When confronted with this question, most people seem confused. Do you mean that there is more than one kind of estate sale? The simple answer is, “Yes”. Let’s look at the word, “Estate”. An estate is:
“The interest which any one has in lands, or in any other subject of property.” – Black’s Law Dictionary, 2nd Ed.
Based on this definition, it is easy to see that an estate is simply the assets that a person has accumulated at any point in time.
Different kinds of estates:
There are many kinds of estates. When we think of an estate, we typically think about a decedent estate. This is the estate, or property, left when someone dies. But there are living estates as well. Today, it is common for people to down-size once the children have left the house. Getting rid of the excess property is a form of estate sale. An estate sale may also occur if someone goes into a different living situation. Have you ever tried to combine two households without having to get rid of some stuff? This too is an estate sale. If a person permanently goes into an assisted living facility, an estate sale may be necessary here too. Finally, in the case of a divorce, the marital estate may need to be liquidated to facilitate equitable distribution.
Different kinds of sales:
In addition to the different kinds of estates, there are also different kinds of estate sales.
Garage Sales: A garage sale is typically a do-it-yourself solution where the owner or the representative of the estate advertises a sale, marks prices on items, and accepts cash.
Garage sale buyers are typically looking for cheap items, and are prone to negotiating or haggling.
Estate Buyers: An estate buyer may come to you if you have a house full of items to sell, or you may go to them if you have a few items to sell. The estate buyer evaluates your item or items in terms of the benefit or potential benefit to them. From there, they make an offer.
Some estate buyers will make you an offer on everything. Others will try to “cherry pick” high value items, leaving the items of lower value. An estate buyer’s goal is to purchase your items for the least amount possible. They have no fiduciary duty to give you fair market value for your items. Their goal is to benefit themselves, not you.
If an estate sale company or auction business, which would normally have a fiduciary responsibility to achieve the highest value for the estate assets, also represents themselves as an estate buyer, beware. This is a conflict of interest. The same company cannot accept the fiduciary responsibility of maximizing the value of the estate, while simultaneously trying to purchase items at the lowest price possible.
Tag Sales: A tag sale is typically a solution offered by an Estate Sale Company, also known as an Estate Liquidator. In a tag sale, estate assets are staged for sale, and “tagged” with a price. This price may be based on market research, or simply on the experience of the company’s personnel. Items may be individually tagged or similarly priced items may be placed in an area with one price tag. The sale is primarily advertised to a local market. Buyers must show up in person to make a purchase. Typically potential buyers are served on a first-come, first-served basis. Some Estate Sale Companies establish a line for potential buyers. Others use a number system. Most estate sale companies have a discount policy. A discount policy typically lowers prices at specific times. If an item isn’t sold at the tagged price at the beginning of the sale, the price will go down over time. Other companies will entertain lower offers at the end of the sale, for items that remain.
Because of these discounts, prices go down – waiting means lower prices, especially for items that may not have broad appeal. In some cases, buyers may know more about an item than the Estate Sale Company. A valuable item may be missed by a company that doesn’t have expertise in a certain area. The item may be tagged with a price that is below market. No company can be expected to be an expert in everything. Further, a tag sale is typically limited to the local market. If an item doesn’t have broad appeal, a buyer may decide to wait for a discount, if they feel that there isn’t someone else in the local area who would be interested in it.
Another concern is the lack of regulation for Estate Sale Companies. In most areas, a person can go into the estate sale business simply by obtaining an occupational license, if one is required in their area. There is no regulation for contracts, escrowed proceeds, insurance, payment requirements, deadlines for payment, or sale records and documentation.
Estate Auctions: An estate auction is a sale conducted by an auction business, whereby bids are received, and the estate’s assets are sold to the highest bidder. There are several types of auctions. An auction may be by public outcry or by sealed bid. In a public outcry auction, an auctioneer opens an item for bidding and accepts bids until the highest bid is reached. In a sealed bid auction, written bids are accepted until a specific time when the bids will be opened. The highest bid is typically accepted.
In a public outcry auction, bids may be accepted from bidders present at the auction, in writing from absentee bidders, by phone, or through online bidding platforms. A specialized, modern form of the public outcry auction is the online only auction, where bids are only accepted online. These auctions are timed, where lots, which could be a single item or a group of items, are open for bidding for a specific period of time. Sophisticated bidding software is typically employed to avoid “bid snipers” that are found on websites like Ebay. With this software, bidders cannot swoop in at the last moment and place a bid, winning the item. If a bid is placed in the last minutes of the sale, the bidding time is extended to allow competing bidders to bid. This creates a bidding platform that closely resembles what happens at an in-person auction. If a person places a bid at an in-person auction, the auctioneer doesn’t immediately drop the gavel to sell the item. The auctioneer looks for a higher bid.
For an auction, items are staged and “lotted” either individually or in groups. For a cataloged auction, an auction with simultaneous online bidding, or an online only auction, the lots are photographed, and a detailed description is written. To expose the estate items to largest number of potential bidders, based on the bidding options available, the auction may be advertised locally, regionally, nationally, or internationally. This can greatly expand the number of potential purchasers. During the auction prices go up, not down. If an item is accurately cataloged and exposed to a broad market, collectors or those who have expertise in the item will compete to purchase the item. This assures that fair market value is obtained for all estate assets.
Further, most states have laws requiring the licensure of auctioneers. Many of these states have pre-license education requirements, and/or continuing education requirement. States may also require auctioneers to post a surety bond, or contribute to a recovery fund to be used if the auctioneer fails to pay their client. Typical laws require the use of contracts that put all terms of the agreement between the company and the client in writing. The laws also typically spell out when and how a client is to receive the proceeds of the auction, and require proper documentation of the sale.
Auctions aren’t limited to the personal property. Auctions may also be utilized to obtain an offer for, or sell the real estate held by the estate. This type of sale takes advantage of the marketing for the personal property to also help market the real estate, and vice versa.
Hybrid Sales: In a hybrid sale, certain items may be auctioned, others may be sold at a tag sale, and others may be sold at a garage sale.