When buying gold from private individuals in the form of used or scrap items it really is a skill. Here we’ll discuss the techniques to master that skill.
Many times it depends of the type of item you are buying because of its perceived value. For example, a broken chain would seem to be of far less value than a chain that ‘s in tact. To us of course, the scrap buyer, it makes no difference whether it’s in tact or broken. The actual melt value is the same no matter what the condition.
So, let’s cover some different types of items that can be purchased from the private sector, at prices far below spot…
Jewelry Offers
Making an offer and closing the deal on a jewelry buy is usually simple but occasionally you have to become somewhat of a salesperson.
The most important point is – YOU MUST BE A LISTENER!
If you listen, they will usually tell you why they are selling.
Like I said earlier, the easiest type of sellers are those who have jewelry that is broken, worn or missing stones. The reason is, these types of items have no perceived value to the seller.
Another type of seller that is fairly easy to deal with is one where the item they have to sell is a result of a failed relationship or divorce. When there is no longer an emotional attachment, no matter what someone is selling, it’s an easy purchase.
In a divorce situation, the woman usually ends up with the engagement ring and wedding band. In most cases she did not make the original purchase. Because it was not her money used to buy them, she could care less how much she receives for those items. She may have no idea what was paid when they were purchased in the first place.
Basically, if the item the person is selling is an undamaged piece of jewelry there has to be a good reason for them to sell at a fraction of retail.
Listed below are some of those reasons – Listen for them as you are in conversation with the seller.
1. No longer emotionally attached, such as divorce.
2. Inheritance.
3. Desperate need for cash.
If they don’t divulge their reason, simply ask them “What is the reason you are selling?” They will usually give you their life story after that question!
Dealing With The Tough Seller
There are some statements you would rather not want to hear from the seller, such as:
“I know what it is worth.”
“I know what I paid for it.”
“I was told it is worth X amount of dollars.”
The big one is, “I have an appraisal.” ( an appraisal is about 20% higher than retail and is for insurance purposes only)
These statements indicate immediately, that this will be a tough buy. After a lot of experience you’ll be able to turn them around about 50% of the time, but they can be a bit challenging if you are new at buying.
Sometimes after I hear those types of remarks I just say “I buy for the gold content only, so I most likely would not be able to come close to what you are looking for.”
You’ll be amazed, though, how that statement sometimes turns their attitude around. And the moment it does, you can be fairly certain you’ll get the buy.
Another way to justify your offer to the tough seller is to explain the retail markup. As I’m inspecting the item, I generally start by telling them:
“The retail markup on jewelry is very high. The basic increase from wholesale to retail is 300%. In fact, most of the catalogs the jeweler shows you are priced in what the trade refers to as “triple key”, meaning the retail price is three times wholesale. Like all the other buyers, I pay below wholesale because the item is used”
Once you educate the seller with that information they are already thinking in their mind, wow, I will not be getting anything near what I paid for this.
Then as I’m handing the item back to them I tell them my offer. If they reach out and grab it they most likely do not want to sell. But, if they don’t reach out to take it you have a good chance at buying it.
Always keep in mind, you are offering a service. And one that is hard to find, I might add. Even if they do find your competition they will get no more for their item than what you offered them. If they get nasty with you tell them to take it to the person they bought it from and see how much they offer, if they will even buy it!
Most of the sellers you deal with will be pleasant. But, as in any business where you deal with people, you’ll occasionally run into an unpleasant one. Just be friendly and use tact when dealing with the tough seller.
Remember, as a buyer/investor you can always walk away from a deal, you have the leverage!
Buying Dental Gold
You’ll occasionally have the opportunity to buy dental gold, which is 16k.
Crowns, Bridges, caps, partials and inlays are forms of dental gold that someone may have to sell. And it may have teeth along with it!
If some teeth are included with the gold you can smash them out by laying it on something solid such as concrete, then take a hammer and smash the item until the teeth break out.
You have to be careful when buying dental gold because there could be silver or other white metals mixed in with the gold. I would suggest that if it is not gold in color, do not buy it.
When I calculate the value of dental gold I use the 10k formula just to be safe. There can be other elements trapped within the gold that might add to the weight.
Buying Class Rings
Class rings from high school and college are often sold to gold buyers. When buying class rings be sure the ring has a karat stamp inside the shank. There are other metals used to make class rings that the acid test will show as gold.
Also, the stone in the class ring is usually a good part of the weight. I weigh the ring and make an approximate offer based on only half the weight. If they take the offer I use a hammer to smash the stone out of the ring then weigh the gold again to get the exact weight and then make my actual offer.
Buying Gold Bullion
The hardest gold item to buy below spot price is gold bullion. This can be in the form of coins or bars and is usually .999 pure gold. The reason it is the hardest to buy is because these sellers usually follow the spot gold price very closely and expect to receive near spot when they sell.
You will periodically have bullion offered to you to buy. If you do, always ask them why they are selling. There could be circumstances such as inheritance where they will sell well below spot price, and you won’t know unless you ask!
How Much To Offer
The amount you offer is entirely up to you. If you are buying for investment purposes you can go a bit stronger on your offers, as opposed to someone who is buying for profit, but you don’t have to.
If you have no competition in your area you can generally make offers of 25% to 50% of scrap value and have no problem closing the deal. If you do have others buying in your area I would do some spying and see what percentage of scrap value they are offering.
I generally offer about 25% of value when buying scrap items because, to the seller, scrap has no perceived value. Many times my offer depends on the sellers reason for selling and the amount they are looking to get for their item.
I generally find that if I offer low on the scrap and a bit higher on the complete items, I end up having an average of 40% to 50% of scrap value invested in all of my buys.
Always remember, if you can’t make the buy it’s no big deal, just wait for the next one to come along! Sellers of gold are everywhere at today’s prices.
