Gone are the days where simply calling it an “auction” means it’s going to sell. Today’s buyers are looking for bargains, and bargains can be found at forced auction sales. When a lender orders an auction sale, this typically means that they wish to move this asset off of their books. In most cases, money is not as much as a concern as timing and ability to close the transaction. Holding costs and deferred maintenance are often reason enough for a lender to order an auction sale which means one thing for buyers out there- this is going to be a good opportunity.
We have many such sales going on right now at our website, here are two: House Auction Company is handling the absolute auction sale: North Carolina Coastal Waterfront Property 6 Beaufort County Waterfront Home Sites on May 15th, 2009. Tranzon Asset Advisors is handling the Lender Ordered Auction: Excellently Located Retail Shopping Center in Cincinnati, OH on June 3rd, 2009.
.
It seems like it was just yesterday when bank branches were opening up locations on every corner for the convenience of their customers. Now with all of the mergers and unrest going on in the banking world, bank branches seem to be closing on every corner. These locations usually offer excellent opportunities for investors for conversion into retail sites.
With the amount of inventory coming onto the market it’s no surprise that financial institutions are turning to auctions to quickly and efficiently get these properties sold. One of the larger sales we’ve seen this year comes out of John Dixon and Associates out of Georgia. They are auctioning off 23 bank branches over several states on behalf of a national REIT (real estate investment trust). The auctions take place at the end of the month over a 7 day period.
We expect to continue to see this sector increase in inventory and therefore more auctions to happen over the next 12-24 months as financial institutions continue to consolidate and or go dark completely.
The amount of properties (
commercial and
residential) that are being brought to auction in the past quarter is certainly on the uptick when compared with earlier this year. This was due primarily to the shakiness of all the credit markets. Now that things seem to be on the road to recovery more properties are coming to auction. However, the dilemma remains the same- without credit how many of these properties are actually being moved out the door.
Auction sales are cash sales, or at least “cash at closing” sales. Most buyers still must depend on commercial lines of credit and banking relationships to get deals done and right now that seems to be an impossible task. Since lenders are still not willing to lend, cash right now is king. Those who are sitting on mountains of cash will be the kings over the next couple of quarters when buying property at auction. Vulture funds, opportunity funds, etc are all getting out there now and competing for some of the excellent deals being offered by auctioneers. As inventory swells even more, auction sellers will become more realistic. However with recent interventions (such as the bailout) the natural course of the auction market as we see it may be delayed.
Auctioneers right now are certainly working with the institutions that absolutely need to sell, evidenced by these auctions coming up next month;
Premier Real Estate Auctions is offering a bank liquidation auction of 3.99 acres of prime waterfront in Florida. There are two sites available with both offering excellent development opportunities. Tranzon Alderfer Real Estate is offering prime vacant land at auction in Pennsylvania. This is a sealed bid as well as an absolute auction. Assiter Auctioneers is offering at absolute auction the Baptist St. Anthony’s Hospital in Texas. The building is over half a million square feet.
With the downturn in the marketplace more and more auctioneers are getting in on the bulk ballroom auction sales. These sales are mostly impersonal but certainly effective for an institution looking to quickly dispose of hundreds of properties in one day. We have noticed that auctioneers who have traditionally performed on site auctions for a single residential property still exists.
The challenges that they face are new. No longer can a real estate investor of a single residential property buy today at one price and sell tomorrow at a higher price. So what’s the secret to success these days with this type of auction? It comes back to the same tactic that all auctioneers use right now to create a sense of urgency for buyers. That’s offering the property either at absolute auction or at a published reserve price that is just so low that any reasonable investor in the area would be foolish not to buy.
This is certainly the case for Luxury Real Estate Auctions offering 2509 Ogden St in Denver, Colorado next month. It’s a beautiful townhome built just in 2000 and is offered at a published reserve of $155,000. According to industry locals this is a slam dunk price for this property and should attract a ton of buyers to the auction sale. The auction price, of course, will determine the true market value for this property.
Auction companies have traditionally offered brokers who bring clients to an auction and “duly register” them a broker cooperation fee. This is essentially a commission to the broker/agent if their client successfully closes on the property. However, in the last few years, during the boom times, we noticed some auctioneers moving away from this practice. After all, properties were selling left and right, without any need to excite the brokerage community to come out and play.
The times have turned and we’re seeing broker co-op fees climbing: 2% seems to be the norm, however, 3% and even 4% can be found right now. And the registration process is usually a piece of cake. Fill out a 1 or 2 page form, have the broker and the buyer sign, fax it in and collect the cash! Well the buyer still needs to win the bid and close on the property, but that’s just a minor technicality-:) Auctioneers also prefer (and sometimes require) that the broker/agent be present at the auction along with their client and for good reason: usually the agent can assist the client in value, signing, etc.
The slower economy has hit the brokerage industry particularly hard. Brokers and their agents should be embracing the auction community by searching right now for residential auctions or commercial auctions for their clients and get in on the broker cooperation fees being offered!
Here are two very exciting residential auctions coming up offering a generous broker cooperation fee:
Rowell Auctions is offering over 100 properties throughout Georgia this month at online absolute and reserve auction.
Tranzon Driggers is offering 31 new homes in Ft. Myers Florida. One third of the offerings will be sold absolute.
And here are two very exciting commercial auctions coming up offering a generous broker cooperation fee:
Eddie Haynes Inc is offering an RV Park and Executive 18-Hole Par 3 Golf Course in Cedar Valley Oklahoma.
Tranzon Venuebid is offering 6 +/- AC Upland Gulf Front Land in South Padre Island, Texas.
As the markets change focus, auctioneers also change, often concentrating in certain asset types at certain times. Williams & Williams out of Tulsa, OK has traditionally been an auctioneer for residential bank owned property. However in recent months they have aggressively pursued the commercial market auctioning off several assets including office buildings and land developments.
We have found that certain auctioneers tend to say that they specialize in the “auction process” more than any specific asset type.
RE/MAX Group Auctioneers out of Cartersville, GA is mixing it up next month with “Commercial, Residential, Land, Lots and Development Opportunities” throughout the state. Among the offerings is a 7 bedroom home and an office building. Certainly these cater to different types of buyers. They are offering the properties in both sealed bid format and on-site open outcry format. the auctions will take place over several days throughout October.
We’ve commented on this earlier this summer and now there has been a serious spike in not only absolute auctions but also the “all absolute” auctions. In these auctions all of the properties being offered are sold regardless of price to the highest bidder. Offering a few properties absolute or a small percentage of the total pool may not be enough anymore. Buyers want more and the auction community is responding.
Tranzon Asset Advisors out of Kentucky will offer all 18 residential lots for a lender at absolute auction in early October. The sale will take place on site in Missouri and is expected to be sell-out. The auctioneer is ahead of the curve working with the lender as opposed to the developer who is most likely either all or partially out of the picture.
Developer auctions have been a much tougher sell these days with little or no absolutes and published minimums that may not even appeal to today’s buyer. Some developers, however, are happy with their auctions even if they don’t have a complete sell out claiming that the exposure their project receives as a result of the auction marketing assists them in disposing more inventory in the “after auction” market.
Again, another post on a subject we covered not long ago- traditional brick and mortar auction firms assisting their clients in using online technology to get assets sold. Here’s a great a example: J. Duncan & Associates out of South Carolina will offer
two lots at online auction only. The stated minimum bid auction will end on September 26th.
So yet another company will move to at least a partial online strategy for some clients. Benefits are many- the obvious being the auction day event which is pretty much out of the equation. Some also claim that the time to market is faster and marketing costs are lower but this is still up for discussion. We think you still need to advertise as hard if not more to drive the right buyers that will purchase in an online format.
Lots of lots. That’s the name of the game we’ve noticed this summer. Given market conditions residential building lots are selling at tremendous discounts from coast to coast.
Hamele Auction Service is offering several lots in Wisconsin that are perfect for log homes. The upcoming auction event will take place in early September. The sale will be conducted as “multi-parcel auction” event-”whichever parcel combination obtains the highest price is the way the lot(s) will be written to Offer to Purchase”.
Tranzon Alderfer will also be offering several lots as well as new condominiums and much more in an upcoming “Builder’s Closeout Spectacular” auction event to be held in Pennsylvania. To entice buyers even further the auction firm is offering several properties at absolute auction.
Lots of lots on the block this summer is creating opportunities for buyers looking to build or just land bank until the market turns.
We’re starting to see a lot of volume coming out of the “online only” real estate auction companies. One in particular is Bid4homes.com, a new initiative launched by the folks at Bid4assets.com focused on the residential real estate market. The latest offering is
27 single family homes offered at
absolute auction. The homes are scattered across the country but the key to their success may be that the auction house already has a major following on the internet having been in the business for almost a decade.
Some offline companies or as we like to call them “on the ground auctioneers” have added online auction components to compete. (Be advised that we are talking about timed auctions, and not live streaming auctions that require a whole separate post to blog about.) We think the trend will gravitate towards both, an online auction for one situation and an on the ground auction for another situation or even a hybrid of both. With the volume of residential property still to come all auction companies will be extremely busy trying to come up with innovative ways to sell and keep the clients happy.
