WHAT EVERY SELLER MUST KNOW BEFORE LIQUIDATING THEIR ESTATE!
By: Kenny Lindsay
Each year we receive hundreds of phone calls from regular folks that find themselves in the demanding position as an estate representative for a family member or friend. It seems such a role is always a thankless job and very demanding on your time and nerves. When an estate occurs it seems that the MAJORITY of family members make a statement along the lines that “we need to have an estate sale” – the term ‘estate auction’ is what they really mean.
In most cases, it becomes apparent that the person named as an estate representative (executor) lacks the necessary experience and know how to adequately perform the required tasks when settling an estate.
When the time comes to properly liquidate the assets of an estate, it seems that 9 out of 10 times, estate representatives improperly select the wrong type of liquidation service, which ultimately costs the benefactors of the estate thousands of dollars and added frustrations.
We have found that the majority of estate representatives and executors whom we speak to simply do not understand what the difference is between an Estate (Tag) Sale versus an Auction.
The fact is, the difference between an estate sale versus an auction is mammoth and under no circumstances are the two services synonymous with one another.
Before I explain those differences here are some numbers that might quickly put things in perspective.
By conducting an estate auction 100% of the personal property will be sold at the end of the day. Some of items will sell for far beyond our wildest dreams and some of the items will sell at discounted anticipated value.
Everything will have sold for its fair market value that day.
- In average figures at an Estate Tag Sale:
- About 30% and everything marked with too low a price will be sold.
- About 50% will be sold at discounted prices.
- About 20% will need to be disposed of or given away.
- 0% will be sold for more than it is marked. Tag sales are negative negotiation sales methods where the price can only go down, not up.
ESTATE SALE vs. PUBLIC AUCTION From Wikipedia, the free encyclopedia (Take note of the underlined) An estate sale is a type of garage sale, or yard sale to dispose of the majority of the materials owned by a person who is deceased or will be moving. A professional usually conducts estate sales, for a percentage of the revenues. This is because the scope of the process is usually overwhelming to the survivors, and for the specialist’s experience with pricing antique items, his or her following of customers, and the specialist’s experience in disposing of unsold goods in an unsentimental manner after the run of the sale. Antique and collectible dealers use estate sales as one of their more important wholesale sources. Estate sales are typically 1 to 3 days long, often with a price reduction toward the end.
ESTATE SALE: NO INDUSTRY STANDARD Starting an estate sale company requires no professional standards of any kind. More specifically, there are no professional organizations, no bonding required for the funds, education, and training, designations, continuing education or even a Code of Ethics for the estate sale company to abide by. By and far, it’s the wild, Wild West, shoot from the hip of all businesses.
ESTATE SALE: CONFLICT OF INTEREST This is the number one red flag that should be at the top of your radar screen. You will find that an antique, Internet auction seller or second hand goods dealer, who is pricing your items, which is clearly a major conflict of interest to say the least, operates a large majority of estate sale companies.
Problems that may arise out of a situation like this is the estate sale company may strategically position and price valuable merchandise which is quietly sold to the estate sale company, or friends, so they can reap the true value of the merchandise elsewhere. Many estate sale companies reserve the right to retain any remaining inventory at the end of the sale, which again raises eyebrows and is a major conflict of interest. Transactions as to who the real buyer was are none existent.
ESTATE SALE: THE EARLY BIRD GETS THE WORM The only form of competitiveness involved with buying your merchandise is folks arriving the earliest on the morning of your sale in hopes of being one of the first in the door to find ‘the good stuff’. Some estate sale companies use a number system where random numbers are pulled out of a hat which determines WHO gets inside the home first or people have to line up early in the morning to get in first while the rest of the buyers standing in line wait to gain entry and hope that all the ‘good under priced stuff’ was not bought up by the first group that was in.
ESTATE SALE: THE JUDGE, JURY AND EXECUTIONER Nobody can possibly be an expert on all collectibles, jewelry, antiques, Persian rugs, coins, lighting, art, automotive, tools and even household furnishings. However, the vast majority if not all estate sale companies play the role of the Judge, Jury and the Executioner. In other words, pricing of your valuable assets comes down to one person establishing such values, which are often erratic.
It’s a well known fact in the antique and resale business that dealers prefer so called ‘professionally’ operated estate sales as they can capitalize on improperly marked goods – that is, if they are one of the first ones in the doors.
ESTATE SALE: MARKETING IS LITERALLY NON EXISTENT The majority of estate sale companies that we have observed over the years have zero concepts on the art of marketing. Essentially, there is no marketing campaign whatsoever with the exception of a classified ad in the local newspaper, a sign on the corner and perhaps the utilization of the Internet in some capacity.
Instead of laying out a detailed marketing plan, they cut this corner right out of the equation and brag up and count on their local following. Let’s put it this way, when was the last time you read an article in the local newspaper or a story on the evening news that talked up an estate sale? It does not happen because they are low publicized and non-newsworthy events.
Over the past 30 years Roumillat’s auctions have been the center of many newspaper and television articles in the Low-Country.
ESTATE SALE: NEGATIVE HAGGLING For the most part, there isn’t any negotiations whatsoever at an estate sale. The exception is, if an item isn’t priced then the estate sale company will shoot from the hip and name a price from off the cuff. The other exception is, typically estate sales are two and three day events where, over time, prices are slashed up to 75% off from the original marked price. When prices are negotiated down on your merchandise, negative haggling is the automatic process.
ESTATE SALE: SHODDY CONTRACTS AND AGREEMENTS Obviously, this isn’t the case with every company that provides estate sale services but there does seem to be a trend with poor contracts in this field. Those that I’ve seen are simply cut-and-dry one-page wonders that are full of legal loopholes and leave the owner practically defenseless – well, at least according to the contact.
First and foremost, a good contract should never be written by anyone other than an attorney and never in a fashion to gain leverage over the other party. Common language in an estate sale contract is the estate sale company reserves the right to retain any unsold merchandise. Some will say they will take it home and try to sell it on the Internet. Accounting could go on for months.
Many times the owner is not allowed on the premises during the sale and the estate sale company isn’t responsible for theft which is ironic considering that you may have dozens of vastly unsupervised strangers rummaging through all rooms in your home on the first sale day.
In addition, you’ll see that most estate sale companies have very little mention on how they are going to promote your sale. They often pay for all advertising right out of their own commission that they can afford to do because there isn’t much of an advertising campaign in the first place. Be careful with what you agree to. Read the contract in its entirety and always have your attorney review the contract for legalities and liabilities. .
ESTATE SALE: A MOUNTAIN OF LEFTOVERS Leftovers are fine at holidays but not when your ultimate goal is to sell and clear out the residence of personal property. Unlike an auction, the likelihood that you are going to have a mountain full of leftovers and a big mess on your hands are indeed pretty likely. Some estate sale companies will address this concern and make ‘clean up’ arrangements.
ESTATE SALE: YOU CAN’T WATCH! Despite the fact this point was mentioned in the ‘contracts’ section of this article, it deserves its own section. Many estate sale companies have a provision in their contact that no member of the family is allowed on the premises while the sale is under way. Regardless of the reasons given, if this isn’t a red flag to you then nothing is.
The fact is most estate sale companies do not want you around during YOUR sale. Like I said earlier, it’s the wild, Wild West of all businesses where there is no accountability whatsoever to a licensing authority, bonding company, no registration of buyers, and even the owners of the property are not allowed to be present.
But you probably do have homeowners insurance!
ESTATE SALES ARE A POOR BUSINESS MODEL At the end of the day, an estate tag sale is simply a glorified garage sale which is typically operated by one or two semi or retired part-time ‘weekend warrior’ type of small business owners. None have any professional training, or required education in the ‘estate sale’ field whatsoever. There are no ‘industry standards’ starting with a strict code of ethics because there isn’t any trade organizations or associations.
Many are current or former antique shop or reseller dealers who bring a level of expertise in specific areas but nevertheless, when they are dealing such goods along with representing an estate and setting the prices themselves, it’s clearly a conflict of interest to say the least.
Despite all of this, the actual estate sale process is poor and rarely advantageous to the seller. Assuming that everything an estate sale company does is above par, the process alone nullifies the effectiveness of the ultimate goal – receiving the optimal value on the goods through a competitive complete liquidation effort. The liquidation is never complete without the use of a garbage dumpster, goodwill and a guarantee in writing that the estate sale company will ensure that the property is clutter-free and clean at the end of the sale.
There is NO salesmanship whatsoever when it comes to selling your valuable assets at an estate sale. None. The handlers of the estate use the ‘silent salesmanship’ approach to selling your goods, which equates to a price tag and willingness to reduce prices and hope that a buyer will purchase the item.
Estate sales are simply not the best choice when liquidating many estates.
WHEN ESTATE AND TAG SALES ARE EFFECTIVE Choosing the right type of service to liquidate an estate is subject to the type of merchandise that needs to be sold.
An estate sale (tag sale), garage sale is effective if the estate simply contains general household merchandise, outdated modern day furnishings and most foreign imported goods. However, if there is a selection of fine antiques, collectibles, memorabilia, certain types of collections, quality modern furniture then an estate sale is absolutely a poor choice.