was the middle one-third and was in an attractive EF condition (similar in shape to the scan below). The complete note catalogues at $15,000 in VF but the one-third fragment realized only about $50 ..... ouch !! (I guess I should have waited a year or two longer before auctioning it!)

Also, we should remember that there are several different types of "rarity" and that these appeal to different types of collector. For example, some notes are rare as a basic type (e.g., the Newfoundland note below), some notes are of a common type but have a rare date (e.g., the Dominion Bank $50 1901), and some notes are of a common type but have a rare signature (e.g., the Dominion Bank $5 1925 with Nanton signature).

{http://images.andale.com/f2/115/106/3433819/2007/5/28/1179895357864_0.jpg}

I believe you have answered your own question, a third of a very rare note will realize about face value!

It seams that even though these notes are in bad condition they will generally remain rare. A bad quality note will result in a large price break for collectors but still realize healthy premiums. A $400 rare note may be considered by 100 collectors resulting in high demands but the same note in EF for $15,000 may only have one interested buyer. In this case auction formats need to have many interested parties in order to function. Otherwise the buyer winning bid will be nowhere near what he was willing to pay for the note.

I remember the 1/3 of the NF $50 you had auctioned off. If memory serves it was purchased by Jasper. I had considered your note but had no idea of its authenticity so I took the safer route. After seeing the realized priced I was convinced many had assumed the same thing. Knowing what I know now I would have gladly placed a substantial bid on your lot.

Regards

Jason

I remember the 1/3 of the NF $50 you had auctioned off. If memory serves it was purchased by Jasper. I had considered your note but had no idea of its authenticity so I took the safer route. After seeing the realized priced I was convinced many had assumed the same thing. Knowing what I know now I would have gladly placed a substantial bid on your lot.

As they often say, "Nothing Ventured, Nothing Gained". It's sometimes better to take a chance rather than to lose out on what may turn out to be a once-in-a-lifetime opportunity (especially if the seller offers a money-back guarantee). Over the last 35 years I have missed out on many great items because I was a bit too cautious and it still happens to me from time to time. I guess it's just human nature to be cautious.

That one-third of the Newfoundland $50 1889 note was 100% genuine and it sold previously at the 1981 INTERPAM auction in Toronto where it realized a whopping $60.00 (see scan below)! The INTERPAM auction was one of the greatest auctions of Canadian chartered bank paper money in the last 50 years but, to my dismay, I was in the process of paying off my mortgage at the time and was strapped for cash. However, to be truthful, prices were considered to be very high at the time .... just as they always have been and just as they always will be! The moral of the story is that if you see a choice or rare bill and can afford it then just go ahead and buy it! Choice and rare items have never been cheap in the past and they will never be cheap in the future  ..... although they may now appear to have been cheap when looking back 10, 20 or 30 years. We can expect to see AU/UNC Bank of Canada $25 1935 notes at $20,000 in the not-too-distant future .....

It's wise to remember that the "bargain" is not always in the price but in the OPPORTUNITY to acquire it.

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{http://images.andale.com/f2/115/106/3433819/2007/5/28/1179541776128_0.jpg}

A $400 rare note may be considered by 100 collectors resulting in high demands but the same note in EF for $15,000 may only have one interested buyer.

Some many good points brought up in this forum re: lower grade notes...esp the above.  I think lower grade rare/scarce notes seem under-priced in Canada.  Perhaps this is more a reflection of the small body of collectors here.  Its likely that if the same note were up for auction in the US it would go for a higher price still.

I realize that rarity is a big factor but in my opinion there becomes a point where a note becomes just plain ugly and essentially uncollectable. It might be a bit different in the case of a museum that wants an example of every known note or a collector who has spent his entire life researching and collecting one or two specific banks. However, the typical paper money collector wants something that is esthetically pleasing to look at (like collectors of art and antiques). I personally feel that very low grade notes (we used to call them "rags") will not appreciate in value as fast as high grade notes ..... but I could be wrong as they have certainly increased in value on eBay in recent years!

It is well known that collectors of paintings, antiques and antiquarian books stay away from damaged pieces. Of course, at the end of the day, any collector is free to collect whatever he/she wishes to collect (color varieties, date varieties, signature varieties, high grade, low grade, etc.) and it's true that many damaged notes do have the potential to be restored/repaired.

For me, a very spoiled and damaged note is interesting only when this note is truely unique (the only example known):  you must be content with simply because there is nothing else better available.  But the price of a very low grade and extremely rare note will rely on the buyer's desire to get a such note and his will to pay for.

About a year ago I auctioned on eBay a fragment from an issued example of the ultra-rare Union Bank of Newfoundland $50 1889 note. It was the middle one-third and was in an attractive EF condition (similar in shape to the scan below). The complete note catalogues at $15,000 in VF but the one-third fragment realized only about $50 ..... ouch !! (I guess I should have waited a year or two longer before auctioning it!)



{http://images.andale.com/f2/115/106/3433819/2007/5/28/1179895357864_0.jpg}

As the buyer of the note, I can say it found a very good home. I was shocked at the price I got it at as my bid was substantially more than what I paid.

However, the typical paper money collector wants something that is esthetically pleasing to look at (like collectors of art and antiques). I personally feel that very low grade notes (we used to call them "rags") will not appreciate in value as fast as high grade notes

I'm sure most would agree with you here.  I have no interest in low grade notes or ones that have ink defacement, or tears.  However, I know some who don't mind such problems esp on the more rare varieties.

Personally, I collect notes that are aesthetically pleasing but I have not observed that with the majority of collectors I know.  Most obsess over UNC and that's what keeps the lower grade prices down.  It is true that typically UNC (if hordes aren't found) do increase in value most dramatically, and it seems that many collectors are very concerned with the steady rise of their investments these days.

Personally I collect notes that are aesthetically pleasing but I have not observed that with the majority of collectors I know.  Most obsess over UNC and that's what keeps the lower grade prices down.

I too much prefer aesthetically pleasing notes and that doesn't necessarily mean they have to be UNC or even EF. Generally speaking, I would prefer a choice clean unimpaired VF (properly graded of course!) with wide even margins to a technical EF or AU note that had some sort of major distraction like a prominent edge tear, a stain or even a margin of 1 mm width or less. Also, on UNC notes, I much prefer a well-centered note with a minor counting crease to a poorly centered note without the counting crease. After all, a counting crease is often not very apparent when looking straight on at a note whereas poor centering can never be hidden (except perhaps by trimming!)  I have always hated poorly centered notes that have one or two very narrow tight margins, just as postage stamp collectors have hated poorly centered stamps for the last 50 or more years. Indeed, perhaps it's because I'm a stamp collector too that I tend to abhor off-centre notes that have one or more extremely narrow margins.

Perfectly centered pre-1940 Canadian stamps with larger-than-normal (so-called "jumbo") margins routinely sell for 3 to even 10 times the corresponding price of poorly centered examples and I think we will see higher prices on well-centered notes with "jumbo" margins in the future. However, with notes, good centering alone is not sufficient as many notes have been (or are going to be) trimmed to create that effect. It is necessary to have both good centering and wide "jumbo" margins to create that "trophy" appearance.

I agree that we all strive to obtain the best possible grade for all our notes. I admit I will be guilty of letting in a few poorer grades for the simple fact that it was the first one I saw and who knows when I will see the next one. One thing is for certain, I do feel a sense of satisfaction once it is in my collection. Once I find a better one I will let the lesser of the 2 go. It is very difficult to be fussy when so few remained.

Whether the note is UNC or Good I feel that an authentic note is what it is. Perhaps the Good note will not appreciate as fast and won’t be desired by so many collectors but it still feels great to say that I have or had one. There is most likely much more history behind a grungy note than an UNC note.

I agree that we all strive to obtain the best possible grade for all our notes. I admit I will be guilty of letting in a few poorer grades for the simple fact that it was the first one I saw and who knows when I will see the next one.

These are very valid comments. Indeed, they are the words of the "true collector"! We often forget that paper money and coins circulated repeatedly whereas postage stamps were used only once. Collectors therefore expect and accept varying degrees of defects on circulated notes and coins.

It's pretty obvious to me that collectors today are willing to accept low-grade and defective notes because the higher grades have been removed from the market over the years by serious collectors and by museums. As with all collectibles, material that would not have been considered collectible in the 1960's and 1970's is now being eagerly snapped up because the higher grade material is just not available in today's market. In fact, I well remember the expression "That (defective) note should be destroyed for the good of the hobby" but you certainly don't hear that now! How times have changed! Many advanced collectors will never ever sell their prized possessions while they are alive so, in consequence, many rare notes may only appear for sale once in 50 or more years. That's a sobering thought, isn't it?

DOMINION BANK $50 1901--- CPM NEWSLETTER RARE NOTE REGISTER

While reviewing some old CPM Newsletters I came across the following register in the December 1993 issue:

Dominion Bank $50 1901:

1. 05621/A Institutional Collection
2. 39818/A National Currency Collection
3. 48355/A ANA Milwaukee sale lot #3012
4. 49681/A Private collection
5. 52327/A Charlton; 30 Sept. 1975 lot #227
6. 79059/A Institutional Collection
7. 87851/A National Currency Collection -- Bogert-Osler (logo)
8. 93503/A Interpam, 1981 lot #249 -- Bogert-Osler (logo)

Note: 1 - 5 have manuscript countersignatures; whether note 6 has the manuscript or typed left signature is not known.

The note illustrated at the top of this thread (# 41722/A) was not known to the compilers of the 1993 register. It therefore appears that 9 notes have been recorded to date.

DOMINION BANK $50 1901--- CPM NEWSLETTER RARE NOTE REGISTER

While reviewing some old CPM Newsletters I came across the following register in the December 1993 issue:

Dominion Bank $50 1901:

1. 05621/A Instiutional Collection
2. 39818/A National Currency Collection
3. 48355/A ANA Milwaukee sale lot #3012
4. 49681/A Private collection
5. 52327/A Charlton; 30 Sept. 1975 lot #227
6. 79059/A Instiutional Collection
7. 87851/A National Currency Collection -- Bogert-Osler (logo)
8. 93503/A Interpam, 1981 lot #249 -- Bogert-Osler (logo)

Notes 1 - 5 have manuscript countersignatures; whether note 6 has ther manuscript or typed left signature is not known.

The note illustrated at the top of this thread (# 41722/A) was not known to the compilers of the 1993 register. It therefore appears that 9 notes have been recorded to date.

Dear Ottawa

As usual you come trough with some great insightful information. I thank you very much for finding and adding the registers info to this post. As there are nine that remains I see only 5 are in private hands which leaves this note reasonably rare. I am still holding on to mine and will most likely do so for some time.

Speaking as a more recent collector I have missed out on many of the older CPMS news letters that posted info on the register. As it is next to impossible to retrieve them all I am indebted to collectors such as yourself who always graciously assist newer collectors. I will be more than happy when a full published version of the register is released. Until then I will continue gathering every bit I can and hopefully be able to help others in the process.

Jason