In the aftermath of a major life event such as death or divorce, we’re often encouraged to cope emotionally for our well-being and that of our loved ones. Even as we come to terms with the loss or challenging circumstance, we face another situation that requires our attention: disposing of our deceased family member’s or our own personal assets. Less emotionally tough but just as logistically complex is the decision to downsize your home or help your parents trade down to a smaller house. Specifically, what do you do with belongings that are no longer needed?
There are experts to do the heavy-lifting on your behalf
Specialized services are available to assist with property disposition and the belongings of individuals who are deceased or relocating. The estate liquidation process can be handled by appraisers and evaluators who can guide you or organize the sale of different types of household items, among them estate sale specialists and auction companies.
Steps of estate liquidation
The first step is to remove jewelry, expensive items, and important papers, and have an appraiser evaluate the valuables for purposes of sales and retail sales tax. Ideally, appraisers need to be brought in early to avoid giving away items whose value has not been recognized. At the time of engaging an appraiser, check if they are a member of one of three major and world-renowned personal property appraisal associations: the International Society of Appraisers, the American Society of Appraisers, and the Appraisers Association of America. Membership in these associations offers confidence that appraisers will adhere to the ethical code required of them.
If you’re interested in hiring an appraiser who works for an auction house, they must guarantee a boundary between their appraisal work and professional work. Appraisers typically charge a flat fee or a per hour fee plus expenses. Hourly rates can hover between $150-$350, depending on the appraiser’s experience and qualifications. Working with an appraiser who charges a percentage of the appraised value may work against your interests, and is best avoided.
The next step is to initiate a general property disposition. When disposing of ordinary items, expect nothing more than yard sale values for objects sold or donated. Here again, try not to throw, give away or sell belongings without a specialist’s guidance. What you regard as junk may be valuable and fetch you a good price. It is quite common for family members to donate old books or typewriters and realize only later that they’ve washed their hands off a collectible with significant value.
After a professional is part of the process and you’ve removed what you wish to keep, step back and let the liquidation process take its course. If you’re too involved, there is a risk that you may have second thoughts about items that have been included in the estate sale assessment or listed for sale. And if you end up pulling one or more items, you may have to pay extra charges in lieu of misleading customers. The scheduled sale may even be canceled.
An auction versus an estate sale
Auctions and estate sales are the most common ways to sell personal assets.
An estate sale is a liquidation process conducted at the site of your property by a coordinator who tags the items to be sold and determines an asking price for each. The sale goes on for a period of one to three days, over which prices are often negotiated to ensure a successful sale. The estate sale is scheduled at the property, and on a particular day, interested individuals line up to wait their turn to enter, review and buy the items in the home.
An estate sale can be set-up quickly and easily, and is usually the preferred option to sell ordinary household items. You cannot be on the premises when the sale is underway, and you need to be comfortable letting strangers enter the property. Estate sales and negative haggling go hand in hand. You may have to sell items at up to a 75% discount. You don’t get an itemized receipt telling you what item sold for only unless it exceeds a certain amount.
Be sure to do your research properly at the time of hiring an estate sale company as there are no professional standards that they’re mandated to follow. There are no educational, training, licensing and insurance requirements to abide by either. In the absence of any code of ethics, careful selection assumes even more importance.
You may be familiar with how an auction works – bids are invited and the item is sold to the highest bidder. The auction can be conducted at your premises, online and – if you’re selling valuable items – at a gallery. Online auctions expand the pool of buyers, and there is a far greater possibility of selling your items at a higher price than at an estate sale. The auction industry has established standards for auction companies to follow, and members of state and national auctioneer associations are required to comply with a code of ethics. The industry prescribes extensive educational resources, and most states mandate licensing, insurance and escrow requirements for auction companies. You are welcome to attend the auction.
On the other hand, auctions require a time commitment, with online auctions taking three days for cataloging and a week or more for bidding, while on-premise auctions take up to a month for advertising and set-up. If auctioning at a gallery, you will have to account for the costs to move your items.
Auction and estate sale companies charge 30%-40% of the gross sales.
Where to begin your search for an estate sale or auction company
Estatesale.net and Estatesales.org are popular listing sites for service providers and local sales. Enquire with vendors regarding their services, insurance and prices. Ask them about what you can expect throughout the process. Estate sale companies assess, sort, price, and tag items. They may even bring in appraisers to determine a fair price for your valuables. They advertise your sale and organize it at your property or online. After the two- or three-day event, they either purchase the rest of the items for pennies on the dollar or arrange for them to be donated, recycled or disposed of.
Narrow down to 3-4 companies and have them visit the property to see its contents. You can schedule such initial visits for free, where the vendor will determine the items that can attract buyers, and share helpful tips on where you can donate or recycle the rest. Peruse the vendor website, and note their customer testimonials. If you have time, attend an estate sales event being conducted by the shortlisted vendors.
Good estate sales professionals work in the best interests of their customers. They are focused on helping ease the liquidation process and make as much money as possible for customers. They don’t compel you to sell items that hold a special meaning for you, and after assessment, may even advise against a sale if most of the valuables have been kept and there aren’t enough items left to justify the cost of conducting the sale.
At this point, cleanout companies can step in to complete the liquidation. A cleanout company cleans out your home after sellable items have been taken away, removes items, and hauls them away for disposal or recycling, or donates the items. Estate cleaning services may also be included – vacuuming the floor, clearing out the refrigerator and tidying up your home for whatever you plan to do next. Usually, an hourly rate is charged based on the manpower required.
Sorting through belongings after a death or discarding personal items when downsizing is sentimental. As these activities carry emotional weight, having a cleanout company take over can prevent emotional angst.
Find auction companies on the National Auctioneers Association (NAA) website Auctioneers.org; it is an advocacy group representing auctioneers, auction businesses and related companies that promote auction as a marketing method, or practice auctioneering. NAA membership is open to anyone worldwide. The auction association of the state you reside in is another source.
What to ask an estate liquidator
When launching your search for an auction house or estate sale company, certain questions can help you gauge the reliability of the vendor and make an informed decision.
How many years of experience with the type of personal assets you will be selling?
The liquidator must have adequate experience valuing and advertising the valuables or collections you wish to sell.
Do they provide a written contract?
The liquidator must provide a written contract outlining the terms of services, responsibilities of each party, fees, and sale and payment timelines. Get a copy of your signed contract or have them send you a digital contract that you can save and print out as needed.
Are they insured?
Almost all auction companies have insurance to protect their business in the event of a liability lawsuit seeking monetary damages. However, verify their coverage, noting if the company has general liability insurance. There is always a risk that a worker may get hurt at a tag sale or during a cleanout. It is recommended that along with general liability insurance, the company also carries workman’s compensation coverage.
Request them to attach a copy of their recent insurance certificate along with your signed contract copy. The same applies to estate agent companies that require more scrutiny given that just about anyone can set up shop and there is no regulatory oversight to address disputes between vendor and customer.
Are they credentialed to carry out appraisals?
You don’t want your liquidator comparing the price of your items to comparable items on eBay when setting their price! If the company does not have trained appraisers on its payroll, they will consult a trained professional. As mentioned before, it is best to have items of perceived value appraised before engaging an estate liquidator. When auctioning off items, the auction company conducts research on each item and shares this information with buyers to attract competitive bids and achieve a high sale price.
How do they market your estate sale event or auction?
An experienced liquidator will leverage effective marketing platforms to get before a large and relevant audience. If the company only makes assurances without explicitly stating how they will promote the event, it is best to continue your search.
What kind of sales documentation can you expect?
Will your sales report have a total sales result or an itemized list? For total transparency, many companies provide post-auction reporting with an itemized sales report and a summary of auction proceeds.
What about the items that do not sell?
While some liquidators may purchase unsold items at a fraction of their price, others will assist in donating them – or if you agree – have them discarded responsibly.
How much commission do they charge?
Liquidators generally work on a commission basis, charging you a percentage of the total take of the sale. The average rate is 35%. If the company offers cleanout services, a separate hourly fee will apply. Together with the commission, it could take a bite out of your sales. So, determine in advance the extent of professional help you need from the liquidator.
When can you expect post-sale payment?
There is no standard timeline that estate companies are required to adhere to. Your contract will specify the number of days after which you will receive payment. Most state laws pertaining to auction companies stipulate that settlement must occur 30 days after the auction.
A note on tax implications
Consult your attorney on the tax rules applicable to the estate sale of a deceased parent’s possessions. The value of all the household items is included in the total value of the estate to calculate estate tax. If the estate is transferred and held soon after death, the value of the items will be the amount they sell for at the auction/estate sale, not their appraised value. If you want to exclude household items from the estate’s value, you cannot claim a charitable deduction if you donate items left unsold after the estate sale.