What Are Estate Sales and How Do They Work?
Understand estate sales: what they are, how they work, and their key role in efficiently liquidating personal property from a home.
Estate sales are a method for selling personal property, typically held at a private residence. They efficiently liquidate the contents of a home, often due to significant life transitions. These sales are accessible to the general public.
Understanding Estate Sales
Estate sales differ from typical garage sales by liquidating an entire household’s contents. These sales commonly occur due to major life events like downsizing, moving, or the passing of a loved one. When an estate sale happens after a death, the items are part of the decedent’s estate, which may or may not be subject to probate depending on the asset’s nature and local regulations.
Professional estate sale companies usually manage these events. Engaging a company ensures expertise in pricing, marketing, and managing the sale. These companies operate on a commission-based structure, retaining a percentage of gross sales. Commission rates generally range from 30% to 60%, with 35% to 50% being a common average.
From a tax perspective, estate sale proceeds can have implications for the seller. If inherited items are sold, their tax basis is generally their fair market value on the previous owner’s death, known as a “stepped-up basis.” If the sale price exceeds this basis, capital gains tax may apply. For individuals selling their own property due to downsizing, capital gains may be realized if an item has appreciated significantly since its original purchase, as there is no stepped-up basis.
Federal estate tax applies to very large estates before assets are distributed to heirs. However, most estates fall below the high exemption threshold and are not subject to it.
The Process of an Estate Sale
An estate sale begins with an initial consultation and assessment by a company. They evaluate the property’s volume and value to determine the sale’s scope. A contract is then established, outlining the work, commission, responsibilities, and client payment schedule. This contract also specifies how unsold items will be handled, such as donation, disposal, or return to the owner.
After the agreement, the preparation phase begins, involving sorting, cleaning, and organizing the home’s contents. Items are staged and priced. Pricing aims for fair market value, often 30% to 60% of typical retail or online prices. This preparation period usually takes several days to a week, depending on the estate’s size and condition.
Sale days involve managing public entry and overseeing transactions. Estate sale companies accept various payment methods, including cash and credit cards. Sales tax is generally collected on purchases. After the sale, post-sale activities include clearing out any remaining unsold items and providing a detailed accounting of sales to the client. Net proceeds are typically remitted within 7 to 14 days after completion.
Items Typically Featured
Estate sales feature a wide assortment of personal property from an entire household. Buyers can find furniture, from antique to contemporary styles. Artwork, including paintings and sculptures, is commonly available, alongside diverse collections such as stamps, coins, or other memorabilia.
Beyond larger furnishings and collectibles, sales include household necessities. Kitchenware and tools for home and garden maintenance are common. Clothing, jewelry, books, and linens also contribute to the diverse inventory. This broad selection caters to a wide audience, from collectors to those seeking everyday functional items.
Attending an Estate Sale
Information about upcoming estate sales is available through online listings and local advertisements. Websites often provide details on sale dates, times, addresses, and item previews. Arriving early on the first day is common for the best selection.
Understanding the typical pricing structure is beneficial. Items are generally priced at full value on the first day, with discounts applied on subsequent days to liquidate remaining inventory. Most sales accept cash and major credit cards. Buyers are responsible for transporting larger purchased items, so planning for pickup is advisable.
Attendees should be mindful of general etiquette, such as respecting the property and items, and understand that all sales are usually final and items are sold “as-is.” Sales tax is generally collected from buyers. Estate sale companies are responsible for collecting and remitting any applicable sales tax.