Estate Executors’ Headaches: Liquidating Tangible Personal Property
If you are going to host an on-site auction, the auctioneer will take care of the mundane things, such as advertising and having enough parking.
Pop quiz for executors: what estate settlement task will take up most of your time, cause you the most aggravation, and return the smallest amount of cash to the estate coffers? Answer: liquidating the tangible personal property.
Of course, anyone who has ever served as an estate executor already knows this. To the uninitiated, let me describe the process: imagine living in the same house for a long, long time. Then imagine having to pack up and move; you have to clean out the house, the garage, the shed, and the basement. It’s a lot of work. Then imagine having to group items according to type, clean, tag and price everything, and then sell it. This “moving” job just doubled (or tripled) in magnitude.
So, what is my advice for executors? You don’t have time for all that; hire a professional to liquidate the personal property. A good liquidation company is worth every penny you pay them. The trick is to find a good liquidation company. Here’s a look at a few generally available options, and the “pros and cons” of each.
Before I start, let me offer some advice that could affect the outcome of your sale:
• Don’t let anyone cherry-pick the contents of the estate before you have your liquidation sale. Set aside items that are bequeathed to heirs and stop there. Don’t let family members or neighbors claim anything or remove anything. Don’t let antique dealers buy anything. Here’s why: attendance at estate sales is driven by the types of items offered at the sale. If you sell or give away the antiques and collectibles beforehand you will have a poor turnout at the sale. As an early mentor used to tell me, “you can’t catch any fish if you sell the bait.” Also, as executor, if you give away or underprice an item that could have brought a lot of money at the sale, you may be held responsible for the deficiency by the heirs or the Probate Court.
• An adjunct to the above is that estates that have little to offer in the way of antiques or collectibles probably won’t be of any interest to estate liquidation companies. If that’s the case, you be stuck with option number three below.
Here are the “big three” options for liquidating an estate:
On auction day, a crew will arrive early and set everything into the auction area. At the appointed time the auctioneer will start calling bids and when he/she is through everything will have been sold down to the bare walls.
The first option is an on-site auction. Don’t let an auctioneer talk you into consigning the best items to his auction house; that will only leave you with the dregs that you will have to sell or dispose of. A good auction company will inspect the estate, calculate their operational and advertising costs and quote you a price. Generally, the more money paid up front (like advertising and set-up costs) the lower the commission rate to the auctioneer.
Once a sale contract is executed, the auctioneer takes care of everything: the set-up, display, advertising and dividing the property into saleable lots. If tents or porta-potties are needed, the auctioneer will arrange for them. On auction day, a crew will arrive early and set everything into the auction area. At the appointed time the auctioneer will start calling bids and when he/she is through everything will have been sold down to the bare walls.
The downside of an on-site auction is that it’s very dependent on the weather; the auction is usually held outside. The strength of any auction is the excitement generated by competitive bidding, and such bidding requires a good crowd. To have a good local crowd requires good weather, lots of parking, and (if it’s a large estate) refreshments and toilet facilities. Being weather dependent, outside auctions are seldom held in the winter.
The “weather” downside can be mitigated by using an auction company that has the resources to live stream an auction over the Internet. Many of the country’s top auction companies have joined forces with Proxibid. Of course, this option is expensive so an estate must have enough in-demand collectibles to justify the cost.
In a tag sale, a sale operator will tag and price everything in your house, outbuildings and wherever else there may be estate property. Most items are tagged right where they sit, but some items may be displayed on tables.
Estate Tag Sale
The second option is to have an estate tag sale. In a tag sale, a sale operator will tag and price everything in your house, outbuildings and wherever else there may be estate property. Most items are tagged right where they sit, but some items may be displayed on tables. Usually, the sale is multi-day; the first day the tagged prices are firm; the second day a discount is offered, and if a third day is required the prices are lowered substantially. Of course, buyers still want to negotiate every price as the sale progresses. Sale attendees arrive early and are given a number, and only a certain number of people are allowed in the house at a given time. Each tag sale company has its own way of running a sale.
The upside of a tag sale is that it can be executed any time of year without regard for the weather. Since the attendees come and go as they please, no special arrangements have to be made for refreshments or toilet facilities. On average, a well-run tag sale will garner as much money as a well-run auction.
The biggest downside of engaging a tag sale operator is that unlike auctioneers, tag sale operators are not licensed fiduciaries. That is, they have no legally mandated financial responsibility to either the estate or the buyers. Most tag sale operators operate ethically, but there is no body of law surrounding their activities. A tag sale operator can handle an estate’s money, keep records and distribute funds however they see fit. In most states, auctioneers must be licensed just as real estate brokers and insurance agents are. If an auctioneer fails to act ethically or responsibly he could lose his license and his livelihood. A tag sale operator who acts irresponsibly would suffer no consequences, other than a black mark on his reputation and a possible lawsuit. If you’re lucky, you may find an auctioneer that will run a tag sale for you in the winter months.
Another downside of a tag sale is that there’s almost always property left over after the sale.
If you enter into an agreement with a tag sale operator, be sure to spell out in the contract how money will be accounted for and handled, when remissions will be made, and what will be done with the “leftovers” from the sale.
The third option is the humble garage sale, which are less formal than both tag sales and auctions. You will put in considerably less effort put into pricing items.
The Humble Garage Sale
The third option is for estates that have little in the way of collectibles. The property in these estates will look pretty much like what you’d find in your local thrift shop: used but useable. An executor’s goal with such property is to not lose any money liquidating it, which means either giving it away to charity or having a garage sale.
Garage sales are less formal than both tag sales and auctions. There is considerably less effort put into pricing items; instead, similar items are grouped together and priced using signs that say “all men’s shirts $1” or “Paperbacks Two for $1” and so on. Everyone is familiar with garage sales and knows how they work. For those who aren’t, primers such as Eric Michael’s “Garage Sale Superstar” will teach you all you need to know.
If you’re not inclined to run a garage sale yourself, there are independent operators who will do it for you. Check your classified ads in the “yard sale” section; most such operators advertise there. One company that leads the way in executing garage sales is Grand Slam Garage Sales.
Regardless of which type of company you use to liquidate an estate’s tangible personal property, check them out thoroughly. Read their online reviews, check the Better Business Bureau, and do a Google search for “Complaints (company name).” If you’re considering an auction company (and your state licenses auctioneers) go to your state’s website, click over to the occupational licensing section, find auctions, and look up the auctioneer’s license number to see if there have been any complaints.
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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