A — July 27 - August 16, 2012 — Mid Atlantic Real Estate Journal www.marejournal.com M id A tlantic R eal E state J ournal A uctions
By Richard G. Warner, Warner Real Estate & Auction Company When does an auction make sense?
E
ach year, auctions are used to sell billions of dol- lars of real estate. Once
the NationalAuctioneersAsso- ciation industry research sur- vey compiled by Morpace, Inc.
2003-2008. Characteristically, an auc- tion helps define the mar-
property’s market is small, an auction can accelerate the sales process. Auctions are also advan- tageous when the property owner wants to control the structure of the sale. In an auction, the seller establishes the specific terms of the sale, and the market bids based on those terms. The auction firm codifies all the financial, legal, and other materials in advance, including the con- tract for sale the successful bidder must sign. This im- portant aspect of an auction is comforting, especially to
owners who have experienced cancelled sales due to contin- gency-riddled contracts. Most auction transactions are made on an “as is, where is” basis and require potential buyers to complete their due diligence prior to the auction. Both the positives and the negatives of the property must be dis- closed. There are scheduled on-site inspection times when all interested parties can pre- view the property. The auction or bid date sets a deadline by which the buyers must act if they wish to purchase the property. Auctions also allow the seller to effectuate a “time certain” sale. This is a key advantage for owners who want to defer taxes by selling a property and buying a replacement property in an IRS Code Section 1031 exchange. Additionally, own- ers seeking to sell properties before the end of the year to offset gains and losses find controlling the time line of the transaction extremely important. Owners of properties with negative cash flows can also benefit from a “time certain” sale, especially if they are un- able to retrieve carrying costs incurred during a protracted marketing campaign by selling at a higher price. Most auc- tions take place within 45-60 days, with closings ranging from 30-45 days thereafter. The speed of these sales can translate into huge savings for the owner. For example, a property has a negative cash flow of $10,000 per month and based on the absorption rate will take 12 to 18 months to sell. By utilizing an auction, the owner can afford to dis- count the sales price between $120,000 and $180,000 and still come out ahead. An ex- ample in the current market is a condominium developer who accomplishes an entire sell-out in 75 days thereby eliminating his carrying costs and the uncertainty of future market conditions. Owners and brokers now regard auctions as a cost effec- tive tool to accelerate the sales process and control the terms of the sale. Richard Warner is the president and founder of Warner Real Estate & Auc- tion Company, Inc. and a licensed real estate broker inNewJersey andPennsyl- vania. n
thought use- ful only for disposing of problem and hard-to-sell properties, auctions are gaining pop- u l a r i t y as an effective sales tool for all types of real estate.
Owners and brokers now regard auctions as a cost effective tool to accelerate the sales process and control the terms of the sale.
Richard Warner
determined the sales growth for auctions of commercial and industrial, residential and land increased 31.3%, 47.7% and 36.8% respectively from
ket for hard-to-value, unique properties. The competitive bidding technique reaps pre- mium sales prices for such properties. In addition, if the
Current market activity shows that auctions are on the rise nationwide. For instance,
4 AUCTIONS REAL ESTATE & EQUIP. DOSWELL, VA XTERIORS CONCRETE PAVERMANUFACTURING FACILITY Located Between Richmond, VA &Washington D.C. – 0.4± Miles o I-95
2007
ENTIRE OPERATION!
15,000± SF Concrete Paver Mfg. Plant
FORECLOSURE / LIQUIDATION
3,000± SF O ce Building
1 Auction #1 Consists of 3 O erings (A-C) to be Sold Separately & As An Entirety: TURN-KEY Concrete Paver Manufacturing Facility O I-95 ON SITE SALE: AUG. 2 2 PM 16401 International Street, Doswell, VA 23047 A 27± AC including 15,000± SF Concrete Paver Mfg. Plant, 3,000± SF O ce Building B 2007 AME PFS-1300 “Smart-Line” Stationary Concrete Paver Plant C 2007 Standley Twin-Mixer Batch Plant (1500 & 500 Liter)
VEHICLES & MOBILE EQUIP Bids Close: Thurs, Aug. 9 beginning @Noon OFFICE FURNITURE FIXTURES & EQUIP Bids Close: Thurs, Aug. 9 beginning @ 1 PM CONCRETEPAVERPLANTACC&INVENTORY Bids Close: Thurs, Aug. 9 beginning @ 2 PM 4 3 2 Personal Property & Support Equip – ONLINE ONLY: Bid Fri, 8/3 thru Thurs, 8/9
Real Estate Tour & Equipment Inspection by Appointment Only
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