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Seller's FAQ's
Q. How often do you hold your auctions?
Ans.
Our auctions are a function of obtaining
assignments from sellers. We do not have a set
time when to hold an auction event, but will
work with our sellers to determine the best time
to hold an auction. Our auction programs are
generally held 60 - 90 days after receiving the
commitment from the seller.
Q. Where do you hold your auctions?
Ans.
Generally we hold our auctions in hotel
ballrooms in close proximity to the property
being auctioned. If the property is viable, we
may hold an "on-site" auction. We do not hold
auctions under tents or in open areas, while we
can schedule an auction date we cannot control
the weather. Sometimes with commercial
properties or special purpose properties, not
easily accessed, we may hold the auction in a
major city with convenient airport access.
On-line only auctions are accessed
through a web site location.
Q. Are you limited in states or geographies for
properties to auction?
Ans.
No, members of the Paul A. Lynn & Associates
auction team and strategic partners have over
100 years combined experience in selling
properties in most of the U.S., Canada, Mexico
and the Caribbean. Through other professional
auction firms, our CCIM network and other
affiliate and associate organizations, we have
real estate and/or auctioneer's licenses in all
50 states and access to international markets.
We have the capacity to auction real estate over
a broad geographic area, offering technical
expertise and local knowledge. We have
relationships with other experts that offer
extensive experience in the marketing and sale
of all types of residential, commercial and
special purpose real estate.
Q. Do you auction personal property?
Ans.
Yes Paul
A. Lynn & Associates, LLC has over 30+ years of
Real Estate auction experience and generally see
ourselves as real estate brokers and marketing
experts that use auctions and accelerating
marketing to sell real estate. There are times
when some personal property may transfer with
the real estate, through a "Bill of Sale".
Over the
last few years we have developed extensive
relationships with other auctioneers, auction
professionals, and disposition experts that have
experience in all types of personal property
sales whether it is antiques in a home, fixtures
in a store, equipment in a factory, heavy
machinery and even collectable cars. One of our
strategic partners is a worldwide leader for
auctioning, buying, selling and/or brokering all
types of industrial machinery, equipment,
fixtures, rolling stock, whether a
company going through consolidation or Chapter
11 & Chapter 7 Bankruptcy.
Whether you want to sell equipment in a
plant or antiques in a trophy home, we can put
together a partnership and team with appropriate
auctioneers that can provide you the specialize
expertise necessary to expedite your disposition
requirements.
Q. What are the major benefits of an auction for
the seller?
Ans.
CONTROL! In an auction environment the seller
has the ability to control the offering,
structure of the deal, timing (setting auction
date as deadline), closing date, Title
Commitment, Purchase Agreement, financing (if
being offered), all while offering the property
on an "As-Is, Where-is" basis, and other aspects
of the sales dynamics. Buyers have the ability,
however, to control price, therefore it is
important to make the offering fair and
commercially competitive otherwise bidders will
not participate, or possibly lowball their bids.
Q. What are some of the differences between a
traditional brokerage sale and an auction sale?
Ans.
In a traditional sale the seller sets the price
and the buyer sets the terms. Generally the
buyer negotiates some period of time (30, 60, 90
or more days) to perform due diligence before
the contract goes "hard". Usually the buyer will
come back to the seller a couple of days before
the end of the "free look" period to try and
renegotiate terms or give the seller a
"haircut". Sometimes this process can be
extended indefinitely, freezing the property
with no action for 3, 6 or more months. In an
auction environment the seller sets the terms
and invites all interested buyers to determine
price based on those universal terms and
conditions. The buyers must perform all of their
due diligence prior to the auction and has no
opportunity for further due diligence after the
auction. The property in most cases is offered
on a "As-Is, Where-Is" basis. If the bid is
accepted by the Seller the earnest money goes
hard immediately and must be increase to 5% -
10% of the Contract price within 5 days of the
auction; the property will close in accordance
with the terms of the Purchase Contract, usually
14, 30 or 45 days after the auction.
Q. What is an Absolute auction?
Ans.
In an Absolute auction the property being
offered is sold to the high bidder, regardless
of price. While perceived as somewhat risky, in
reality in an Absolute auction more buyers will
participate, generating greater competition
toward a higher sales price. When buyers know
the Seller will sell the property they can
justify the time and expense associated with
participating and bidding at the auction. In
cases of a portfolio sale of multiple properties
we may offer a portion of the portfolio Absolute
and a portion With Reserve (see below).
Q. What is a Minimum Bid auction?
Ans.
In a Minimum Bid auction the property will be
offered subject to a Disclosed Minimum Bid. If
the Minimum Bid price is reached the property
will sell to the high bidder at or above the
Minimum Bid price. If the Minimum Bid price is
not reached the seller will have the right to
decide if they want to accept the bid, reject
the bid or try and negotiate with potential
buyers (who may or may not have been part of the
auction) to purchase the property under mutually
acceptable terms. Setting a Minimum Bid price
for an auction is an art, not a science. We
generally recommend our sellers set the Minimum
Bid price at 30% - 50% below their desired price
in order to encourage multiple buyers to
participate in the auction and allow for the
bidding to reach the desired level. The Minimum
Bid price needs to be low enough so that buyers
perceive the potential of a bargain and feel
comfortable that the price they ultimately pay
is "fair market" value.
Q. What does it mean when a property is offered
"Reserve - Subject to Seller's Acceptance"?
Ans.
This type of offering is known as a "Reserve"
offering, while it is the perception of most
Seller's this is the safest form of offering, in
reality in an auction environment a Reserve sale
tends to be the least effective method for
getting the property sold and closed. Buyers
perceive a "Reserve" auction in many cases being
more like a modified negotiated transaction and
will not spend the time and effort to perform
the due diligence if they feel the seller is not
really motivated to sell the property.
Q. What is the best method for offering the
property in an auction?
Ans.
As these questions are answered we can make recommendations to the seller as to the type of offering that will be most effective in accomplishing the seller's objectives. In some case, if multiple units are being offered (such as multiple condo units or multiple lots), we would make a recommendation to offer a portion of the units be offered either Absolute or with Minimum Bids, with the balance offered With Reserve. Every property and every Seller has different criteria and we will work with our Sellers to develop an offering strategy that is appropriate to the market and help the seller accomplish their objectives.
Q. What is Bidder's Choice bidding?
Ans.
Over the years we found that in offering similar
types of properties (condo units, lots or
commercial properties of comparable prices)
buyers have different criteria, features or
attributes that were important to them. It might
be height in the building, view, proximity to
amenities, geography or any other number of
other factors. We also observed in some cases
only a couple of buyers were interested in a
particular unit while multiple buyers were
interested in other units. As a result we
developed the process of Bidder's Choice bidding
where we will place on an availability board
anywhere from 2 to 10 or more similar properties
and the auction is conducted in multiple rounds
of bidding. The first high bidder will select
the property they want from the properties
presented on the offering board. After the first
property is chosen, another round of bidding is
conducted and the new high bidder gets their
choice from the remaining properties on the
board. In effect we are expanding the number of
bidders participating in each round of bidding
by allowing them to choose from ALL of the
available units being offered. This will
generally result in more active and aggressive
bidding and ultimately higher prices for the
seller then may be accomplished through the
process of sequential bidding (bidding
individual units in order).
Q. What is the difference between a
"Stand-Alone" auction and "Multi-Property"
auction?
Ans.
We work with sellers they may have a single
property or portfolio of properties they wish to
sell at auction. Additionally, a seller may have
an asset that is of relative low value they want
auctioned and cannot justify all of the
marketing costs associated with an auction
event. Where an asset or portfolio justifies the
required marketing budget necessary to hold the
auction, we will develop an auction program for
a single seller or asset; this is referred to as
a "Stand-Alone" auction. Alternatively we can
place multiple properties for different sellers
in a "Multi-owner, Multi-property" auction
program where all sellers share a portion of the
total auction marketing expenses into a regional
auction program, In a multi-property auction
properties may be dissimilar but all sellers are
able to share the costs of the auction for
advertising, marketing, brochures and auction
day expenses.
Q. What types of properties can be sold in an
auction?
Ans.
Throughout the years members of our auction team
and strategic partners have identified over 50+
different property types we have sold through
our auction programs. These include traditional
residential properties like; Single family
homes, trophy homes, condominiums (urban and
resort), co-ops, development lots subdivisions,
and many other types of residential properties:
Commercial properties: Retail, office,
industrial, hospitality, multi-family, single
tenant NNNs, properties with current income
(NOI) and vacant properties and sites: Land;
lots, subdivisions, farms, ranches, future
development sites: Special purpose properties;
Corporate campuses, medical buildings,
environmentally challenged properties,
governmental agencies (schools, jails, city
halls, surplus sites, right-of-ways, housing
authority sites), manufactured home communities,
dock-o- miniums, air rights, notes,
leaseholds. In
general, any type of property that can be
transferred through a buy-sell agreement can be
sold in one of our auction programs.
Q. What types of sellers use Paul A. Lynn &
Associates, LLC auction programs?
Ans.
Throughout the years members of our team have
represented all different types of Sellers. Some
of these include: Banks (and other types of
financial institutions); Insurance Companies;
Corporations; Private sellers; Home Builders;
REITs, Partnerships (general and limited);
Family Trusts; Family offices; Bankruptcy
Trustees and Courts; Probate Trustees;
Receivers; Special Service Providers;
Governmental and Quasi-governmental entities;
Housing Authorities; Chartable and other
non-profit organizations; in essence any type of
Seller or agent that has the authority to
contract and sell real estate.
Q. Are your auction programs all the same "one
size fits all"?
Ans.
No, we always look back on our experience from
past auctions and bring the "successful" parts
of those programs into new auctions programs, we
also try to learn and make each future auction
better. The ultimate goal is not to have an
auction but to sell the real estate for our
clients (the sellers) at the highest price, in
the quickest period of time. On a general basis
65% - 75% of our program is based on past
successful experiences and 25% - 35% of the
program is specifically customized to reflect
the requirements of the seller, property, timing
and current market dynamics.
Q. What type of formats do you use for your
auction programs?
Ans.
Depending on the property being sold and the
needs of the Sellers, we have been involved in
selling real estate in Live, open-outcry
auctions, Sealed Bid sales, on-line only
internet auctions and hybrids which may combine
portions of each. Depending on the property
being offered a portion of the property may be
sold in Sealed Bid formats, followed up by a
Live open-outcry Auction. If we find the
potential buyers are scattered over a large
geographic area, we may hold the live auction
with a direct internet feed that allows bidders
from anywhere in the world to be part of the
auction event. We can also set up phone bidders
and simulcast events, where auctions can take
place in multiple locations simultaneously. Over
the last few years, on-line only auctions have
become more prevalent, where we have found the
bidding competition to be as active as a live
auction event.
What of the strengths of an on-line
auction is that bidders can bid and be located
in any location throughout the country and the
world
Again, the type of forum and method of
offering is conditioned on how to create the
most competition for the property, resulting in
the best results for the seller.
Q. What are the costs to be part of an auction?
Ans.
Generally there are two basic costs for a seller
to auction their property(ies),
advertising/marketing expenses and sales
commission. Marketing expenses are a cost for
the seller and can be paid either prior to
commencement of the auction or at closing.
The purpose of the marketing fee is to
pay for the extensive and aggressive advertising
and marketing campaign that is intensively
conducted over a 4-6 week time period. This
marketing fee is used to pay for advertising,
public relations, brochures, the auction venue
and other associated expenses and a detailed
budget is presented to the seller for their
approval. The amount of the marketing fee is
contingent on a number of factors among which
include: timing, forum, property value, and type
of media required to reach potential buyers. On
a general basis the marketing expense will run
between 50 and 150 basis points of the value of
the property to be sold. After we have had an
opportunity to review the property or portfolio
being auctioned, we will prepare a special
report that will make specific recommendations
for the marketing of the property and provide a
detailed budget of the proposed marketing
budget.
Upon successful sale and
closing of a property a commission is paid based
on a percentage of the sales price, the
percentage rate of which is a negotiated fee
(See Buyer's Premium below). In essence the
overall transaction costs to the seller for
using the auction format will be comparable or
even less than a traditional brokerage
transaction.
Q. What is a Buyer's Premium?
Ans.
A number of years ago major art and antique
auction firms started using a Buyer's Premium
(BP) as a method to compensate the auctioneer
and as a method to transfer some or all of the
transaction costs of holding an auction to the
buyer. Over the past few years BPs have been
used in real estate auctions. A BP should be
perceived by the buyer more like a sales tax
than an impediment to their bid. In
active/aggressive bidding the buyers will not
consider the BP and it will be added to the high
bid price to determine the gross contract or
purchase price and can be part of any financing
program being offered. When a BP is collected it
will be used to provide all or part of the
commission compensation provided to Paul A. Lynn
& Associates, LLC and any other associate
members of the team for their commission and/or
compensation. The payments may also be set up
with a part of the compensation coming from a
commission charged to the Seller and a portion
from the BP.
The commission rate and amount of the BP
is negotiable and will be part of the discussion
outlined in the Special Report and proposal.
Q. Where do you advertise and how do you find
buyers?
Ans.
When looking a property to auction the first
question we ask ourselves is "Who is our buyer
and how do we get to them"? Depending on the
buyer we are trying to attract we will decide if
the marketing needs to be local, regional,
national or international in scope. Over the
last few years the methods of getting to buyers
has changed. We use Public Relations methods to
get media sources to pick up stories in
newspapers or on TV stations. In recent years
primary methods were Wall Street Journal, local
newspapers, business journals and direct mail.
While these are still primary methods of
advertising and promotion, we are also using new
media such as email blasts, (RedNews, Property
Blast, etc.) banner ads on on-line real estate
publications (Globe St. NREI, Bisnow, ICSC,
etc.), CIEs (LoopNet, CoStar,
Catalyst, local and other CIEs) targeted
radio and cable services, LinkedIn, Facebook,
Zillow, Twitter, etc. We are always looking for
new and effective methods to get to potential
buyers, in a cost effective and time efficient
manner.
Q. Do you work with other brokers?
Ans.
We work with and cooperate with other brokers on
many levels. Most readily we will work with a
Buyer Broker that is representing the buyer in
one of our auctions. The commission rate and
registration process is specifically stated in
our auction brochures and we highly encourage
buyers to have representation in that our
fiduciary and contractual relationship is with
our Seller/client. In that real estate auctions
is a very specialized form of real estate
marketing, we work with other brokers looking
for them to provide us referrals of their
clients, listings and relationships and will
share with them a portion of our
fees/commissions earned and received. There are
other areas where we can work with other brokers
and provide compensation and fees, during the
marketing campaign and auction day event.
Q. What is the term of your listing/auction
agreement?
Ans.
One of the misperceptions of marketing real
estate in an auction is that auction day is a
"one day event". In reality, we are selling
valuable real estate and using the accelerated
(auction) process to expedite the sale. As
compared to traditional real estate marketing,
the auction process will give the seller a true
value "read" of the market in 90-120 days.
However, the auction process is really a 4-6
month process: the initial 60-90 days is spent
advertising and marketing the property, getting
buyers informed about the property and getting
them to participate in the auction and bid. If
the property can be sold on auction day, then
closing can take place 14-45 days thereafter.
Sometimes the auction is used to identify
potential buyers, if the property was offered
subject to a minimum bid or on a reserve basis,
it might be necessary to negotiate with
interested buyers to reach a mutually acceptable
agreement on a post auction basis. Like a more
traditional brokerage listings, our relationship
with the seller and the property is usually 6
months (plus or minus).
Q. How is financing handled in your auctions?
Ans.
First and foremost we want our auctions to NOT
be subject to any Buyer financing contingencies!
The last few years, however, have presented
probably one of the most unusual financing
dynamics in modern history. Mortgage rates have
been at a plateau of historic lows, hovering in
the 4% - 5% +/- levels, however, access to
mortgages from traditional mortgage resources
(banks and traditional lenders) are sometimes
more complicated. Real estate sold in an auction
is still selling real estate and leverage or a
mortgage is a traditional part of the equation.
In order to maximize the potential sale prices
in an auction it is important to offer or have
some type of financing component or resources in
the auction sale. The more attractive the
financing terms that can be offered, the larger
the buying universe and bidding competition will
be, resulting in higher prices. The three
primary types of financing we are using in our
auctions today (depending on property type) are:
Third party financing from a bank or other type
of traditional lender; Assumption of existing
loan, if the assumption requirements are fairly
straight forward and not overly restrictive;
Seller financing, usually with an above market
interest rate and short term call (3-5 years).
We may also work with SBA Lenders, hard money
lenders or other mortgage sources that buyers
can contact prior to the auction so they know
what their buying capacity may be. The type and
structure of any type of financing offered in
the auction will be advertised and stated
clearly during the auction marketing campaign.
Q. Do all your properties sell in the auction?
Ans.
As always, that depends. If the property is
offered on an Absolute basis, then it is
considered sold when the hammer comes down!
However, many sellers use minimum bid or reserve
offerings for all or part of their portfolio in
an auction environment. The ideal situation has
the property marketed, auction held, bid price
accepted and the property closed 14-45 days
later. If the auction price is not accepted at
the auction then it is important to look at why
it did not sell. Was it price, financing,
zoning, real estate taxes, structure of the
offering, use/function or any other number of
reasons? Alternatively, we may have been
offering a portfolio (such as multiple condo
units or lots) where a portion of the portfolio
was sold and we have a few residual units
remaining. After analyzing the situation and
circumstances, including discussion with buyers
that did show an interest in the property but
did not bid, we will work with the seller to
develop a post auction marketing strategy to
sell the property. This is when our expertise as
real estate brokers comes into play, it is
important to realize we see ourselves as real
estate brokers that use the auction to expedite
the sale of the real estate; the ultimate goal
is to SELL REAL ESTATE, and this may take place
before, at or after the auction.
Potential Results of an auction program:
·
A+ Result: Multiple buyers participate in the auction, bid the
property to an acceptable price, both parties
sign the Purchase Agreement and the property
closes 30-45 days later (45% - 55% probability)
·
B Result: Multiple
prospects explore the property may or may not
participate in the
auction and we get a bid but at a price not
acceptable to the seller (35%+ probability)
·
C Result: There is
limited to no interest in the property,
indicating no buyer interest at this time, under
any conditions (15% - 20% probability)
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