Franchises Use Auctions to Sell and Buy Excess Real Estate and Surplus Property

Going, Going, Gone!

Auctions are used to sell everything from fine art to used cars and these days it is increasingly popular method for selling commercial properties and liquidating personal property or buying. Companies are taking advantage of the Great Recession. 

Auctions are an efficient means for franchise companies to get rid of surplus real estate inventory and raise capital in a market where financing remains tight. Auctions are more prevalent now with a downturn in the economy but they are a viable choice in any economy. An Auction brings a willing buyer and seller together in a structured time-defined format. 

An Auction provides a quick way for a company to sell properties it is no longer using, get rid of costs associated with carrying the real estate on its books, and move on to some more positive uses for capital. 

Flight of Capital 
Another reason why auctions are growing in popularity is because the banking crisis has stymied the flow of capital for many borrowers. Casualties of that capital crunch is that commercial real estate sales have dropped drastically.

Fewer properties are trading hands and the cost of financing is higher, real estate sellers and buyers are both confused as to what sales prices should be in the current market. 

One way to bridge that pricing is through an auction. An Auction is an excellent way for values to be determined. 

More auctions are "live" or outcry auctions because of the pricing uncertainty that exists in the market. Sellers want a fair price for their property and buyers don't want to feel foolish and overpay. The live auction is a good way to establish realistic price, because everyone can see and hear the other bid. 

There other types of auction methods, such as sealed bids, modified sealed bid and online auctions. The sealed bid is closer to the traditional sale because the Seller has more flexibility to accept, reject or counter the best bid. Sealed bids are often used in the sale of high profile buildings. 

As a result many Sellers opt for a modified sealed bid auction. In this method, terms are set so bidders in the top percentage range are offered the opportunity to bid in a live auction format. The sealed bid is used to qualify the bidders for the "final round". 

The pros and cons 
The auctions hold advantages for both sellers and buyers. Some people think of auctions as a last resort. They are not, Roesch says. The mystique of the auction attracts players that might not otherwise become involved. 

From a seller's perspective, an auction may create a bidding environment that may fetch a higher price. The seller can set up a "reserve" so they can reject bids that don't meet a minimum price. An auction can speed the process by posting a specific time line for due diligence, auciton, and closing.

There is generally a 30 to 45 day due diligence period before the auction or date that sealed bids are due. In most cases once a bid is accepted the sale of the property is completed within 30 days. Open auction bids are typically all-cash, non-contingency offers. 

There is always the potential for the buyer to get a bargain. 

We will see more and more retailers of all sorts use auctions to sell excess real estate. Walmart for example uses auctions to ensure timely sales of out lots in front of existing stores. Often times it is not the core business of a retailer to babysit vacant real estate that is not part of their core business. 

Father Time Auctioneers of St. Louis are NAA Accredited Auctioneers of Real Estate 

If you are considering selling your real estate property, contact us! We'll discuss your property and your needs and do a preliminary assessment to determine if your property is a good candidate for a Father Time Auction.