The Best of Ed Welch: The Business of Selling Your Collection
The Business of Doing Business
By Ed Welch
You do not own your collection. You paid for it with your money. You cared for it for years. You may even have paid insurance premiums on its value. Regardless of these facts, your collection does not belong to you.
You have two partners who have a stake in your collection. Most collections are liquidated using the services of an auction house. Auction fees can be as high as 40 percent. The auction house owns between 25 and 40 percent of the value of your collection. The Internal Revenue Service owns between 22 to 30 percent of the value of your collection. You own between 40 and 50 percent of the value of your collection.
I was contacted by collector who bought antiques from me for more than 25 years. He quit buying three years ago at age 76. He is now in the process of trying to sell is collection. He received quotes from three regional and one nationally known auction houses. He was shocked at the high cost of selling through auction. Part of the high cost is the fault of the collector. I will explain more about this later. The collector lives comfortably in his retirement. Still, he was counting on the income from his collection to allow him an his wife to vacation in Europe and as a safety net in case of unexpected medical expenses.
His collection is worth at least $750,000 and may be worth more than a million dollars. This is one of his problems. He has no idea of the value of the nearly 3,000 items in his collection. The collector kept no buying records. He did not keep up with current selling prices. With the exception of a few outstanding items, he has no idea what he paid. This information would greatly reduce his tax liability.
Only one of the four auction houses he contacted was willing to sell the collection without having it appraised. I cannot fault the three auction houses that demanded an appraisal. They could be financially liable if they sold rare items for little or no money. Plus, they make money as a percentage of the selling price. They want all the items they sell to bring current selling prices.
The collector could hire an appraiser to sort through the collection and determine a current value. This would take weeks and would be expensive. Larger auction houses will have an in-house expert judge the value of the collection or hire an outside expert. This service will be reflected in the selling fees.
I was in the collector’s home five years ago. Lying casually on a coffee table was a small item worth at least $10,000. Any visitor to this man’s home could easily slip such an item into his or her pocket. I said nothing at the time but did ask him about this when he contacted me concerning the selling of his collection. He did not remember the item. He does not know where it is today. He surmised that he had taken it out of one of his many display cases to show a visitor.
This collector is not unusual. I believe that most collectors have a good idea of the value of their major pieces. However, if they have been collecting for 20 years or more, they have no idea of the value of their lesser items, especially if they own hundreds of items.
The collector asked if I would consider managing the sale of his collection for a percentage of the selling price. He added that an appraisal would not be necessary because I specialize in this field. I refused his offer for the following reasons.
Liquidating a major collection one item at a time would take hundreds if not thousands of hours. To get top dollar, much advertising would have to be purchased. Booths would have to be rented at major shows. Lesser items could be bundled and sold at small auctions. Some items could be sold on eBay. Six of his major items would have to be sold by a large auction house.
The collector was, in reality, asking me to become his employee for the year or more it would take to sell off his collection.
I recommended that he contact businesses that specialize in liquidating estates and collections through sales, consigning only the leftovers to local auction services. Finally, I let him know that his best items were more expensive than the price range I normally carry. But, I would gladly buy items from his collection including many of the antiques that he had bought from me.
The remainder of this article is not for the longtime collector getting ready to sell. There is no cheap way to undo the damage caused by 20 plus years of poor record keeping. However, a young collector can avoid many of the mistakes made by old time collectors like myself.
For more than 40 years I have collected early town histories, first person accounts of capture by Indians, first person accounts of trade routes, Indian trails, old forts, riverboat and shipbuilding. I also collect diaries, store journals, barter agreements, hand-drawn maps, and hand-drawn surveys. In total, I have more than 200 books, documents, and maps.
Recently, I attended an auction and watched the sale of a copy of one of the rare books that I own, selling price $1,500. My book is in better condition. I remember the amount that I paid, $50. Unfortunately, I cannot say the same about most of the items in my collection. Because I did not intend to sell these items, I paid little attention to price paid and kept no buying records.
I have two options. I can spend the time necessary to do the appraisal myself or hire out the work to be done. The collection is likely to become part of my estate. My children have no idea of the value of the collection, how to get it appraised, or how to liquidate it. It is my responsibility to have this collection appraised and to provide my heirs with written instructions on the best methods of selling the collection.
If you are a young collector, do not make the same mistakes that my customer and I made. Keep buying records. Every two or three years look at your buying records. If the values of the things you collect have gone up, make notations to this fact.
I have a good friend who collects firearms, walking sticks, paintings, baskets, nautical items, hand-made colonial household tools, early blown glass, and many other items. He clips articles from trade papers and magazines that relate to things in his collection. He saves auction catalogs containing items the same as those in his collection. He staples notes to the covers and pages of the catalogs such as, North flintlock pistol, page 27, item 138. Of course, he has a North flintlock pistol in his collection. He bought the pistol when he was 18 years old for $35. He will turn 70 next January. His sons and daughters will have no problems selling items in his collection they do not want to keep.
Good collection records will allow you to pass your collection to your children and grandchildren without paying the high cost of liquidation fees. Your heirs then have the option of selling in small lots, reducing selling fees and tax burdens.
As many of you are aware, our friend Ed Welch passed away in October, 2012. His wisdom and entrepreneurial spirit will be greatly missed. At the request of many of our loyal readers we’ve decided to publish some of their favorite columns from past years.