Pawnshopping
Part 1 of 3

by Watchking

It was the start of a warm languid day in Galveston. The morning mist was burning off and I had packed myself at breakfast. Thought I'd check out the Cash America on Broadway. Their interiors were all the same, prepackaged gray and blue. Five or six watches sat in the glass covered counter. I recognized what seemed to be a Tag Heuer Professional with a black dial, date and luminous hands and pips. The watch was an early series but the dial reminded me of the 2000 series. The stainless bracelet resembled the Breitling professional model. I asked to see the watch and inquired about the price. "No problem ", the salesgirl said, "It's $25". I began to look more closely at this watch, certain that it was a fake. But the more I inspected the more I thought that "If this is a fake, it is a ver-r-r-y good fake".

The more I looked the more I felt that this watch was real. I didn't have my case wrench but since most fakes have pry off backs I pulled out my loupe and checked the back's edge for a pry edge depression or tab. There wasn't one. I tried it on. The bracelet was about one link too short, but I made it fit by opening the wet suit expansion segment and shortening the link position on the clasp. It felt right. It was a quartz model with a mineral glass crystal. I bought it and kept it as a gift for a family member who might have a smaller wrist than mine. A few hours later I was able to verify the watch's pedigree at Cash America's own vintage watch shop on Westheimer Blvd in Houston.

I had found another prize in a pawn shop. Taking Texas Highway 6, I drove through Alvin and Missouri City on my way to Houston's west side. When I reached Highway 59 I went west instead of east. A few miles later I was in Roesenberg. One of the old-style pawn shops on the main drag was nearly across the street from an EZ Pawn, one of the new breed of pawnbrokers similar to Cash America. The old pawn shop had wood floors that creaked as I walked. For $30 I bought a Le Jour coin watch made from a real Morgan Silver dollar (dated 1888). And so it went. By the time I went back up Highway 59 into Houston my shopping instincts had been honed to a razor's edge.

I enjoy rummaging around in pawn shops. If a pawn shop is just trying to get its money out of a watch so it can go back to the loan business then I want to search out the gems in it's inventory. There is an exploratory spirit involved in digging around in old cookie tins and worn cigar boxes for vintage gems that need to keep time again. Sometimes you can even find a prize in the antiseptic interior of the new-style loan stores like EZ Pawn or Cash America.

So let's go over the basics when shopping in pawn shops although the details can vary from state to state and country to country.
Pawn shops are basically loan offices that take small items as collateral. The loans repayment rate is usually in the range of 70-95% of all loans. If a loan is not repaid then after some reasonable period (often 90 days) a pawned item can be sold by the pawn shop.
Almost all items pawned will have serial numbers except for those that traditionally do not have them (like rings or neck chains). As well almost all items pawned have their serial numbers reported to the police who usually compare them to stolen item serial numbers listed in the US National Crime Computer.

Since pawn shops survive by making loans that get paid back, the pawnshop owners make a point of setting up loans so that they CAN be paid back. First and foremost pawnshops don't like making loans if the amount of repayment is so large that they don't think the customer can pay it back. For this reason pawn shops will often loan only a small amount of the value of the item being pawned. This gives the customer a chance to repay their loan and it encourages the customer to make every effort to find a way to pay back their loan so that some valuable item isn't forfeited out of pawn. In addition pawnshops regularly take losses on loans. How is that possible you wonder.

Lets say that a pawn shop pays a loan window teller $8 an hour. If the paper work and testing of a pawned item takes 1/2 an hour and the customer borrows $10, and that loan is paid back in a week plus the $1 fee, the pawnshop loses $3 on the transaction. The average loan is for 90-100 days at which point the pawn shop has broken even on its $10 loan, assuming no cost for storing the pawned item. Many people pawn guns and other seasonal items for the winter by paying $1.to $2. per month in "interest" on their loans so that they will have a safe, dry place to store their goods out of season. When an item that is pawned has not had the interest owed paid on for some reasonable period (like 90 days) the pawn shop can usually sell it. The pawn shop owner usually wants to turn this item back into "Loan cash" while at the same time recovering some of the money lost on other loans (as described above), due to forfeited items that have become unsalable while in storage or items that turn out to be fakes or stolen (and thus relinquished to the police).

So why do pawnshop owners remain in business. It is because people usually repay their loans that pawn shops stay in business. If a loan stretches out to 120 days a pawn shop begins to make a substantial interest rate on their loans. Seasonal construction workers are regular pawn shop customers. They are able to repay their loans during 8 months of the year and they take loans out during the other 4 months. The same holds true for commercial fishermen and oil workers or any jobs with slow periods. Pawn shops that are in business for 1-2 years can expect to make 15-20% return on their investment after expenses if the economy is good. If the economy is bad then more customers will default on their loans and the forfeited items will have no buyers. This is when pawn shops will do anything to sell an item. This makes the pawn business very sensitive to the economy.

Unlike the stereotypes in the movies and on TV, most pawnbrokers get their money from bank loans or shareholder stock issues. The image of the pawnbroker dealing meanly with their customer base also doesn't hold up. There is great competition amongst pawnbrokers and if one pawn shop treats its customers badly, they will go somewhere else. So how do watch collectors approach pawn shops?

The first thing to consider is that pawn brokers are astute at assessing people who walk through their doors. The pawn broker is also bound by numerous government and police rules and regulations. Pawn shops want to turn over their "items available for sale" so they can make more loans. Finally, a pawn broker will prefer to offer discounts to a customer that buys a number of items over a long period of time (this can vary if an item is sold "as is" due to damage or malfunction). All of these factors influence your relationships with pawn brokers.

I have a number of "postcards" made up before I go on a trip that will take me by a number of pawn shops. These postcard are the means that the broker can use to contact me, a shipping address (usually a PO Box) and I include a list of the kind of things I wish to buy on a regular basis. Once I shop five or six pawn shops in any area I will often find that only one or two will have watches I want to buy and at prices close to what I will pay. If the broker has time I will often take them out for coffee or lunch or bring in donuts. This friendly approach is insignificant to the high dollar value of the watches I can buy, but it breaks the ice and shows the pawn broker that I am serious.

Pawn brokers will rarely make low offers on watches. They may have very good prices, but if I want a further discount for buying three or four items I will usually have to ask for it. Pawn brokers usually prefer not to "cut their own throats". If my offer is insulting to their intelligence I may have lost a great opportunity for the future. Some of the shareholder pawn shops actually use the reverse auction approach to selling forfeited items. This means that the price actually goes down for every week that an item remains unsold. I bought a solid gold 39 jewel Girard Perregaux Gyromatic chronometer for less than $100 because it had been on the pawn broker's shelf for 8 months. I also bought a wind-up 17 jewel solid gold Longines mid-sized watch for $8 more than the Girard because it had only been out for sale for one month. Both represented a good value but the Girard was about $800 underpriced. Since I wasn't going back to this shop for a while I needed to buy them both or likely lose the Longines. This particular pawnbroker sent me pre-addressed postcards I left, with each new watch item that came out for sale. One turned out to be a JL Memovox which was worth all the trouble the postcards entailed.

Click here for Part 2