John Haney, General Manager, Higgenbotham Auctioneers, indicates that he is seeing more bank-owned properties being offered for auction. In fact, they’ve had more activity with bank-owned properties in the past 90 days than they’ve seen over the last few years.

They are seeing this nationwide, and not just in Florida where Higgenbotham is headquartered. However, in Florida, they are marketing a portfolio of 75 properties for a Florida-based bank to close by year end.

Haney is also seeing an uptick in overall activity at the auction sales. He attributes this to seller and buyer expectations becoming more aligned. In the past few years, there were few or no buyers for some properties and that is changing. During a recent auction for Wal-Mart Realty, there were between 8-10 active bidders for each property. About a year ago there may have been less than half as many bidders. In ballroom sales, where a year ago a crowd might consist of approximately 50 bidders, Higgenbotham now gets about 150 bidders. They are seeing more faces and good bidders. Sellers have finally become more realistic and have accepted current market values. They are no longer hoping for the prices they saw in 2007.

Haney indicates that sellers who also offer financing are likely to have a larger number of more serious bidders for their property(ies). He mentioned a large auction in Georgia that they are currently marketing. The seller is offering no-interest financing with a five year balloon. Buyers need to have a 20% down payment.

What does Haney forecast for the year ahead? He believes the trend that has started during the later part of 2010 will continue. He suggests that we’ll see an increase in the amount of actual transactions. Likely sellers will include sales from bankruptcy courts, banks and also from corporations that want to take advantage of the time value of money. They’re looking to take the money now and use it elsewhere in their operations. Haney counsels sellers to sell now if they have an alternative investment in mind – “what’s the difference in selling in November 2010 for $1M or waiting and selling in March 2011 for $1M? Take advantage of the time value of money and let your money work for you.”

 -Patricia Faulkner

Patricia Faulkner is a Senior Vice President and auction specialist on NAI Global’s Special Asset Solutions team.

Many times agents have single properties that don’t fit (because of geography or property type) into a multi-property sealed bid PowerSale or are too small for an outcry auction startup. At times, the property has been exposed to the market and while interest has been significant from potential buyers, an urgency to place a bid has not been shown. An online auction is a great way to bring together all “interested parties” and finalize a sale.

I reached out to Joe Tang, CEO at AuctionPoint, to ask him a few questions about AuctionPoint and find out a little more about the current climate for online auctions.

Patricia: How has your activity been in 2010 compared to 2009?

Joe: Activity has increased dramatically in 2010, as agents become more aware of the benefits of AuctionPoint in moving properties quickly and efficiently at market price.

Patricia: Are sales up?

Joe:  Significantly. 

Patricia: Are prices up?

Joe: We haven’t seen a major shift in pricing.  As you know, a big opportunity in today’s market is educating sellers on realistic pricing expectations for their assets.

Patricia: What types of properties garner the most interest amongst buyers?

Joe: Rather than a specific property type, we’re finding that any property with a motivated seller willing to set an aggressive starting bid and invest in marketing generates significant interest.

Patricia: On average, how long have properties been exposed to the market before a seller and agent go the route of an online auction?

Joe: That varies – the decision to auction is primarily based on how motivated the seller is to move the asset quickly and at fair market value.

Patricia: What is the advantage for agents of using AuctionPoint versus other companies offering similar technology and service?

Joe: Bottom line: agents keep their full commission.  In addition, AuctionPoint delivers a completely customized, property-specific online auction website under the agent’s name and brand, a dedicated auction advisory team and a monthly marketing event that delivers 1.8 million impressions to supplement the agent’s marketing program.

Patricia: What do you think the next year will mean for AuctionPoint and online auction platforms available to real estate agents?

Joe: The use of online auctions will continue to grow as top-performing agents are now relying on them to sell all types of assets quickly and efficiently.

-Patricia Faulkner

Patricia Faulkner is a Senior Vice President and auction specialist on NAI Global’s Special Asset Solutions team.

What follows is a straight forward guide to aligning with a partner and getting started with a sale to achieve maximum exposure and the highest possible return for a seller.

Pricing

Has the seller reviewed a current Broker Price Opinion? Sellers often look at an accelerated marketing program as a way to test the market. How wrong! Review a current property evaluation survey completed by a local advisor who will present solid facts and a current financial analysis. From the findings presented, determine whether the property should be sold absolute or with a reserve price. Sellers may wish to discuss the analysis with your lender should the value far below your debt balance. Maximum value can be diminished if reserves are set too high in an accelerated marketing environment.  Buyers are aware when sellers have set unrealistic prices. They sense that the seller is unmotivated and do not take the sale seriously.

Project Team

Ask firms you are considering to provide a written proposal.  The firm and its team must be prepared to meet a seller’s goals!  No matter how persuasive their references or presentation appear, chemistry and synergy are essential.  To insure a coordinated collaborative environment, request a single source full time project manager, both knowledgeable and responsible for all functions and communication.  Ask them about their reporting system and the frequency of updates during the sale. When meeting the project leader, request names, backgrounds and responsibilities of each team member.  The team must demonstrate that they have the experience with similar sales and a solid plan to take your sale from start to finish within the timeline set. Consider firms that have a verifiable track record of past and recent sales of similar assets.  Generic references from non-related industries should not complete your vendor selection due diligence.  

Marketing Plan

Accelerated marketing provides a highly targeted marketing campaign to broaden the exposure of the asset. Marketing dollars from all properties in the sale are leveraged to create a larger, more robust marketing budget. Before commencing any project, have an agreement outlining the responsibility of the sale advisor to implement the plan.  Valuable time and breakdowns in critical function occur when either party lacks clarity on each other’s role from concept to completion.  There are dozens of functions and variables to be addressed. Ask for a detailed marketing plan including advertising and media sources and regularity of placements. A marketing plan should include details on property signs, brochures, print media, direct mail, email, telemarketing, electronic and social media, public relations and property due diligence packages. If an outcry auction is the selected method of sale, details on auction day sales coordination and staffing must be addressed.

Executing the Sale

Maximum asset value is derived from the right strategy and flawless execution.  Sellers should know their options up front and be prepared to make decisions in an “accelerated” fashion. Each offering is unique, and one seller’s strategy may not work for the next with the identical assets.  Plan together, stay on course and trust your sale advisor.  Once the selection has been made and the team strategy tactics and scope of services begin, it is critical to maintain trust and stay the course.  If the decision agreed upon was a date-certain sealed bid sale after sixty days market penetration, stay the course. Sellers may receive pre-emptive bids from buyers prior to the date of sale. If the sale advisor stresses the asset is important to the offering and interest has been exceptionally high, rely on their advice.  If an advisor reacts to real time changing market conditions and recommends fast sales or changing the asset stratification, allow their guidance.

Remember, they are working in your best interest and want to achieve optimal asset value!

-Patricia Faulkner

Patricia Faulkner is a Senior Vice President and auction specialist on NAI Global’s Special Asset Solutions team.

The results were good but they didn’t surprise me. All five properties sold during less than 25 minutes of active bidding, with three going to the same bidder. There were about 60 active bidders in a room with more than 200 people including brokers, reporters and curious spectators. Prices were good with some cap rates actually surprising.

Auctions of income producing properties, multifamily or otherwise, resulted in sales last year; they are appealing this year and likely will continue to be in the future. (NAI Global Chief Economist Dr. Peter Linneman cites insufficient inventory to meet future demand for multifamily.) The properties buyers now seem to finally show an interest in are vacant buildings and land. I’m finding that both sellers and buyers are no longer afraid of the market.

I spoke to a regional retail developer yesterday who has an appetite for vacant retail buildings. For some sites they have tenants in hand, for others they are banking on future land value only. They are finding good deals at auction and paying 25 to 40 cents on the dollar. Some of the top U.S. homebuilders also reported auction purchases in Q4 2009 and into this year but their appetite is not for raw land; rather they want approved and improved lots that will allow them to build the moment a local market shows positive signs.

John Haney, General Manager of Higgenbotham Auctioneers International, is also seeing some increased activity. “Commercial prices are low, and in some markets may adjust even lower, but in six months to a year, financing will likely become more available and prices will begin to readjust. This year will present incredible opportunities for cash buyers who know the local markets. Also, sellers who can offer owner financing to buyers will likely see higher sales activity than those who can’t. Owner financing is certainly one of our top marketing tools this year.”

-Patricia Faulkner

Patricia Faulkner is a Senior Vice President and auction specialist on NAI Global’s Special Asset Solutions team.