Whether you are baby boomer who is downsizing, someone faced with a divorce or with the loss of a loved one, there will come a time to decide how to handle the selling of personal assets that are no longer needed.
There are many options, and the most common is to conduct an auction or estate sale. Both methods can help achieve the same result of selling through the assets, yet it is important to first answer a few key questions to help narrow your search process.
- Are there any special or more valuable items in the home to be sold? A collection perhaps: art, stamps, coins, jewelry, antiques, wine, etc.
- What is your timeline to move out of the property?
- Is the convenience of the process more important or financial gain from selling through the items?
An estate sale, also known as a tag sale, is an on-site liquidation process in which a coordinator is hired to tag items to be sold and set an asking price for each item. As the sale progresses over a period of one to three days, prices are negotiated and reduced to help sell the items. On the morning of the estate sale, individuals line up, take a number or use a sign-in sheet to determine the order in which they can enter, preview and purchase the items in the home.
Pros of an estate sale:
- Quick setup (one to three days).
- Quick on-site sale (one to three days).
- Ease of sale for general household items.
Cons of an estate sale:
- Strangers walking through the property.
- No state or national licensing, education, ethics, insurance or regulatory requirement for estate sale companies.
- Necessary price reductions on Days 2 and 3 as items are picked through.
- Estate sale company purchases the remaining items for pennies at the end of the event.
- Sellers don’t receive an itemized receipt of what each item sold for unless above a certain amount.
- Owner and family cannot attend the sale.
A method of selling property in a public forum through open and competitive bidding. Items sell to the highest bidder. Depending on the size of the project and the auction company that you choose, auctions can be conducted on-site, online or within a gallery. An auction isn’t strictly a method to sell more valuable items — the entire content of a home can be sold at auction.
Pros of an auction:
- Competitive bidding allows for prices to increase with higher demand.
- Online auctions can bring a larger pool of buyers, whether local, national or international.
- Helps with seller privacy and keeps crowds from coming to the home.
- Buyers can preview items online and bid live to win the item.
- For a gallery auction, items are transported and sold off-site at a sale at an auction gallery.
- Items can be marketed to a larger pool of buyers and collectors specific to the asset type who are local, national and international.
- Higher sell-through rate than an estate sale.
- There are licensing, ethics, education, insurance and escrow account requirements by most states.
Cons of an auction:
- On-site online auction can take a sizable time commitment (one to three days for cataloguing and seven to 14 days for online auction bidding).
- Gallery auctions incur a cost to move the items.
- On-site auctions can take 20 to 30 days for marketing and setup.
An auction or estate sale company will generally charge between 30 and 40 percent of the sales collected. For example, if the event had a total sale of $10,000, the seller would receive $6,000 to $7,000.
Where do you find estate sale companies?
- Google Auctioneer and your town. It will come up with options for you to select as many of your auctioneers also do estate sales.
- Each are popular sites where vendors pay to list their services and local sales are listed.
Where do you find auction companies?
- Auctioneers.org, the National Auctioneers Association and your local State Auction Association website.
- Northcarolinaauctioneers.org, the Auctioneers Association of North Carolina or your local state auction association.
- It’s important to select an auction company that is associated with local and national organizations to ensure they are keeping up with the latest education, code of conduct and trends.
- Always seek out the appropriate designations like a Certified Estate Specialist who is specifically trained to handle your overall needs from the personal property and real estate testate or intestate.
What questions do I ask an auction or estate sale company?
- Do they have a properly written contract?
- A properly written contract should outline responsibilities of each party, fees, timeline for the sale and timeline to receive payment. Avoid potential problems and make sure to sign and receive a copy of your contract.
- What is the experience level of the company for the type of items you will be selling?
- If your sale includes collections, the company should have a person who can properly research the products and give a estimation of what it should bring at auction. Also make sure you understand that it is an estimate, it is not an actual hard figure.
Does the company hold appraisal designations or does someone on their staff?
- For an estate sale, pricing is everything. One person cannot be an expert in everything; however, it is critical they have the proper training (Master Personal Property Appraiser, Graduate Personal Property Appraiser, International Society of Appraisers, American Society of Appraisers) to be able to research items. Priced too low, the item is quickly picked up and additional margin is lost.
- Priced too high, it will not sell and later will be discounted.
- At an auction, research would be conducted to provide information about the piece to help buyers outbid one another for maximum sales results. The pricing opinion is no longer as important as the auction process will help set the market value.
When will payment be made to you after the sale?
- Every company has a different timeline. Make sure your contract states the number of days after the sale when you will be paid. Estate sale companies do not have any laws to follow, while auction companies are required to settle payments within 30 days in most states.
Is there a minimum sale requirement?
- If your sale does not meet a certain minimum, there could be additional fees. Companies should disclose that upfront.
- For instance, if your sale does not bring in more than $10,000, you may have to pay a $500-$1000 marketing fee, plus labor for the sale. No one does anything for free, so don’t believe that by asking for reduce commissions you save yourself a dime.
What is the commission amount?
- Many sellers base their decision on selecting a company by the lowest commission percentage. This is generally the wrong approach, as sellers need to understand that they need to select the company who will help them realize the highest sales total.
- For example, if Company A sells the home content for $10,000 with a 30 percent commission and Company B sells the same content for $16,000 at a rate of 40 percent, the seller would receive $2,600 more with Company B even though the commission was higher.
What marketing budget and platforms do they use?
- A marketing budget will help your sale be publicized to the right audience of buyers. It is important to compare where and how your marketing budget is spent. This is where the experience and training of the company being interviewed is critical. An email list is not enough to attract a broad range of buyers to help you achieve the most for your items.
Do they have a current certificate of insurance?
- It is important to verify that the company has liability insurance. Ask for a copy of a recent insurance certificate to be attached to your signed contract copy.
How are sales documented?
Does the company have a tagging, invoicing and point of sale system for the sale of your items? When you receive the sales results, will you be provided an itemized report or just a total? Most states require itemized sales reports from an auction company, but an estate sale company can run its reporting as it wishes.
What happens to the items that do not sell?
- Will the company help donate, or resell later the remaining items? Some companies offer to purchase the remaining items for pennies on the dollar.
When work is done properly, sellers can profit nicely by conducting an auction or estate sale. It is an excellent resource to help offset the cost of the move. But sellers must take the time to ask the right questions before selecting the right firm to help them.
In addition, you must also understand that your auction or estate tag sale team will perform to the contract and you should not attempt to Micro-Manage them. If you attempt to do so, you may lose the sale, and still be on the hook to pay marketing and labor, even if you fire them.
The last thing anyone ever wants to read in the paper a month after their sale is that an item not properly priced at an estate sale was purchased and resold at an auction for 10 times more. This is common with Estate Sales. So be sure to ask for a properly licensed auctioneer.