The Pros and Cons of Bank Note Certification

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I sent 38 EF/AU/UNC notes to BCS recently in two separate batches and received them back by Fedex three days later. ...... All in all I'm very pleased with the service, holder quality and grading accuracy of BCS.

I thought i would start a new topic rather than reply to an old and very long thread. Having recently sent a large number of notes away for certification I now have a much better understanding of the pros and cons of the certification process in general. I would be interested in finding out how other members feel about the pros & cons issue.

My principal reasons for sending notes to TPG companies for certification (other people may have different reasons):

(1) to facilitate the sale of high-grade notes at shows and on eBay. Many buyers (especially investors) are reluctant to accept sellers' grading opinions on raw notes, and with very good reason. I see little reason for slabbing lower grade notes (below VF condition) but that of course is a personal choice.

(2) to test and confirm my own grading standards, which is important for all collectors and dealers to do from time to time.

I still prefer raw unslabbed notes myself but if I were an investor or a novice collector I would undoubtedly feel more comfortable buying slabbed notes. The biggest disadvantage of slabbing from my point of view is that slabbed notes are very cumbersome and heavy, typically between 1.5 and 2.0 times the areal size of a standard holder and between 2.0 and 3.0 times the weight of a standard holder (depending on whether or not the slabbing company employs the "holder within a holder" concept). Holders within holders afford excellent protection for the notes but it becomes much more difficult to view a note through two layers of plastic. Also, over the years, all plastic holders without exception pick up friction rubbing marks and become rather foggy. In the case of raw notes it's easy to replace the holders but it's not so easy with slabbed notes!

As noted above, I favour slabbing when it comes to offering high-grade notes for sale as that makes life so much easier for the buyer. The buyer is totally free to break the seal of the slab and remove the note if that is his/her preference, and I'm sure that many buyers do actually do that. However, the perennial question remains, i.e., what if any recourse do you have if you break the seal and discover that the note has been overgraded? That's not such a problem with an item costing, say, $100 but on a $10,000 item it would be! That's why, when sending CANADIAN paper money away for certification, I much prefer the very strict and conservative grading standards of the CANADIAN TPG companies over the looser and less consistent standards previously displayed by the American companies.

Above all, it's extremely important to remember that when you send off a note to a TPG company you are paying for a professional opinion of the note's condition and its originality (or lack thereof). You are NOT paying for the glitzy holder! The operative words in this respect are therefore "Know your grading company!"
 

One question that I would like to put forward to members is that
"Should a TPG be associated with an auction house, coin/currency dealer, or private seller in any way?"  I think that the conflict of interest and possible personal gain from self grading notes for sale could be looked at in a negative way.
Any opinions on this?

In my opinion, I always feel there is some kind of bias when a nusmismatic dealer offers a coin and/or bank note grading service, and also sells their "3rd party grading (TPG)" coin and/or bank note to collectors.  Where's the third party?   There's just no independent, unbiased opinions if this is the case.   Higher TPG grades usually translates into higher realized prices thus a bias towards higher grading levels for their coins and bank notes. 

For example, ICCS (grading service for coins) do NOT sell their own graded materials directly to collectors.  That's considered a "true" TPG grading service.   An arm's length transaction.  Thus giving independence and is unbiased.   Dealers and collectors a like who submit a coin to ICCS for grading get's that TPG service.  It's up to the dealer or collector to decide whether or not to accept that TPG opinions.   

It all comes down to making sure that the buyer views the coin or bank note first-hand to determine if that grade was either graded correctly or is overgraded. 

"Should a TPG be associated with an auction house, coin/currency dealer, or private seller in any way?"  I think that the conflict of interest and possible personal gain from self grading notes for sale could be looked at in a negative way. Any opinions on this?

This is a very valid question and one that begs to be asked. However, the principals of all three of the third-party paper money grading services in Canada are involved in varying degrees with the buying and selling of Canadian paper money, viz., in alphabetical order:

BCS in Ontario (http://www.banknotecertification.com, http://www.colonialacres.com/contact.shtml)

CCCS in Quebec (http://www.canadiancoincertification.com/index4.php).

CCGS in Alberta (http://www.canadiancurrencygradingservice.com/about-ccgs.htm)

There is no truly independent TPG company for paper money in Canada at the present time. This may well be one of the reasons why many Canadian sellers on eBay and at commercial shows seem to prefer having their notes graded by American TPG companies, in particular PMG and PCGS. However, a more likely reason is that the American grading scale is much looser than the Canadian (Charlton) grading scale, and that is true for both paper currency and coins. 

This is only a question and nothing more. Do you believe that a note being graded for Colonial Acres by BCS would get a better grade than a note being submitted by a private collector?

This is only a question and nothing more. Do you believe that a note being graded for Colonial Acres by BCS would get a better grade than a note being submitted by a private collector?

I'm not going to touch that one lol!

Suffice to say though that when I'm grading my own notes I must admit that I do sometimes tend to give them the "benefit of the doubt" whereas when I'm looking at other people's notes I tend to be a bit more severe.  I think it's just human nature to act in this fashion. It's similar to the well known phenomenon that every coin or note has two grades, i.e., one grade when you're buying it and another (higher) grade when you're selling it!

Suffice to say though that when I'm grading my own notes I must admit that I do sometimes tend to give them the "benefit of the doubt" whereas when I'm looking at other people's notes I tend to be a bit more severe.  I think it's just human nature to act in this fashion. It's similar to the well known phenomenon that every coin or note has two grades, i.e., one grade when you're buying it and another (higher) grade when you're selling it!

I agree Completely!
I think that everybody does it.

I agree Completely!
I think that everybody does it.

Another thing that a lot of people (most people?) do is to remove the note from the TPG holder if they feel that it's been significantly undergraded but leave it in the holder if they agree with the grading or, heaven forbid, if they feel that it's been overgraded(!). It all comes down to human nature and there's no way that human nature will ever change.

Collectors and dealers have been ripping coins out of TPG holders for many years and then resubmitting them in the hopes of obtaining the grade that they feel is appropriate. It's going to start happening with TPG bank notes too, if it hasn't started already .....

I noticed one of my old "friends" in the latest Torex auction, i.e., Lot 2833, a $20 1935 English Text note in PMG-65 EPQ (Serial # A250627, Plate C). It sold for a whopping $20,000 plus 20%.

http://cgi.liveauctions.ebay.com/ws/eBayISAPI.dll?ViewItem&item=140275822373&category=52622&viewitem=

In November 2003 I put this very same note up on eBay together with its consecutive companion (see image below). The catalogue value at the time was CDN$7,500 each in Unc. My starting bid for the pair was US$10,000 (then about CDN$14,000) but there were no bidders, perhaps because my eBay description contained the dreaded words "These notes do have a couple of truly microscopic traces of having been handled by human hands as is usual on early uncirculated notes".  I guess I shouldn't have been so forthcoming in my description!

Thus, this note has increased in value by about three times in the last five years. How the markets change!

{http://img.villagephotos.com/p/2008-1/1293040/$20PAIR.jpg}