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Sellers Auction Information
Sellers FAQ's
Types of Auction Sellers
When we meet with a client or Seller we
review the specific dynamics of the property
or portfolios as well as the objectives of
the seller, we then make recommendations as
to the type of auction, marketing
requirements, methods bidding or other
disposition alternatives. We review with the
Seller’s, their lenders, partners and other
interested parties the goals, timing, market
conditions and property characteristics and
present options for the sale. One of the
first things we try to do is predict “who is
the buyer and how do we reach them?” While
evaluating how to best meet these goals, we
try to predict the buyer profile, where will
we find the buyer and structure a
disposition program that is comfortable for
the Seller and yet create the “illusion of a
bargain” motivating buyers to investigate
the property and participate in the sale.
Methods of Offering Properties at Auction
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Absolute or Without Reserve –
There is no minimum bid and the Seller is
committed to sell the property to the
highest bidder, regardless of price. We will
generally use a “Suggested Opening Bid” to
give an indication where the bidding will
start, but remember, in an auction it
doesn’t matter where the bidding starts,
only where it ends! While an Absolute sale
appears to be most risky, in reality it will
bring out more bidders and creates more
potential sale value for the seller.
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Minimum Bid or Disclosed Reserve –
A Minimum Bid is disclosed, committing the
seller to sell the property to the highest
bidder either at or over the published
Minimum Bid. As opposed to a traditional
sale, if a Minimum Bid strategy is used, the
Minimum Bid price should be set at a
discount to perceived current market value
in order to generate bidders to participate,
buyers are looking for a bargain and will
not participate in an auction or bid sale
unless a “perceived” bargain is projected,
even though in many case they will pay more
than they initially thought they would.
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With Reserve –
The seller reserves the right to accept or
reject the highest bid. This method is
perceived as being the safest, in reality it
can be the least effective in that the
buyers may not feel the Seller is “serious”
about selling the property will wait to see
if it sells at the auction and try to buy it
at a greater discount if it does not sell.
The goal will be to convey the seriousness
of the Seller they will sell the day of the
auction and create a “fear of loss” which
will motivate buyers to “act now”!
Types of Auctions
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Open Outcry Auctions –
Used where the buyers prefer to bid in
person and will buy the property exactly
under the terms of the offering. This
strategy is selected when price is the
primary consideration as to who buys the
property. This exciting method much
resembles a fine art or other collectable
auctions that you may have experienced in
person or on television. With the advent of
the internet, on-line bidders can be brought
in to participate in the open outcry
auctions.
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Sealed Bid Auctions –
In this type of auction bidders submit a bid
on an approved real estate sales contract
which is submitted with designated certified
earnest money funds. The seller selects the
winning bid which may be the highest price
or a buyer the Seller feels can best perform
and close the transaction. There is also the
option to narrow the list of bidders and go
back one or more bidders with requests for
“highest and best offers” This type of
auction is favored if there is a likelihood
that the seller is interested in considering
optional terms to purchase or there is more
than one property being offered and
assemblage can be determined by each bidder
to meet their individual needs. Sealed Bid
offerings are also effective when it is
perceived that the depth of the buying
universe is small and potential prices can
be highly divergent.
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On-Line Auctions –
On line auctions are simply another approach
to an open outcry auction. An online bidding
platform can be much like EBay or it can be
in conjunction with an open outcry auction.
On-line bidding is becoming more prevalent
and widens the buyer universe where bidders
can be located in any location and bid
competitively with all buyers, either in an
on-line only auction sale or in tandem with
live auction event.
Multi-par Auctions – This is a
process where large land parcels or
dissimilar portfolios can be bid in a
process “parts against the whole”.
Take for example a 500-acre land
site, the highway frontage may have more
value than the interior tracts.
Instead of looking for one solo
buyer, multiple buyers can buy based on
their usage requirements, resulting in
higher gross value to the seller.
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Simulcast Auctions –
An open outcry auction that is conducted in
two or more bidding locations simultaneously
allowing bidders in different cities or
different countries to bid for the same
property.
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Hybrid Auctions –
Hybrid Auctions simply include elements of
the various programs listed above providing
the seller with the optimum approach to
create additional bids for their property.
Our objective is to achieve the overall
objectives of our clients whether that is
price, terms, or timing.
Bidding Methods
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Traditional Bidding –
In a traditional auction, the auctioneer
begins by asking for an opening bid and then
the audience continues to escalate bids
until the highest bidder is determined.
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Dutch Auction Bidding –
In this method the auctioneer begins by
asking for an opening bid at a highly
elevated price, one they know is more than
the value of property and keeps moving down
until someone in the audience bids, the
auctioneer will escalate bids until the
highest bidder is determined. This is a
method most effective when the auctioneer
knows there is limited interest or few
buyers for the property and will generally
end the auction quickly.
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High Bidder’s Choice –
In this style of bidding, similar properties
are grouped on a display board next to the
auctioneer. Bidders then bid for the right
to select the property or unit of their
choice from the available inventory. The
highest bidder's choice is then removed and
a subsequent round of bidding begins with
the remaining properties. This style of
bidding is most commonly used on the sale of
new construction condominiums or townhomes
or with commercial properties of similar
value. The benefit of this type of format is
to create greater competition from all
buyers, vs. a unit by unit or sequential bid
format, with buyers not knowing if the
person next to them wants their desired unit
or property.
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Multi-Par Bidding –
Multi-Par Bidding is most commonly used on
the sale of large undeveloped land where
multiple parcels of land are offered. This
method allows the bidder to place bids for
various configurations of parcels based on
the bidder's desire to assemble the parcels.
Types of Properties Sold
Over the course of more than twenty five
years members of Paul A. Lynn & Associates,
LLC have successfully been involved in the
marketed and sale virtually any asset type
of real estate, in many U.S. states and
internationally including Canada, Mexico,
and the Caribbean. Major categories include:
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Residential –
New construction, condominiums (resort and
urban), Co-ops, town homes, single-family
homes, trophy homes, resort residences,
penthouses, historic mansions, luxury
estates, subdivision land, portfolios and
home sites:
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Commercial –
Multi-family apartments, office buildings,
corporate campuses, office parks, senior
housing, strip centers, malls, outparcels,
C-Stores, NNN single user properties,
leaseholds, subleases, restaurants, storage
facilities, boat slips, and all other types
of income properties. Properties can be
vacant or occupied:
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Industrial –
Factories, freight/transportation
facilities, grain elevators, warehouse
buildings, light industrial parks,
development land, environmentally
“challenged” properties:
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Special Purpose Properties –
Schools, Government buildings, hospitals,
churches, theaters, athletic facilities,
private islands, air rights, manufactured
home parks, parking garages, and marinas:
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Hospitality –
Limited service hotels, full service hotels,
bed-and-breakfasts, historic properties:
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Vacant Land & Acreage -
Development and investment land, raw
acreage, farm land, recreational property,
land leases, and timberland:
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Governmental Agencies/Housing Authorities
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As funding have been reduced from HUD and
other sources, many of these Governmental
and quasi-Governmental agencies are looking
to sell surplus or unused properties to: a)
Clean up portfolio b) Generate additional
funds to provide services for their
constituents c) Put tax exempt properties
back into the private sector d) Reduce
blight in urban area and rebuild
neighborhoods.
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Note Sales – Bank note sales, individual or portfolio of notes
Bankruptcy or Partnership Dissolution –
Auctions are excellent methods of bringing
transparency to the sale of assets for the
dissolution of a partnership or the sale of
assets in a bankruptcy situation for the
benefit of creditors who prefer not to take
title to the asset but would rather sell it
immediately at market value without assuming
the liability of being part of the chain of
title.
Trust and Estate Sales –
The duties of fiduciary or trustee include
the following in the sale of an asset:
Making the asset available to all who might
have an interest in buying the asset,
transparency of the transaction, having all
bidders bid under the same terms and
conditions. Many times in an estate
situation there are tax consequences or
different beneficiaries have divergent
objectives in dissolution of the estate,
sale of the real estate at auction is the
solution for trustees to these important
issues.
Divorce and Family Partnership Dissolution –
Unfortunately families go through trauma
today that result in marital divorces or
requirements for family businesses that have
been around for years, to find ways to
monetize the assets of the family or the
business. Due to the potential acrimony and
time considerations, auctions are an
excellent method of bringing transparency to
the sale of the assets and in some case can
allow certain family members that want to
retain the property while in turn finding
the “true market value” in order to payoff
other family members.
Non-Profit/Charity Donations –
Individuals today want to make donations to
favored charities or other non-profit
organizations and have appreciated real
estate they can donate in lieu of making a
cash contribution., In most cases the
non-profit organization is not set up to
manage real property and wants to monetize
the donation as quickly as possible. Through
the use of an auction the property can be
sold and turned into dollars, with the
contract or the title transferred to the
non-profit where the donor can avoid
complicated tax planning issues to the
benefit of the receiving entity.
The IRS requirements relating to a
Bargain Sale are a bit more complicated than
a traditional sale, particularly as it
relates to the valuation for the donor to be
able to use the deduction.
It is important to the 501c3 entity
and the donor to have good legal and
accounting assistance to avoid issues with
future audits and penalties.
Public/Governmental Entities –
In most state and public sector governmental
entities there are strict regulations and
statutes that require the entity to use some
form of competitive bidding method for
contracting and disposition of surplus
property, including real property. A
properly structured real estate auction
program can assist the public entity in
increasing exposure of the property and
maximizing the value of the real estate for
return of dollars to the taxpayers.
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Paul A. Lynn &
Associates, LLC |
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Real Estate and Personal
Property |
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Disposition Strategies - Solutions |
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Paul A. Lynn, CCIM - Principal |
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406 Coachman – Houston, TX 77024-6401 |
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Email:
paullynnccim@gmail.com |
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Auction Line: 832.598.8BID (8243) |
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Fax: 832.201.9886 |
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