Most 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, 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.

2. Upwards of 20% of the items in a tag sale will remain unsold.

3. 100% of the items will sell for no more than the “tagged” price.

4. Almost always, the tag sale provider lacks the expertise to properly price all items, therefore full price discovery is not accomplished.

5. Regulation and licensing of tag sale service providers is almost nonexistent in the United States. A harmed seller would have no choice but to sue in court for damages.

6. Most tag sales lack sufficient marketing to attract the most qualified and interested buyers, therefore applying downward pressure on sales results.

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.

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: