What Is an Estate Sale?

When someone passes, there are often many moving parts to ensure their estate is settled properly. In some cases, there will be an estate sale to sell off, or liquidate, the person’s belongings. Then, the proceeds will go to a destination of the deceased’s choice, which is most commonly to any beneficiaries named in the will.

This article will help you understand how an estate sale works and what goes into holding one. You’ll also learn the methods for pricing items, as well as how to pay taxes on the proceeds. Finally, if you’re attending a sale, we’ll explain what you should know beforehand.

Understanding Estate Sales

An estate sale is the auction or sale of one’s personal property. Typically, it can occur because a person has passed away or is moving and is unable to retain their belongings. For instance, in the latter scenario, a person may be moving to an assisted living facility or nursing home, requiring them to significantly downsize or get rid of their property.

Following someone’s death, their estate manages their property and assets, typically under the control of an executor. In this case, an estate sale may take place for a few different reasons:

• In the will, there’s a specific directive ordering one to take place.
• The beneficiaries of the estate don’t want or are unable to take any of the belongings left to them
• There’s a dispute between the beneficiaries about the dispersal of property, resulting in the court ordering a sale

According to Ben Michael, Attorney, Michael & Associates, another reason for an  estate sale is that the deceased’s “family cannot sell the house without first clearing it out.” He adds, “Unless you want to absorb all the belongings from the family member that has passed, then an estate sale is the easiest way to clear the house and ready it for sale.” Another benefit is that you can “use [them] to pay off debts that the deceased family member might still owe.”

Be aware that estate sales are not small undertakings to sell a few items. Rather, they are meant to liquidate one’s property in bulk. For this reason, they only come into play after a serious life event that requires all of someone’s items to be sold, such as a death, divorce, or even bankruptcy. Examples of items commonly sold are:

• Jewelry
• Furniture
• Art
• Collectibles
• Clothes
• Vehicles

Holding an Estate Sale

Conducting an estate sale is an undertaking that requires careful planning and attention to detail. To hold one, you’ll typically have two options – do it yourself (or with other family/friends) or hire a company to handle the entire process for you. In the case of the former, “you need to make sure that you have the proper permits to hold the sale. It’s similar to holding a garage sale when it comes to permission and permits,” explains Michael. Be aware that regulations vary from state to state, so it’ll be best to reach out to your local government about how to go about setting one up on your own.

Most often, people will hire an estate sale company to set up the event. This requires you to pay a percentage of the proceeds in return, which can range from 25% to 50%. Typically, an estate planning company will handle the following:

• Appraising and pricing items. The company will carefully conduct market research and assess an item’s condition. Then, it will come up with a price commensurate with an object’s value.
• Marketing the sale. Through a combination of digital and local marketing, estate sale companies will attempt to get customers for the event.
• Organizing the house and items. Estate sales typically require careful staging of items to entice customers to buy. A third-party company takes care of this process, leveraging its previous experience of what works and what doesn’t.
• Managing the sale. A firm will manage transactions, keep records, and speak with customers to ensure the event goes smoothly.
• Wrapping up the sale. Once the event is over, the company will clean the house, deconstruct any staged products, and leave it as if nothing happened.

Another benefit of hiring an outside company is that it allows a neutral party to do the heavy lifting. It’s common for emotion, and in some cases, tension, to run high in the wake of someone’s passing. Employing an impartial company can help minimize any issues that may occur.

What to Know About Pricing Items

One of the most important steps before holding an estate sale is fairly and appropriately pricing the items. Of course, you want to make a good amount per item, but if you charge too much, it may not sell at all. Putting the right price tag on an item usually takes extensive research and understanding of a given market.

When you work with an estate sale company, they’ll handle the burden of appraising your items. This includes researching similar products, market value, and what people charge on various marketplaces. And, typically, these services may already have experience pricing similar items (or the same one) and will know what will get it to sell at a good price.

If you decide to run a sale yourself, it will be up to you to appraise each item and adequately price it. You can do so either by reaching out to a professional to value an item or by researching on your own. If you choose the latter, it may also be beneficial to carefully assess what an object goes for on marketplaces like eBay, Craigslist, or Facebook Marketplace. Be aware, however, that these places don’t always reflect what an item is truly worth and its value is ultimately what someone is willing to pay.

Paying Taxes on Earnings

How you pay taxes on estate sale proceeds depends on the reason for the event. If you’re selling items on behalf of an estate, then you may need to report the earnings on the estate’s income tax return, depending on the value of the estate. In this case, an estate must be worth at least $13.61 million as of 2024 for federal taxes to be owed. Keep in mind that you may also owe state taxes depending on its value threshold, which differs from the federal one.

If you’re holding an estate sale for your belongings, you will be responsible for paying taxes on the earnings. Here, you may need to pay capital gains tax if you sell an item for an amount that’s more than its market value. The exact amount you owe depends on the sale price of each item and your tax bracket, which your income level determines.

Ideally, you’ll be working with an estate planner or a financial advisor before conducting a sale. We recommend you double-check with them about any tax implications before holding the event to avoid any surprises.

Frequently Asked Questions

How much does the average estate sale make?

This depends on the number of items you’re selling and the price you set for them. Estates vary in size and can include a wide range of high-priced items, or they may not. You should also consider that if you hire a company to manage the sale, it will cut into your profits significantly.

How is an estate sale different from a garage sale?

Garage sales seem similar on the surface, but they are simply a sale of items you may not want or would like to profit from. On the other hand, an estate sale is meant to liquidate all of a person’s belongings all at once. These events are typically professionally managed and require careful planning and marketing to be a success.

One similarity between the two is that each requires permits to legally operate. In the case of an estate sale, people often hire companies to manage it. Here, the company will already have the necessary permits to conduct the event.

What percentage do most estate sale companies take?

On average, an estate sale company can take anywhere from 25% to 50% of the net proceeds from a sale. These, however, vary from company to company.

Do I need to hire an estate sale company?

While it’s not a requirement to hire professionals to manage an estate sale, it makes the process much easier. You may decide to go it alone, but that leaves the burden on you to obtain permits, plan the event, and sell items. Additionally, you’ll need to price items properly, which can take much work.