The 30 to 60 days leading up to the auction is the time for you to get questions answered, attend inspections of the property you are interested in, and determine what you can afford to spend. The actual auction is simply the time to offer the price you are willing to pay for the property.
Auctions Go Fast!
The auction itself moves fast. First-time attendees are usually surprised to learn that the sale they are attending is over within a few minutes. In many cases, if the auction is for a single home with nothing else to be sold, the entire process lasts less than 30 minutes. So, don’t be late!
On auction day, prospective buyers register for a bidder number by filling out a Bidder Card. The registration period usually begins from one hour to two hours before the scheduled auction time. There is no fee to register at the auction and high bidders may use cash or personal checks for down payment. You can also get all last minute questions answered and tour the home one final time if you wish.
Before the Bidding Begins
The auction begins promptly at the appointed time with opening remarks summarizing, for the record, the terms of sale, the property information, the methods of bidding and any last minute changes or disclosures. These comments usually take only a few minutes, concluding with the auctioneer answering any final questions. Then the bidding is ready to begin!
The Auction Team
Assisting the auctioneer will be bid assistants, to make sure anyone trying to bid is recognized and that all bids are recorded with the auctioneer. Bid assistants may also assist with questions during the auction, including asking the auctioneer to pause if necessary. It is not a myth that bids can be made accidentally … by scratching one’s nose and the like. But if you did not intend to bid, simply inform one of the bid assistants or the auctioneer and the mistake will be corrected. Any tie bids or other issues regarding who has the high bid are always resolved by the auctioneer, who has complete and final authority.
From the first bid, things move quickly, with bidders offering their bids up to the price they are willing to pay for the property. The auctioneer can and will say “sold” as soon as he determines that the final bid has been made. It is not necessary, nor customary, for the auctioneer to slowly announce, “Going once, going twice, etc.” He simply decides the bidding has stopped and announces, “Sold.” If the auction is for a single property, this concludes the auction and the purchaser simply executes the contract of sale and makes the required payment.
“Buyer’s Choice” (Available at some auctions)
If there is more than one property or parcel being offered, the “buyer’s choice” method is often used. In a “buyer’s choice” sale, items will be numbered for identification purposes. The number will not relate in any way to when the property will be sold. Instead, each time the auctioneer says “sold,” the person with the high bid will choose which parcel(s) or property(s) they want to purchase by announcing the number(s) describing that property(s) or parcel(s).
The high bidder can take as many parcels or properties as they want from those that remain unsold, and in any order or combination. His or her high bid is simply multiplied by the number of properties or parcels they have chosen at that time. Once chosen by a high bidder, and unless otherwise announced, that property is “sold” and no longer available. It is therefore very important that bidders realize if they do not have the high bid, the property or properties they want could be chosen (sold) to the high bidder and will no longer be available. Sometimes, the high bidder will choose many properties at once, and in some sales, choose every property available, thereby bringing the auction to a close. “Buyer’s choice” allows buyers, not the auction company or seller, to determine how, when and at what price they will purchase property.
What is a Bankruptcy Auction?
A bankruptcy auction is held on behalf of the courts. foreclosure auction is typically conducted on behalf of a lending institution or creditor. Often times, special asset managers are able to restructure a troubled loan or provide enough time to the borrower to refinance with another lending institution without having to take legal action. In some instances, the lender will even sell the note. When these options have been exhausted, a trustee is assigned to secure the performance of the obligation and the property pledged as security for the debt, is sold to pay the debt. Typically, this sale is performed via the auction method of marketing.
This project consisted of four service station/convenience store properties and a restaurant located within a 50 mile radius of Knoxville, TN. Two of the properties were being sold fee simple while the remaining three e properties were being offered lease hold interest only. All of the locations featured oprating businesses at the time of the auction.
The Value Enhancement Process – Marketing:
Given the short time frame in which to work, Furrow Auction implemented a multi-pronged approach to marketing the property. The first step was to advertise the auction in the Memphis newspaper, thereby exposing the sale to a quarter of a million readers. Secondly, Furrow enlisted the assistance of the local brokerage community by offering broker participation to any qualified broker who represented a successful buyer at the auction. This tactic expanded the reach of the standard advertising as sharp real estate brokers called on their client list to look for candidates to purchase the property. Thirdly, Furrow tapped their data base that has been grown and refined over 34 years of business to market the property directly to buyers of industrial property in the middle and western Tennessee region. A fourth tactic was to send a Furrow Auction professional into the local market to meet with the top lending institutions and obtain their lists of top customers and investors in real estate. These individuals were then contacted directly and provided all pertinent information on the property. The marketing efforts were rounded out with extensive signage and a full property brief located on the Furrow Auction Company Website.
The Value Enhancement Process – Due Diligence:
Creating and implementing a cost effective and timely marketing campaign comprises one half of the Value Enhancement Process. The other – and equally important – part of the equation is thorough due diligence. This process consists of anticipating and answering all questions a prospective bidder might have. In the case of this property, several items were uncovered during the due diligence process that could have had a significant effect on value, had they not been addressed:
- Two tenants occupied the property, one who had a long-term lease, and the other who was paying on a month to month basis. Furrow Auction obtained copies of each lease and subsequently interviewed each tenant to determine their desire to remain in the building. This information was used in our marketing to demonstrate the investment potential of the property.
- The building suffered from a leaky roof, but the extent of the damage was unknown to the lending institution and the tenants. In order to minimize the potential affect on value, Furrow Auction Company contacted two roofing contractors and provided written estimates as part of the property information package so that prospective bidders knew the true costs associated with the roof repair.
- The property was subject to a tax lien due to delinquent city and county taxes, which allowed the Tennessee Department of Revenue a right of redemption in which to claim the property at the sale price plus interest within 90 days of the closing. A detailed and thorough explanation of this process alleviated potential concerns and resulted in positive bidding on auction day.
- All pertinent property information was researched and disclosed including:
- Utility providers and history
- Tax payment amount and history
- Current zoning information and regulations
- Age of building
- Parking capacity
- Traffic count
- Type/Condition/Capacity of mechanical systems
- Ceiling heights
- Access information, number and types of doors
- Column spacing
- Type and extent of sprinkler system
The Bottom Line – Sale Day & Results – SOLD!