A High Quality Professional Estate Sale (Tag Sale) versus an Auction
By Robert Lamb, B.S., C.A.G.A., P.E.L.
The process of selling the personal property in an estate can be a stressful and overwhelming process, which is why many people will find a professional company to conduct an estate sale, an auction, or even sell everything outright. If you are the owner of the estate, or entrusted with the responsibility of selling the estate’s personal property (Fiduciary, Trustee, Executor, etc.), then maximizing the income for the estate is of high priority. There are many differences between an auction and an estate sale both in how they are conducted and the potential income to be made.
An estate sale, or tag sale, consists of selling all the personal property in an estate and is usually held within the home over the course of two to four days. In the hands of an experienced and professional estate sale company the home will resemble a retail store in which all items are cleaned and nicely displayed. Items are inventoried, researched, priced and tagged. Sales are marketed in advance of the scheduled sale date online with pictures and a sale description. Email marketing, local marketing and other methods are also used to attract willing buyers to shop the sale. With correctly marketed sales there will be potentially hundreds of customers shopping the estate sale every day. The better and most desirable items are usually sold the first day at the price marked on the tag for market value. Each day of the estate sale prices are usually discounted progressively with the final day being marked down usually by 50% or more depending on the sale. During an estate sale customer’s will stay and shop during all sale hours finding items to purchase. This maximizes the number of potential buyers and results in higher selling prices overall.
With a local or on-site auction held within the home all the personal property is sold in one day starting with one lot and progressing to until the final item, or bundled box of items, are up for auction. Auctions are also marketed online in advance of the sale date with pictures and descriptions. Auctions may also be marketed using email and other methods. With an auction, certain buyers are there for only a limited number of lots, or even a single item. There is also a buyer’s premium, typically at least 15% or more, added on to the winning bid, which lowers the amount a buyer is willing to bid. During an auction each item comes up to the block to be bid on, but only for a short period of time. This not only gives bidders a very narrow window to buy an item, but people must also wait, often for hours, for an item or lot to come up to the block. This causes the number of people to dwindle throughout the day resulting in less potential buyers overall.
Advantages of selling personal property in an estate sale versus an auction:
- Estate sales provide a comfortable and exciting place for buyers to shop and purchase items over the course of several days. This maximizes the number of potential buyers. Auctions are held for one day and people tend to dwindle throughout the day because they will have to wait for items to come up to the block.
- During an estate sale as much as 50% or more of the items sell the first day for the price marked at what is called marketable value or fair market value. At an auction items are sold to the highest bidder, but often at lessor values because of buyer’s premiums (this is added to their winning bid), bundling items into lots, and dwindling customers throughout the day. Selling in an on-site auction can result in lowering the amount you get paid from your sale by a significant amount!
- Professional estate sales are “revenue maximizing”, which means that the goal is to make as much as possible from the items sold. This differs greatly from what local auction companies advertise. Most state something indicating they are really “liquidation” auctions. This can be seen by not only the way auction companies market themselves, but by the prices items sell for at the end of the day. The word “liquidation” or the phrase “everything sells” [regardless of price] usually means that items will sell below market value and the short period of time in which an on-site auction occurs means that everything needs to sell quickly.
Here are some actual final selling prices for the same items sold at both a high quality professional estate sale and at local on-site auctions. Auction prices include buyer’s premium:
14k Gold Necklace of the same style and weight
Sold at an Estate Sale for $950 (more than gold value)
Sold at Auction for $700 (20%+ LESS than gold value)
Native American Coral Necklace
One (1) necklace sold at an Estate Sale for $35
A 4-piece lot including a similar necklace sold at Auction for $30
Ladies Rolex Perpetual Oyster Datejust Watch
Sold at an Estate Sale for $1900
Sold at Auction for $1200
Santa Clara Pottery Vase
Sold at an Estate Sale for $250
Sold at an Auction for $150
Pair of Brass and Leather Horse Bridal Medallions
Sold at an Estate Sale for $84
Sold at an Auction for $16
Mitchell .45 Caliber Single Acton Revolver
Sold at an Estate Sale for $400
Sold at Auction for $260
Large Leather Accent Chair
Sold at an Estate Sale for $255
Sold at Auction for $30
Leather Double Reclining Couch
Sold at an Estate Sale for $675
Sold at Auction for $100
The advantage of hiring a reputable and professional estate sale company to sell the personal property in an estate sale is clear when you consider the goals of most clients. If you are the owner of an estate, or a Trustee, Executor, Fiduciary, etc., you most likely wish, or have an obligation, to make as much money as possible from all the personal property being sold. If this is the case, then hiring a professional estate sale company makes the most sense. Even if some items remain unsold from an estate sale, you will most likely make more money on the items sold than the total from a local on-site auction.
What about costs?
Estate sale companies charge a percentage of sales, 40% for example. Learn more about fees. Auction companies also charge a percentage of sales, but also charge the customer a buyer’s premium which is added to the hammer price or winning bid, see the following table.
|Including 15% buyer’s premium||No buyer’s premium|
|Amount customer spends on Item A
Including 15% buyer’s premium
|Amount bid before buyer’s premium||$434.78||N/A|
|Commission at 40%||-$173.91 (Auction Company based on lower sold price)||-$200.00 (Estate Sale Company)|
|Net you would receive for this one item||$260.87||$300|
Looking at the example in the table above it is assumed that everything else is equal for simplicity, but as discussed above there are other factors which might result in an item selling for less at auction than at an estate sale. In this example your check would be $39.13 more for this one item when sold at an estate sale versus at an on-site auction. Even if the auction company decreased its commission by another 5% you would still make $17.39 more on this item with an estate sale. And this is for only one item. Multiply this for an entire estate and the difference would be thousands of dollars.
When taking into consideration the other factors discussed above the income maximizing benefits of an estate sale can be quite significant when compared to an on-site or local auction when selling the personal property of an estate.