Americans aren't the only ones who overgrade...

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This has to be one of the ugliest EFs I've seen.

I think it is likely graded correctly.  The procedure, which seems not to be understood very well now that so many graders use "net grading", is to grade as if the defects were absent, then describe them.  See top of page x in 9th ed. Canadian Bank Notes, or page xxiii of GPM 32nd ed.  What the grade says is that the 1878 $1 below is in EF 40 grade where it isn't damaged.  Then you have to make up your own mind how much the damage will impact the price if you are buying or selling.  Is it worth EF40 money?  I should say not.  VF? I highly doubt it.  Fine? not to me, but maybe to somebody else.  For BCS graded notes always pay close attention to the Comments and take everything into consideration when establishing a price.

I agree with both posts though I still feel (overall) that you'll find more notes under graded (graded strictly) by BCS (rather than over graded). The above example is a bit of a surprise for me as I've submitted over 100 notes to them & it seemed as if each were put under a microscope (rather than a light box) & deducted for the most minute imperfection(s). Having said that, I still go back to them since I have confidence the grade will be strict.

I think "Bob's" observations are valid & support the cause to buy "Original" (or "EPQ, PPQ, etc").  This designates that the note is purely the stated grade (with no pressing impairments) has come to mean so much to me as a collector.   The more TPG notes you see the more meaningful it becomes.  Now that I've turned my attention towards World banknotes, I have seen so many more "NET" (unoriginal) examples but with no "NET" designation.  Now, when I see an unoriginal (or non "EPQ") it has become a little challenge for me to spot the impairment. 

Perhaps it's unfortunate that BCS doesn't use some kind of designation (other than the comments) to indicate that the note is damaged and that the EF40 grade should not be taken literally.  I believe this is what "NET", "Apparent", Italic means when used by PMG, PCGS/LCG.  Obviously the word "net grading" implies that somehow the defects have been taken into account in the assigned grade but I don't think that's how it's used by the grading companies.

I agree that it makes more sense to grade the note as Bob describes, as if the defects were absent, but perhaps it should be made more clear that the note is damaged as part of the grade itself.  "Damaged, EF 40" to make sure that the note should not be counted as an EF 40 but primarily as a damaged note with some characteristics of an EF note.

For this note, even that is being way too generous in my opinion.  The comments do not convey the extent of the damage at all.  There is major creasing throughout the damaged portion which would in itself bring the grade to VF or even Fine even if we ignore the numerous holes and tears.  It's also not just one portion of the note that is damaged.  There is fraying all along the top and bottom margins.  There is what looks like a staple hole on the left side with accompanying rust and stains.  The note also looks like it's been through the ringer a couple of times (see the smeared serial number) so I suspect that even the areas of the note without obvious damage are not what you'd expect from an EF note.

This is not meant to discredit BCS (or Bob's opinion) in any way.  Just that grading will always be subjective and even among the best there will be disagreement.

In the event, the note did not sell for EF40 money or anywhere close to it.  The selling price including buyer's commission lands mid-way between F and VF catalogue value.  Given the substantial disconnect between the technical grade of a problem note and its actual market value, it is not easy to see any legitimate reason to have such a note graded in the first place.

This has to be one of the ugliest EFs I've seen.

I would have to agree. A novice collector with catalogue in hand could easily get "burned" on a piece like this at a numismatic show or flea market. Having sent hundreds of world notes (including Canadian) to PMG I don't feel that that company would grade this note any higher than VF-30 at best.

Very good points being made here.

My 2 cents is the third party graders should remain impartial to the potential value of the note. That being said it does raise a good point that such a note could potentially burn a collector. This further stresses the point to buy the note and not the holder!

In all my years I have not seen very many incorrectly graded BCS notes and they do remain the gold standard in my opinion for fairness and reliability.