Capitol Auction & Estate Services is unique; in that we are able to offer a variety of services to help clients dispose of personal property. While we believe the "auction method" of sales is best for items that have wide ranging appeal and value, strong dollar returns can also be achieved by selling every day things at a "tag" or estate sale. While auction buying and estate sale customers overlap somewhat, we have found that these are two distinct buying groups. Each client's circumstances are different and our goal is always to find a way to maximize the return.

My friend, and fellow auctioneer, Mike Brandly recently wrote an article discussing the merits of the auction method of sales. He makes some excellent points and I want to pass his thoughts along.

Terry Mangum — Professional Auctioneer

An auction versus a tag or estate sale?

By Mike Brandly

Many people, confronted with the overwhelming and unfamiliar task of disposing of personal property due to a family member or friend dying, have little or no idea what the key differences are between an auction and a tag sale (tag sales are sometimes called “estate sales”).

A tag sale involves, basically, a person hired by the fiduciary who will “price” each item with a tag, indicating that the item is available for sale at that price. Too, most tag sale attendees assume that there is room to negotiate, so a fair share of items marked with a price sell for less. Tag sales are sometimes spread over more than one day, where prices are systematically lowered on the second day, third day, and the like, to facilitate further sales. Typically, at a tag sale, a fair share of the items do not sell.

An auction involves, basically, a person hired by the fiduciary who will market and sell items “to the highest bidders.” Most auction attendees understand that items will be sold to the highest bidder, and that they will win any item where they outbid all others. At an auction of personal property, there is typically no set prices, and the market sets the ultimate selling price. Typically, at an auction, all the items sell.

Let’s begin with an overall statement in regard to the basic sales mechanism used by tag sales versus auctions:

• A tag sale uses a price discount model where items sell for, at most, the price tagged on the item, or less.

• An auction uses a competitive bidding model where items sell for whatever the highest bidder is willing to pay.

The other major difference between a tag sale and an auction is a tag sale service provider must know how to price every item being offered, or suffer less than optimal results. An auction service provider (an auctioneer) relies on the bidders to realize full price discovery.

Let’s use an example; an estate has a signed and marked Rookwood Vase dated 1921. However, this vase has an unusual scene on it, which is not documented in any Rookwood books or reference guides. At a tag sale, how is the tag sale service provider to price this vase? This presents the basic flaw in tag sale marketing:

• If this vase is under-priced, it will sell for less than market value.

• If this vase is over-priced, it will not sell at all.

This same vase at auction will sell. It will sell to the highest bidder. What will it sell for? Whatever it is worth — market value.

Then, there is the dark side of tag sale marketing:

1. Upwards of 80% of the items in a tag sale are sold below market value.

An auction attracts large crowds of ready, willing and able buyers, through extensive widespread marketing, who have to compete to purchase items they desire. Full price discovery is accomplished, and nearly all items sell, and all items sell for market value.

When is a tag sale a preferred method of selling? An auctioneer had on his website the following two reasons why a client might prefer a tag sale over an auction:

• The X Factor: You are hesitant because of the “unknown factor” of what your merchandise will bring at auction.

We would ask the following questions about these two reasons:

1. What exactly is the “X factor?” In what market scenario does someone know what their item will sell for? At auction, it sells to the highest bidder. In a tag sale, it basically sells for less than market value, or doesn’t sell at all.

2. Control? How can someone control the price at which something will sell? Items sell only if a ready, willing and able buyer agrees with the price. Here again: At auction, it sells to the highest bidder. In a tag sale, it basically sells for less than market value, or doesn’t sell at all.

I would submit that a tag sale is never preferable to an auction. With a tag sale providing that an items will sell for less than market value, or not sell at all — an auction, on the other hand, virtually guarantees market value, and sellers can place reserves or minimums on items, if they so desire, further assuring them an item doesn’t sell below a certain amount.

We brought up a 1921 Rookwood Vase earlier in our story. This vase was purchased at a tag sale for $30 and sold six months later at auction for $3,500. This type of thing happens all the time at tag sales, estate sales, garage sales, and yard sales — where an item is sold at auction later for more. In fact, this would hardly be a record.

ABC News reported in October, 2009 of Teisha McNeal of Shreveport, Louisiana finding a Picasso painting for $2 at a yard sale, and later discovering auction estimates of nearly $2 Million. See the entire story here: http://abcnews.go.com/GMA/Weekend/finding-art-Picasso-treasure-trash/story?id=8904941

How does an auction compare to a tag sale or estate sale? Quite favorably.

Mike Brandly, Auctioneer, CAI, AARE has been an auctioneer and certified appraiser for over 30 years. He is Executive Director of The Ohio Auction School.