About a month ago our auction group was hired by a local bankruptcy trustee to sell a residential property at auction. The lender objected to the offering for a number of reasons, but basically they didn't want the property offered absolute and regardless of price.
After receiveing the objection, the trustee asked me to testify in bankruptcy court in Columbus Ohio regarding the benefits of utilizing absolute auctions vs. reserve auctions. This as an opportunity to get a bankruptcy court ruling that auctions are good and absolute auctions are even better.
Since the impact of the decision would carry so much weight in future cases, both the trustee and I prepared diligently spending hours researching data, developing a spreadsheet showing holding costs, etc. The whole 9 yards.
So we show up at the hearing, spend 2 minutes with the banks attorney and next thing I know the objection is withdrawn. Long and short of it is that we win. No hearing. No decision.
I love winning, but would have really loved making the argument and being able to say that the United States Bankruptcy Court in the Southern District of Ohio believes that absolute auctions are better than reserve auctions.
Oh, the answer to the question? Basically, reserve auctions don't offer the prospect of a real deal and absolute auctions bring out the greed in people. The greed drives people to show up at a sale. The more people, the more excitement and the more bidding.
That's the short version anyhow.
Do you have questions about distressed assets, receivership or bankruptcy sales, auctions? Email me at rfk@gryphonusa.com and I'll try to answer it in an upcoming post.
Richard F. Kruse is the President of Columbus, Ohio based Gryphon USA, Ltd. (www.gryphonusa.com). The Gryphon Organization includes Gryphon Asset Management providing receivership and consulting services in the distressed marketplace, United Country Gryphon Realty & Auction Group (www.ucohiorealty.com & www.ucohioauctions.com) providing real estate brokerage and auction services throughout Ohio and OnlineAuctionUSA.com (www.onlineauctionusa.com) providing commercial asset liquidations from the Midwest to East Coast.
United Country Gryphon Realty & Auction Career Opportunities Available. Call 614-885-0020 x 17
Most reserver auctions that I see here are simply advertising gimmicks by real estate companies. The sellers are sold that "auctions are magic" and you'll get more than list price.
Of course, fee folks show up and fewer bid and never as much as the reserve.
Bank auctions are, of course, different.
Rich,
I think the bigger point is to hire the best help available and take their advice!
Well done! Performance out weighs a Judaical ruling any day! People don't necessarily believe or even hear about court decisions.
Bill
Auctions are becoming more popular in West Michigan. However, there's not a lot of education and many agents don't really know much about them. They can be a very effective way to move property and I think that we will need to use them more aggressively to get rid of the inventory of foreclosed homes.