When losing a loved one, it can be difficult to navigate what to do with their belongings. This is especially so if you were left with little to no instructions on how to divide up their property. Another pain point arises when you or your family members have little use for what was bequeathed to them.
If you’re looking to liquidate and downsize your loved one’s estate, holding an estate auction or estate sale are viable options. They are both great methods of selling property quickly and effectively. The tough part is knowing which one to go with. In this guide, we’ll help explain the differences between an estate auction vs. estate sale, plus the pros and cons for each. By the end, you’ll have a better understanding of which option might be best for you.
What is an estate auction?
An estate auction functions similarly to any other typical auction. First, the auction event is publicized to the general public to garner attendance. The items being sold from the estate are also made available for preview. This can be done through an online catalog, and the items can also be made available for a physical viewing directly prior to the event. The item preview is an essential step, as it can help create excitement and allow bidders to select items they’d like to bid on, and for how much.
During the auction, a professional auctioneer will facilitate the auctioning of each item from the estate. The group of bidders will bid on each item, which is sold to the highest bidder. This determines the final price of each respective item.
In essence, an auction functions off of the basic economic principles of supply and demand. It is up to the bidders to decide how much they would like to offer for a particular item. Competitive bids can help drive up the final price of an item. Conversely, an item could sell for very little if there is no demand. The final price represents the fair market value.
Although you do not necessarily get to pick the final price of each item, you have the option of setting a reserve amount. This is the minimum price you are willing to accept for an item.
Pros & Cons of auctions
Generally, auctions are a great way to sell almost all, if not all, items from the estate within a relatively short time span. Each buyer who attends the auction has an equal opportunity to buy each item. Auctions bring about an illusion of scarcity, which can help inspire bidders to bid more for an item than they normally would. Competing bids could bring about the pleasant surprise of selling estate items for much more than you had expected. Auctions can also save you from dealing with those who want to haggle for a lower price. You can predetermine your reserve values, and the professional auctioneer will take care of the rest.
Although estate auctions offer a plethora of advantages, there are some drawbacks to consider. First and foremost, an auction takes some time to prepare. You must review, interview and hire a professional auctioneer. Then, you have to go through all of the items from the estate you’d like to sell and present them to the auctioneer. Finally, you run the risk of not knowing the value of an item you are selling until it is already auctioned off and it is too late. However, a good auction house often offers in-house appraisal services.
What is an estate sale?
An estate sale functions similarly to a garage sale in that members of the public visit a home to buy items for sale. A garage sale is typically limited to one section of the home, while the objective of an estate sale is to sell many items from most areas of a home.
Members of the public are often invited to walk through the home and its rooms so that they can view items for sale, including furniture, artwork, and other personal belongings. Each item for sale has an attached price tag.
Professional estate sellers are hired to market and facilitate the estate sale. The sale can go on for several days; prices are reduced with each passing day. For a more in-depth explanation of how estate sales work.
Pros & Cons of estate sales
One of the main benefits of an estate sale is that you do not have to move the items out of the home. This can save a lot of hassle and time, especially if you have a lot of items to sell, including heavy furniture. Because an estate sale is usually held over a few days, it also increases the chances of selling your items. Professional estate sellers handle the process of the sale and negotiate with buyers on your behalf.
There are some downsides to estate sales to be aware of. For starters, your items may sell for less than what they are worth. Prices are reduced with each passing day, so a buyer may strategically wait to buy a less popular item. Buyers also have the opportunity to haggle for lower prices. Finally, the estate sale industry is not standardized. The professional running your estate sale does not have a code of ethics nor an industry rate that they must adhere to. This puts the onus on you to conduct a thorough vetting process before selecting an estate seller.
What is the difference between an estate sale and an auction?
While estate sales and auctions share the same objective of selling property from a deceased person’s estate, they are quite different in nature.
The first key difference is in the way prices are determined. In an auction, the group of bidders determine the price based on demand. The family of the deceased may set a minimum price, but otherwise the bidders will place bids until there is a winning bidder. An in-demand item may sell for much more than expected. The opposite could happen, where an item doesn’t sell at all.
In contrast, the estate selling company sets the prices of items in advance. Prices are reduced with each passing day. This means that there is no opportunity for a price war. Further, buyers might even try to haggle for a lower price.
The second key difference is time frame. An auction typically takes place over a few hours, and items are auctioned off efficiently. Even the most heated bidding war over a particular item will only take a few minutes. In contrast, an estate sale may take over a few days.
Be sure to factor in the amount of time that it takes to prepare for each event. With an auction house, you would need to present each item to be auctioned off to your auctioneer and have your items appraised. The auction house would also need to arrange for transport of all the items from the estate to the location of the auction. An estate sale usually takes place at the home of the deceased, so there is no need for transport. The estate seller also takes care of pricing items and putting price tags on them. Keep these conditions in mind when weighing the overall efficiency of each type of event.
Estate auction vs estate sale: which is better?
With all this information in mind, it’s time to determine which type of event is better: estate sale vs. auction.
In reality, either type of event can be a godsend during a time of grieving. A team of professionals specializing in either estate auctions or estate sales can be hired and handle most aspects of your sale. They will help guide you during the preparations, determining minimum price points, marketing, and the actual day of the event. You also typically do not attend the event itself, as it can be quite emotional to watch your loved one’s belongings get sold to strangers. Instead, you can stay home and focus on the grieving and healing in mind.
The most important consideration when choosing between the two is what fits your needs. How valuable are the items belonging to your loved one’s estate? Do they have any historical or cultural significance? How many items do you have, and what would transport look like? Is it more important to get the highest possible value for each item, or is it more important to sell as many items as possible?
If you have articles of belongings that are significant in history or value, then you may want to opt for an auction. This is also true if revenue is important to you, as an auction can help create bidding wars. In contrast, if you have an enormous estate to sell and are interested in selling as many items as possible, then an estate sale may be the better option.
Still not feeling sure which type of event is the better fit? We recommend finding an estate seller and estate auction house that you would potentially want to work with. Interview them regarding their services and get a sense of how they would handle the process. Getting a sense of their personality and professionality may guide you in the best direction.
Create your estate plan today to ensure your assets are property distributed
Holding an estate auction or estate sale can be quite the ordeal. The cost of hiring a professional team must be factored in, and holding a sale or auction can also take an emotional toll.
Estate sales and auctions often become necessary when there is no game plan in place. For instance, in the absence of an estate plan, the probate court can order an executor to liquidate the estate to pay off debts and fees. In another instance, the deceased could have left behind a confusing Will that forces heirs to liquidate the estate so they can divide up their inheritances more efficiently.
Creating a solid Estate Plan is the solution to avoiding these pains altogether. By implementing a Will and a Trust, you can clearly designate how your assets and property should be distributed, and to whom. This can also help quell any worries about significant family heirlooms and sentimental items being sold off to strangers by default. You may even consider downsizing and liquidating your own estate in advance so that funds can be distributed more easily to your loved ones. At the end of the day, getting your assets in order can save both you and your loved ones a world of worry.
Wondering how to get started? Trust & Will is an online estate planning platform that can guide you through the process of creating your Will and Trust with just a few clicks of a button! Our helpful quizzes, questions, and prompts will help you determine what type of estate planning documents you need, what to include in them, and how to structure your estate. With a clear and concise Estate Plan, an estate auction or sale may not become necessary! Find out which type of estate planning document you should get started with.
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