As the person in charge of seeing to the sale of your family’s personal property, you have to find a positive answer to the question, Should I have an Estate Sale or an Auction.
We took a look at the National Estate Sales Association website and found that there are all Pro’s and a lack of Con’s when it comes to Estate Tag Sales.
Often referred to as a “tag sale” or “conducted garage sale”, these types of sales may be a solution for those who are not moving from their home, those with heavy furniture items in a multi-unit residence or those who need money or room quickly. For those who are leaving or have left their home, even a multi-day estate sale cannot sell all that an auction can in a few hours. Reputable auction companies know this as a basic principle and therefore do not compete against their own industry by conducting estate sales. Beware of any auction company that offers to conduct an estate sale for you. It should be taken as a sign that they are conflicted in their professional interest by what is best for them and not best for their clients.
Each year we receive approximately a dozen Monday morning telephone calls from unhappy estate sale clients. Many are panicked and angry. All are disappointed. Not only are they faced with poor financial results from the previous days of an estate sale, their overall, most important goal is still not accomplished. The ever-present leftover items that did not sell still have to be dealt with. Add in other factors like a fast-approaching move-out date and estate sale clients end up with more stress than when they began the process of searching for a reputable estate sale service.
Sadly, after an estate sale has been conducted, we cannot help those estate sale clients because the time to conduct a successful auction has passed. Even if time is not a factor, the quality of the remaining merchandise certainly is. The sentence we use most often is, “If the estate sale crowd did not buy it after daily price knockdowns, the auction crowd certainly will not, either.”
WHAT’S WRONG WITH AN ESTATE SALE?
* Value assessment and pricing is usually done by just one or two people. Pricing is a guessing game based on either obsolete price guides and reference books, worldwide market prices like eBay and the good old fashioned “stab in the dark” method of guesswork. Estate sale companies may tout they use the “fair market value” criteria when pricing items but that, in no way, guarantees it will sell, and isn’t that what a seller needs – their items sold?
Consider the paraphrased definition of “fair market value” is ‘the price at which something will sell for as long as neither the buyer or the seller has a compulsion to sell or buy the item in question.’ When a potential seller is contemplating an auction or an estate sale, they most certainly do have a compulsion to sell.
Additionally, buyers must agree with the opinion placed on the price tag or the merchandise does not sell. Pricing further becomes a slippery slope with a costly downside. If something is priced too high at an estate sale, people will walk away and not buy. If something is priced too low, it sells immediately leaving the estate sale client wondering if it was priced too low and money was lost. Unlike a retail store with a stockroom of merchandise, there can be no correction of price after it sells.
* Many estate sale companies are not registered businesses. Therefore, they cannot obtain business liability insurance. Every seller is exposed to substantial risk and liability by allowing any uninsured business (plumber, electrician, etc.) to conduct business on their property. Allowing the general public to come onto and into their home for multiple days at an estate sale is the same scenario. Proper insurance is key—for both the estate sale company and the homeowner. Most home insurance policies become null and void after the home has been unoccupied for a certain period of time. Insurance companies may reject claims placed for liability if someone is conducting a business on the property.
* Generally, the public is granted complete and unsupervised access to all levels, all rooms and all locations of the seller’s home on sale days. Many estate sale companies are understaffed during sale days. This is crucial as more than a dozen people may be allowed to walk through a home, opening closet doors and cabinets and exploring all nooks and crannies. Additionally, many family members do not like the idea of strangers meandering through a loved one’s home for several days. Some estate sale companies have had to ban purses, fanny packs and backpacks from the public on sale days due to theft.
* Estate sales are an unregulated industry void of any state licensing and registration requirements. In North Carolina there are no specific laws protecting a seller and their family using an estate sale company. Critical issues like requiring a written contract documenting a seller’s expenses, sales commission, receipts for sales and a timeline for paying the seller are just a few of the topics where sellers have zero protection.
Remember, estate sale companies handle all of your money first. Unlike many other North Carolina businesses that handle other people’s money, the estate sale industry has no such requirement. Even if an auction company conducts your estate sale the rules of maintaining an escrow account do not apply because they are not doing an auction – they are doing an estate sale.
* Only a limited number of people, generally 5-20 at a time, are allowed to even look at items for sale during an estate sale. Potential buyers have been known to line up outside a home as early as 4 a.m. on sale days to get an admittance number and then have to stand in line for hours waiting just to look at your items in your home. Some estate sale people call that a part of the estate sale “experience.” We have also discovered many times the best items are sold prior to the sale days to estate sale employees or their list of preferred buyers giving items NO public exposure. Not exposing a seller’s items to the most people possible is poor business and a ticket to failure.
Most importantly, at estate sales, whoever sees something FIRST and buys it, is the winner – NOT whoever has the most money.
* Two, three or four-day estate sales do not create any sense of urgency and excitement. Why do in two, three or four days what an auction can do in hours? Plus, the savvy public is aware the term “estate sale” often is misused by those holding a simple rummage sale. People have a tendency to put off attending any multi-day event thinking, “I’ll go there later.” The public also knows the best items are sold on the first day so there is no reason to hurry to the later sale days. Additionally, it is human nature to keep driving past a long line to get in to anywhere and estate sales are no exception.
* Most estate sales begin on a Thursday or Friday – a move that benefits dealers only, not the buying public. That means the general public, who traditionally will pay more for items than a dealer will because they are not in business, have to wait until 1-2 days later to shop at what dealers have left behind. It is to the benefit of the estate sale company to begin sales during the business week to eliminate selling on two consecutive weekends and to allow dealers first pick with no public competition.
* Ironically, some estate sale companies hold silent bid auctions during your estate sale or sell your possessions on their eBay account. Any type of auction held on your property that is not conducted by a licensed auctioneer or you, the actual owner, is illegal in North Carolina. It is also illegal to have an estate sale company sell your items on an online auction website, like eBay, without having an North Carolina auctioneer license number posted in the listing. Any illegal act taking place on your property may put you in a liability corner should a disgruntled buyer feel they have been treated unfairly.
* Many estate sale companies suggest donating the many unsold items after an estate sale for tax benefits. Trust us, there will be many unsold items after a multi-day estate sale. We receive calls from owners on Monday morning pleading with us to finish what the estate sale company started. It’s more stressful work for the seller to track down an organization and wait for a truck with no guarantee the charity will even accept the items. A donation receipt is financially worthless at tax time unless the owner itemizes on their tax return. This is almost always the situation when dealing with an older person’s estate.
We suggest checking with a tax advisor even then because the actual cash benefit may pale in comparison to the receipt. Many have trouble with the idea of giving away items that should have sold for cash.
* Many estate sale companies have buyout clauses that allows them to buy unsold items that did not sell for the prices they put on the price tags. Many estate sale companies also double as a resale shop owner, flea market booth holder or online reseller. Always ask, “Do you own or lease a space at a shop, flea market or sell online?” Then, you must determine if there is a conflict of interest between yourself and the estate sale company.
* Many estate sale companies charge guaranteed minimum sale fees. Another growing trend we are seeing is estate sale companies charging a minimum fee of $1500.00 and higher to do a sale. In other words, they get the first $1500.00 spent at an estate sale no matter what the entire multi-day sale brings. If a sale only brings in $2000.00, the seller gets $500.00 of that. Plus, the estate sale company may also get the rights to buy the unsold merchandise at a discount on top of that.
* Estate sale companies that do use written contracts can have them signed by anyone working for them. That opens the door of who is responsible person or party, the owner or the signer of the contract?
How Auctions Are Different
* Prices are decided by the masses in a live, competitive bidding process. This leaves the opinions of value up to the masses instead of one or two. We suggest starting bids but it’s the public who decides where to start and, best of all, where to end.
* Public access on auction day into homes is limited to the auction areas and approved rooms (washroom) and only with an employee nearby. With rare exception, all auction items are outside of a home. Large items like pianos and pool tables may not be brought outside and are sold inside but only with supervision during preview time. Unless a home is for sale, we restrict the public’s access to the inside.
* All auctioneers in North Carolina must pass a state test to be licensed, issue written contracts, maintain an escrow account for auction proceeds and complete 12 hours of continuing education every two years. No options. It’s the law.
* Our auctions are open to the public. All who attend have an equal opportunity to buy at the same time when an item is on the auction block. There are no pre-auction day sales to friends or colleagues. Auction day is sale day. A bidder who arrives when our viewing period starts has no more opportunity to buy over a bidder who arrives seconds before the bidding starts.
At an auction it is the customer who offers the most money, not the customer who happens to see the item first, that wins. That is where the excitement is!
* 99% of our auctions are held on Saturdays so that more of the general public can attend. One of the strengths of an auction is assembling a mixture of buyers. dealers, investors, collectors and end-users make up a strong buying market that can generally only be assembled on a weekend.
* The word “AUCTION” is an “action” word. The human eye gravitates to the word “auction.” It brings the feeling of “right now!” to the mind. The public knows auctions start at a designated time and end only when everything is sold – no matter when that is. The pursuit of a potential good buy where the public decides the price in a unique and exciting manner is a powerful lure.
* With some rare exceptions, if something does not sell at our auction, it’s not worth donating.
*Auctioneers are not a reseller. We do not own, lease or share space with an antique or resale shop, hold a booth at antique malls or flea markets nor run an eBay store. There are no lines of impropriety for us to blur. We rarely have any items of value left after an auction so there is nothing of value to buy! We also never offer to buy items directly from a client as that is the largest conflict of interest in the auction world.
* We have no minimum commission guaranteed fees. We live and die off of our judgment and commissions. This is where experience counts. We would much rather walk away from a potential auction than to risk doing one where we make more money than the seller does.
* All required auction contracts are signed by an auctioneer. Not only is it a state law to have a licensed auctioneer sign contracts but it’s the right thing to do.
We Know Each Seller’s Situation Is Different
There may be scenarios where neither an auction or an estate sale is practical. Because there is only one chance to settle an estate, it is vital to gather the facts before a decision is made.