Understanding Stamp Values

The subject of stamp valuation is a deceptively complex one. While at first glance, determining the value of a stamp might appear to be a simple matter of turning to one of the many available reference catalogues, in fact the stamp catalogue is just the beginning of the process. At the end of the day, the final sale price of a stamp (or stamps) represents a meeting of minds between buyer and seller, and there are many factors at play in determining that price.

At their best, catalogue values represent the selling price of a stamp in an idealized situation that is rather rare: a retail transaction between a professional stamp dealer and a collector for a single stamp or complete set in a grade and condition that is a good bit above average for the issue but still not the very best. Even in such a rare, idealized situation, stamps will usually sell for a price that is at least a small discount from the catalogue value. Everybody loves a bargain after all, and stamp collectors are no exception.

However, it is important to realize that there are also times that a stamp will sell at a price that is greater than the catalogue value. A stamp might be an exceptionally fine specimen, catalogue values might lag behind a collecting area where prices are rising rapidly, or perhaps there are simply two particularly eager collectors bidding in an auction.

In this overview we'll present some of the major topics in stamp valuation and hopefully clear up some of the mysteries that drive stamp values, setting you on course to making confident purchases and understanding the ultimate worth of your collection.

Condition, Condition, Condition

New collectors and those outside the hobby will often underestimate the role of condition in stamp values. Collectors want clean, undamaged stamps that look good in their collections. Perforations should be even and intact. If the stamp has been postally used, the cancel should be light and unobtrusive. The back of the stamp should be free of pencil markings, hinge remnants and paper adhesions. Collectors of mint or unused stamps are likely to be even more exacting, frequently even examining the gum for minor defects. Mint stamps that have never been hinged sell at a substantial premium over those that have. For older stamps the centering of the stamp image is also very important - printing methods were not as precise years ago and many older stamps are badly off-center.

As noted earlier, catalogue values are for stamps that are somewhat above average grade and condition. As you move down the scale from above average, to average and below, values fall off precipitously. An off-center stamp, a stamp with one or two minor flaws, or a stamp with a heavy cancel, might fetch 20% of the catalog value or less. At a certain point of unattractiveness, stamps earn the label of "spacefiller." If a stamp has a high catalog value, perhaps $50 up into the hundreds, some collectors of limited means might be willing to spend 5-10% of catalog value on a spacefiller. For the more readily available stamps it becomes difficult to sell a spacefiller copy at any price. Consider that if a stamp catalogues at $40, and an imperfect but reasonably acceptable copy can be had for $6-12; why would a collector want a really awful copy for $3?

Another point of confusion for new collectors is the fact that by tradition dealers and collectors describe a stamp's centering and its overall condition separately. Centering is assigned a verbal grade that ranges from poor (P) to average (AVG) to fine (F) to very fine (VF) to extra fine (XF or EF). There is no universal standard for these terms, but catalogues generally provide a guide in their introductory sections. Be aware that in the world of stamp grading the designation of AVG describes a stamp that is very badly off center and in fact well below average. Also be aware that because centering and condition are described separately, it is possible to have a stamp that grades very fine, that is also a badly damaged spacefiller of little value.

There has been an effort in recent years to establish a grading system for stamps that combines centering and condition into a single numerical grade. Numerical grading is also commonly called third party grading because the grade is typically assigned by a private company that issues a certificate and encapsulates the stamp in a special holder to prevent tampering. To date, third party grading has been largely confined to stamps of the United States, and even there has not been widely embraced. Stamps that have been certified at very high grades have been known to fetch prices that are many multiples of their catalogue value, but it seems unlikely that these high realizations would be sustainable if the practice of third party grading were to become commonplace.

Don't confuse grading certificates with traditional expertization certificates or certificates of authenticity. For high value stamps that are easily faked, counterfeited or simply confused with a similar appearing stamp, a certificate from a recognized expert can help in negotiating a higher price, and may in fact be required before a sale is considered final.

Elite Stamps and the Truly Scarce

There are of course certain stamps that by their nature are traded in a world of their own. For some stamp issues there are only a few, or a few dozen, surviving copies. Others may have a census of one or several hundred, but are famous enough to command similar attention. For these stamps the catalogue value is often the last recorded price realized at auction. It is generally expected that the next time one of these elite items becomes available it will fetch at least that price if not more. When multiple copies are available, centering and condition will play a role in the value, but to a lesser degree than would be expected when dealing in more readily available stamps.

Minimum Value Stamps

The great majority of stamps produced over the years have been saved in quantities that can easily meet the needs of collectors. The catalogues price these stamps at a minimum value, but they seldom sell for those prices. Common used stamps are most frequently sold in packets and lots, where the price per stamp could be a few cents or even less than a cent in some circumstances. It is not unusual to see entire sheets of mint stamps advertised for less than their face value.

The logic behind a catalogue's minimum prices is that they reflect a retail price for an individual stamp. In the case of very inexpensive stamps, virtually all of the cost in bringing a stamp to market is in the dealer's time identifying, describing and packaging it for sale.

No discussion of this type would be complete without some mention of stamps that have been mass produced for the hobby trade, but saw little if any actual postal use. These are typically large, colorful issues featuring popular topical themes. Often they are cancelled-to-order (CTO), meaning the issuing postal authority applies a cancel to the stamp to invalidate its value as postage and then sells the stamp either directly to collectors as a souvenir or to wholesalers for inclusion in low cost packets. Many collectors and dealers avoid these stamps altogether and consider them to have no philatelic value.

Collecting Trends

Collector interest in a country, era or topic, has a tremendous influence on stamp prices. The result being that stamps from popular countries can command strong prices even when they are relatively easy to find, while stamps from areas of lesser interest can be quite affordable even if they are seldom offered for sale. As collecting interests change, these changes are reflected in stamp values. The most timely example of changing trends today can be found in the market for stamps of China. A surge in the popularity of stamp collecting within China has caused prices to soar in recent years, setting record upon record for scare items at auctions, and seeing once affordable issues slipping out of reach. For a time, catalogue prices could not keep up with the volatility in China and collectors expected to pay considerably more than catalogue value for stamps they wanted for their collections. The market appears to have stabilized now, but you would still expect to pay full catalogue for most issues.

Bulk Stamps - Packets, Lots and Collections

As with other consumer goods, when stamp collectors buy in bulk they expect to save money. Of course, just how much savings can be expected varies with the exact nature of the bulk lot in question which can range from a random mixture of common stamps to an advanced collection of better quality, hard-to-find items. When evaluating a fair price for a bulk offer, many of the same factors that have been discussed for single stamps must be considered, especially grade and condition. An assortment of damaged and otherwise undesirable stamps is no bargain when sold for 10-20% of catalogue value.

Beyond the question of quality, the focus of a bulk offer is a significant determiner of the percentage of catalogue value you might expect to pay. If the assortment is drawn indiscriminately from all countries and time periods, includes many minimum value stamps, mixes mint and used, and includes partial sets, then 10% or less even for quality material is reasonable. As you move away from this hodgepodge of material to greater focus and organization, then price as a percentage of catalogue value can be expected to go up. There are too many variables to develop any sort of guidelines for that percentage, but lots made up of a specific country or area that only include harder-to-find stamps can easily get 20% or more, and well-built country collections could sell for 30-40% or more.

What to Expect When You Sell

When selling stamps, all of the same factors that affect value apply. Better quality singles and sets are worth considerably more than poor quality stamps. A well ordered specialized country or worldwide collection is worth more than a shoebox full of unsorted stamps.

Today's stamp collectors have more options than ever before when it comes time to sell. Given the right venue, a private collector might expect to sell stamps at prices near or equal to those achieved by full-time dealers. However, while selling individual stamps to other collectors may bring the highest prices, those high prices come at a cost. The best venues for selling stamps tend to charge the highest fees and those fees can be significant. If you have a large number of stamps for sale, a more important consideration may be the time required. Regardless of the value you place on your time, if you have hundreds or thousands of stamps to sell, it might prove impractical to catalogue and list each stamp and then process the transactions and ship the stamps to the buyers. Often the best option for a collector liquidating a quantity of stamps is to break the stamps into small country or topical lots priced somewhere between 10-30% of catalogue value.

Despite the many options for collector-to-collector sales, there are still times that selling to a professional stamp dealer is the preferred path. Just a few such situations include when you have individual stamps of significant value, when you have a specialized collection best handled by a dealer with a specialized client base, when you have a particularly large collection to dispose of, and when you simply wish to sell stamps as quickly and with as little work as possible.

The conventional wisdom regarding dealer buy prices is that a dealer needs to be able to at least double their money on stamp purchases in order to cover expenses - in other words a buy price that is no more the 50% of a sell price. As with all conventional wisdom, this piece is only somewhat true. For very inexpensive, common stamps a dealer might need to pay even less than half of the sell price, if they are willing to buy the stamps at all. If you have stamps from a popular collecting area that dealers are struggling to stock, you might be able to drive a harder bargain. Also, for individual stamps of significant value dealers will expect to pay a price closer to sell price. At the high end, stamps are frequently consigned to auction where the auction house will charge a fee to both buyer and seller based on the final hammer price. These fees vary and are often negotiable, but a 10% commission charged to sellers is about average.

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