First-time executors often make mistakes that cost the estate money and aggravate the executor and the family.
To the uninitiated, being chosen as executor of an estate would seem to be an honor; it’s an indication that the decedent trusted you to wrap up their affairs. At first glance, the job appears to be easy enough: liquidate all the assets, pay all the liabilities (including taxes) and distribute the remainder to the heirs.
Thoughts of distinction quickly disappear, though, when an executor begins to inventory the estate’s tangible personal property. Room by room, the executor sorts through a lifetime accumulation of “stuff” in the closets, rooms, sheds, garage, basement, attic and storage units. Trunks, boxes and tool chests must be opened to see what’s in them. Categories of personal property must be valued and collections appraised. Personal property values are added to the value of the estate and taxed accordingly (at the county, state and/or federal levels). Compared to other estate assets (like homes and stocks), it’s an enormous amount of work for a very small return on investment.
Of course, the state wants its share of the largesse. Unfortunately, the state doesn’t accept used household goods as payment for taxes; it wants cash. For most executors, that means that the estate’s tangible personal property must be liquidated. Executors can effect a sale themselves, or they can hire it out. Either way, first-time executors often make mistakes that cost the estate money and aggravate the executor and the family. I’ll cover more estate liquidation topics in future articles; but for now, let’s have a look at the Top Five Liquidation Mistakes Executors Make.
Allowing family and friends to “take what they want” prior to a sale, like Aunt Jennie’s Victorian brush and comb set, robs the estate of its most valuable assets.
1: Allowing family and friends to “take what they want” prior to a sale
This mistake is almost universal, and estate liquidation professionals sometimes refuse to accept a sale because of it. In some jurisdictions, distributing assets prior to accounting is against the law; but the practice also goes contrary to common sense. When one holds a liquidation sale, buyers are attracted by the collectibles, antiques, artwork, tools, equipment and musical instruments that are advertised. If the executor has given away “all the good stuff,” then what’s left to sell? From a buyer’s perspective, the answer is “nothing worth the cost of gas to attend the sale.” Ninety percent of an estate sale is made up of common household goods that are available at any thrift store for pennies on the dollar. Who wants to waste time and money attending a sale that has no “pizazz?” No appealing merchandise = no customers = no sales. In the words of one of my early sales mentors: “you won’t catch any fish without bait.” Worse, when few items are sold, there is much left over to dispose of. A liquidation problem then becomes a disposal problem.
Selling the antiques and collectibles to a dealer and donating the rest to a thrift store is a quick and easy tactic used by executors, but is loses money.
2. Selling the antiques and collectibles to a dealer and donating the rest to a thrift store
Too often, this is a quick and easy tactic used by executors. But let’s think this through for a minute. How is it a good tactic to sell an estate’s property for the least amount of money one can get? Remember, antique dealers buy low and sell high. Often, buying low means paying 15- to 25-percent of retail value. Experienced estate sale operators can achieve significantly better prices than an antique dealer is likely to offer for the same merchandise. At an estate auction, dealers are frequently out-bid by the general public. No disrespect to dealers is meant here; they have to allow room for a mark-up or they will go out of business. But an executor’s job is to achieve the maximum value possible for the estate’s property. That can’t be done by selling the merchandise at wholesale prices.
3. Pricing merchandise based on its personal value rather than its market value
It’s easy to get attached to a loved one’s favorite items. Uncle Harry loved his trains and Aunt Martha treasured her quilts. As a sign of respect, executors often want the prices of these items to reflect the esteem in which they were held by the decedent. If you want to keep something, keep it, but don’t try to sell it for a high price just because it was a favorite; that’s a mistake. Overpriced items won’t sell. When the market price of an item is not known, get help. There are appraisers and auctioneers who (for a fee) will survey an estate and separate the valuable collectibles and art from the run-of the mill goods and provide appraisals when needed. If the expense of an appraisal based on a physical examination is prohibitive, then a limited evaluation based on photographs, descriptions and other information can be provided economically by a WorthPoint Worthologist.
4. Thinking that professional liquidators cost too much money
If executors had any idea how much work is involved in achieving a successful estate liquidation sale, they would not even consider hosting their own sale. Mind you, often executors have no choice but to run their own sale; sometimes there are no good local alternatives. My last estate sale (a 3,400-square-foot suburban home) took more than 300 man-hours to sort, display and tag, plus two and a half days of selling. Because of the many entry/exit points in the house and the quantity of small collectibles, I required 10 assistants to staff and cashier the sale. Professional estate companies (tag sale and/or auction) remove the liquidation burden from the executor and earn their commissions by obtaining higher prices. Using a professional estate liquidator doesn’t cost, it pays.
Don’t forget to plan for parking on the day of your sale.
5. Failure to adequately plan for parking
Some communities don’t allow traffic-generating estate sales or auctions; others require permits (garage sales usually fly under the radar). Sometimes, estate sale attendees don’t care where they park: in the street, a neighbor’s lawn, on in a retailer’s, church or school parking lot. If a customer tears up a neighbor’s lawn or backs into their mailbox, the neighbor will call the police (trust me) and you will be held responsible for the damage. I’ve seen estate sales empty quickly when the police start handing out parking tickets. You don’t get those buyers back, either. No one wants to risk a parking ticket just to check out an estate sale.
So, have a parking plan! Meet with the immediate neighbors to discuss what will happen, and give them your cell phone number. Use “caution” tape and no parking signs to keep visitors from parking in neighbor’s yards and driveways. Have a staff member outside directing traffic. Happy neighbors make for a smooth-running sale. Check with local parking enforcement to ensure that you won’t be shut down on the day of the sale.
Unlike an on-site auction, an estate tag sale can be done in any season, rain or shine. On-site estate liquidation sales are an efficient way to liquidate all of an estate’s tangible personal property assets quickly and efficiently. An average-sized estate sale can be accomplished in about a week, and once it’s done the hardest part of settling an estate will be over.
Whether executing a sale themselves or hiring out the job, first-time executors would be wise to assemble a team of advisors to keep the estate settlement on-track. The next installment in this series will be “How to build such a team.”
Wayne Jordan is a Virginia-licensed auctioneer, Certified Personal Property Appraiser and Accredited Business Broker. He has held the professional designations of Certified Estate Specialist; Accredited Auctioneer of Real Estate; Certified Auction Specialist, Residential Real Estate and Accredited Business Broker. He also has held state licenses in Real Estate and Insurance. Wayne is a regular columnist for Antique Trader Magazine, a WorthPoint Worthologist (appraiser) and the author of two books.
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