Liquidating Assets for Tax Season: 7 Tips from a Professional Liquidator
There are a lot of reasons to downsize - moving to a new (sometimes smaller) location, running into financial hardship, or simply needing liquid assets for deposits to start a new venture. Sorting through possessions can be a tiring process, taxing you mentally and emotionally.
However, liquidating assets is an important part of life and at no time does this become more apparent than during tax season.
Whether a yard/garage sale, estate auction, or single item sale, there’s a method to liquidation to ensure revenue is maximized without decreasing total assets.
I reached out to the experts, contacting accountants, financial advisors, and entrepreneurial friends to gather a list of seven tips to build the foundation of my penny-pincher’s guide to liquidating assets.
1. Organize and Inventory Everything
One man’s trash is another man’s treasure.
The first step to figuring out what you can liquidate is taking an extensive inventory of what you own.
Sorting through boxes, crates, bins, and storage sheds and documenting each item in a spreadsheet gives you a singular point of reference for your physical assets.
Once everything is inventoried on a single list, it can be reorganized into items to keep, sell, or trash.
It’s important to have this done immediately so that proper planning can take place. Selling a single item can take weeks, and garage/yard sales rarely sell out the first weekend (unless you accept offers to sell by the truckload).
It can take 30 days up to 6 months to liquidate everything, so plan accordingly and have several backups, just in case.
“Don’t keep awkward space consuming items unless you actually need and use them,” says Barry Gordon, professional auctioneer and founder of MaxSold. “Plan what items to keep based on your move; the new space will help determine what to keep and also help justify getting rid of larger, unused items that have stuck around due to sentimental reasons.”
2. Price or Trash It
“I can't stress enough to price everything,” says yard sale pro Carrie Aulenbacher. “Whether items are color-coded (green tags are a quarter, yellow tags a dollar, etc) or individually priced, marking everything eliminates headaches for those helping you with the sale.” Aulenbacher highlights an important part of sales - pricing.
If a price isn’t clearly labeled, customers don’t know whether or not it’s for sale nor for a reasonable price.
Find the new and used prices of every item you’re selling online before the sale, and check again during negotiations. Showing a customer the online prices helps them understand the value they’re already getting from your discounted rates.
“I recommend using the profit bandit app to get an idea of what an item is worth so you can price it accordingly,” recommends Chrystie Vachon from Yardsales.net. “Know what your stuff is worth. So many people are just looking to get rid of stuff that they fail to do their due diligence.”
Pricing should be no higher than 75 percent of the retail value for an ordinary used item in order to attract customers.
While you may technically lose money on the purchase, the time of usage and ownership accounts for at least 25 percent of the item’s value. Collectibles should be taken to the appropriate collectors for valuation before selling to avoid ripping yourself off.
3. Take Pictures and List 5 Places Online
It’s important to take multiple pictures of every item for sale. Pictures help keep track of what leaves the house and are a vital part of attracting customers for online ads.
Big-ticket items (anything over $100) should be listed for sale individually online, even if included in the yard sale.
This puts more eyes on each item, increasing the odds that it’ll sell for an acceptable price.
Goods for sale can be listed on Craigslist, Ebay, Amazon, Facebook, and Swappa.
Each of these platforms offers an online marketplace where goods/services can be offered for sale.
Most shipping can be accomplished for $10-$20, but heavier items like are easier to sell locally, unless the buyer assumes responsibility for shipping costs.
Using social media services like Facebook allows you to target posts to interested groups and friends/family who may be willing to pay more in order to help out.
Be wary of selling to unknown people, however. “Don’t let strangers into your home. If using Craigslist to sell, find neutral ground. Better yet, use a professional third party to sell extra stuff,” says Gordon.
4. Review All Receipts, Titles, and Paperwork
Big-ticket items require paperwork to prove ownership. Even if these items are donated, proof of ownership is required to transfer ownership and receipts prove the value when donations or sales proceeds are reported on next year’s income tax return.
A vehicle, trailer, or home requires a title/deed, firearms and electronics have serial numbers that are often attached to the customer during purchase, and jewelry receipts can make the difference between a large-revenue sale and a much smaller cash-for-gold exchange.
Receipts can be provided to buyers to prove when and where an item was purchased, and whether or not it’s still under warranty, including any third-party warranties upsold at the register.
This can increase the perceived value of a used item in any condition as the buyer knows it can be replaced by the manufacturer or third-party insurer.
5. Tell Your Friends
“Don’t keep things for other people, and warn the freeloaders in your life that you’re downsizing,” says Gordon. “You may have a garage now, but probably won't where you’re going, so they should plan accordingly.”
Letting friends and family know you’re holding a liquidation sale is a great way to bolster sales.
Not only will some people bring over items to sell in your garage sale (often just donating things they don’t need), but they’ll spread the word to their social circles, increasing marketing efforts.
Businessmen know the cost of acquiring a customer is huge, and any free, word-of-mouth marketing lowers this cost. Take advantage of both online and offline social circles, ensuring to maximize sales visibility and profitability.
6. Promote Your Sale Everywhere
Once everything is ready for sale, promotion is the key to driving traffic.
Online and social media promotions are only the start - creating an ad in the classified section of the local newspaper, posting fliers on public bulletin boards, and posting signs on major street corners helps drive traffic.
Look to spend around $20 on stickers, markers, poster board/cardboard, and signage.
Ask your local retail stores, coffee shops, and other businesses if you can advertise your sale anywhere on their property, and be careful not to vandalize anyone’s private property without prior authorization or you may end up with a fine.
Many homeowners associations have strict regulations regarding what can be left in the front yard or whether or how long a garage door can be left open.
Many of these activities are seen as lowering property values, so be sure to check all regulations before holding a sale.
All marketing materials should be legible, include large lettering that can be read from a moving vehicle, and include an address and contact info. This allows people to call or email prior to showing up in order to check item availability.
7. If It Doesn’t Fit, It Has to Go
Nearly everything we purchase has some sort of emotional connection.
For one reason or another, we tend to form an emotional bond with inanimate objects and hold on to items we don’t need simply because we can’t bear to get rid of them. It’s not uncommon for these items to become family heirlooms.
“Far too often, we keep items that aren’t useful anymore, simply because we paid for it and we own it.” says Gordon. “Countless items are passed down from generation to generation or left by friends and family that have no utility and don’t make sense with what you have.”
Ultimately what you can own is limited by what you can store.
There are hoarders out there who live in rooms lined with cardboard boxes and shelves filled with personal items.
This isn’t a way to live.
We need space and room to move around in order to be happy, and the point of downsizing is to detach from material goods in order to live a simpler and happier life.
Don’t hold onto things that don’t make sense, simply because you can’t bear to let it go.
If a replacement is needed in the future, you can always liquidate your assets and purchase a new one.
Change is difficult in life, and selling personal items is a personal experience that changes your life.
Appreciating the past is great, but keepsakes don’t come in the form of oversized, expensive objects filling the room.
A handwritten note or handmade item is far more valuable than anything that can be purchased at a store.
So if finances are tight this tax season, and you’re looking down the barrel of a hefty tax bill, consider liquidating your assets and downsizing your life. The pain is only temporary, and the benefit to your future is exponential.