Marketing Real Estate at Auction

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Marketing Real Estate at Auction

• Edward D. Durnil, CAI, CES
• Tranzon Asset Advisors
• Hosted by the Kentucky Auctioneers Association

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Overview of Real Estate Auctions

• Who are the Sellers and How do we find them?
• What type Property sells at Auction?
• When is the ideal time to sell?
• How best to market Real Estate for Auction?
• Setting the Stage for Success Property
  Preparation, Information Packages, Inspections
  Financing
• Closing the Deal Successful Settlement of Real
  Estate Auctions
• Legal Considerations when selling Real Estate at
  Auction

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Sellers Who are They?

• Types of Sellers
• Private Individuals, Estates, Closely Held
  Corporations
• Lenders-Local/Regional/National
• Corporate Sellers
• Accountants Attorney Prospects
• Real Estate Brokers
• Nursing Assisted Living Facilities
• Farm Service Organizations
• Real Estate Developers Builders
• Other - Discussion

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Sellers Where to Find Them

• Successful Prospecting
• Estate Sales
• Target Estate Attorneys Accountants
• Estate and Financial Planners
• Lenders- FDIC McFadden Directory
• Determine the Target Market Local vs Regional
  Banks
• Learn the terminology REO, Book Value,
  Appraisal Write Down, Non-Accrual vs Accrual
• Corporate Sellers
• Real Estate Department Corporate Investment
  Office
• Real Estate Brokers
• Residential and Commercial

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Sellers Where to Find Them

• Successful Prospecting
• Nursing Assisted Living Facilities
• Director/Management
• Farm Service Organizations
• Farm Credit workout sales
• Agriculture Related Businesses Create
  Relationships to be Top of Mind
• Bankruptcy Insolvency Professionals
• Amercian Bankruptcy Institute NAA Discount
• Turnaround Management Association
• Real Estate Developers Builders
• Other?

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Sellers-Prospecting

• Cold Calling Research Techniques - Online
• Local Service Clubs Rotary, Optimist, etc.
• Target local attorneys CPAs who service
  Estate Planning, Bank Counsel
• Networking and Patience are Key to Successful
  Prospecting
• Ask to Attend and Present at Realtor Events
• Become the Resource for Your Community
• Letter Campaign
• Buffalo Nickel OREO Starlight Mints
• Provide Information Short Simple
• Repetition of Campaign One and Done will not
  work Top of Mind Critical for Success

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Seller Auction SuccessThe winning formula
for the times

• Real Estate Auction Advantages
• Speed of the Transaction vs Listed Sale
• Reduction in Ownership Costs-Interest, Taxes,
  Insurance, Liability, Utilities, Property Care,
  etc.
• Non-Contingent Sale Pre-qualified bidders
• Seller Determines the Terms of Sale
• Seller can control pricing Absolute vs Reserve
  or Published Minimum
• Increased Exposure and Visibility to Market
• Price is Set by Competitive Bidding
• Concrete Plans can be made for the Future

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Real Estate Auction Property Classification

• Residential Real Estate
• Single Family Investment, Luxury, Vacation,
  Condominium
• Multi-Family 1-4 Family, Over 4 Family,
  Apartment Communities
• Commercial Real Estate
• Retail Shopping Centers, Free-Standing,
  In-Line, Big Box, Neighborhood
• Office Low Rise, High Rise, Condo,
  Free-Standing, Medical Specialty
• Restaurants Fast Food, Dine-in, Event Center
  Catering
• Hospitality Hotel/Motel, Convenience Store
• Other Self Storage, Car Wash, Auto Dealership
• Industrial Real Estate
• Manufacturing Light Manufacturing, Heavy
  Manufacturing
• Warehouse Logistics, Terminal, Climate
  Controlled Freezer/Cold Storage
• Special Purpose Real Estate
• Entertainment/Recreation Oriented Gym, Golf
  Course, Educational
• Land Agriculture Real Estate
• Agricultural Use , Timber, Livestock Recreation
• Development Commercial, Industrial or
  Residential

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Timing is Everything

• Tailoring the Sale to the buyer
• Commercial Auctions tend to Sell Best during
  business hours on business days
• Residential Luxury RE can be sold during the week
  or weekend evening sale
• Land Auctions should work for the audience
• Agriculture Lots weekend or evening sale
• Commercial or Industrial - weekday

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Choosing the Best Type of Real Estate Auction

1. Live On-Site
2. Live Ballroom or Meeting Room
3. Sealed Bid
4. Online Auction
5. Hybrid Auction Sealed Bid to Live or Online

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Best Auction Method

• Live On-Site

• Ballroom or Meeting Room

• Use when there is high interest
• Low Chance of Controversy
• Neighboring Owner doesnt want sale to occur
• Family members in disagreement
• Clear Ability to Maximize Value

• Use to avoid Weather issues
• Multiple Properties in different locations
• Create added interest by selling same type assets
  reduce risk of losing buyers vs onsite sale of
  multiple properties

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Best Auction Method

• Sealed Bid

• Online Real Estate Auction

• Seller desires Private Sale
• Best to use if there is a potentially small buyer
  group
• Specialized Asset
• Refinery
• Multi-Million Dollar Residential
• Multiple Oil/Gas Leases
• Other - Discussion

• Virtually All Asset Types sold this way
• Lowers cost of Sale very little staffing needed
• Creates Efficiencies for Buyer No Travel Costs,
  Ease of Bidding
• NOTE Explain bidding process and procedures very
  exactly Engage Counsel

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Best Auction Method

• Hybrid Sealed Bid
• Allows for better Client control of process
• Sealed Bid first qualifies buyers Bid is
  usually accompanied with certified funds deposit
• Second Round of bidding (live or online)
  maximizes value for client
• Seller could accept high sealed bid if it is
  significantly higher than others
• Works exceptionally well for unique assets

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Marketing for Success
Marketing for an Auction Event Best Practices 1.
Creating a comprehensive blueprint that will
bring qualified a qualified buyer pool to your
next auction! 2. Budgeting for the broadest
audience penetration. 3. Executing for Success
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Create Your Plan

• Effective Marketing is Planned
• Developing a Budget Rule of Thumb 1-2 of
  Property Value
• Print - Local Newspapers, Regional Newspapers,
  Targeted Publications
• Internet Marketing Interactive Website Usage
  Information Package Downloadable
• Asset Specific Website Postings Loopnet,
  CoStar, PropertyAuction.com, LandandFarm.com
• Signage Professionally Prepared
• Detailed Information Packages
• E-Mail Internally developed lists vs. purchased
  lists
• Warning Spam!

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Planning Timing

• Signage 4 to 5 weeks in advance
• Newsprint Commercial 4-5 weeks (assuming three
  runs)
• Residential 3-4 weeks prior (assuming three
  runs) same for Agriculture Land
• Internet Postings 5 weeks prior to event
• Email Three separate blasts plus two reminders
  before the auction (1 4 days before auction)

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Budgeting for RE Auctions

• Budgeting

• Developing the Media Mix

• Real Estate Auctions Require extensive marketing
• Budgets should be both local and regional
  depending on the asset
• National Advertising
• Publications WSJ Barrons
• Email
• Webpostings
• Social Media Facebook, LinkedIn, Twitter

• Newsprint 40 minimum 60 maximum
• Internet 20 to 25
• Signs 5
• Email 15 - 20
• Social Media 3 or less
• Information Packages 5 -10
• Brochures 10-15
• Administration 5 to 10

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Bringing it Together

• Execution of the Plan
• Design of Marketing Newsprint Ads
• a. Simple, Clean Design
• b. Placement of Ads Odd Page, lower right
  placement is best
• c. Run times should be weekly at minimum
• d. Display with Color where possible
• e. Photos of the property is essential along with
  brief descriptions with plat if necessary
• f. Always display website for more information
  great tool to let prospective buyers obtain more
  information

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Bringing it Together

• Execution of the Plan
• Brochure Webpage Design
• Similar to Newsprint but with more content
• More Photos
• Detailed Survey/Plat
• Property Information Package on Website with
  Title, Environmental Report, Timber Survey,
  Property Condition Report

Provide All Legally Required Information in
Marketing Auctioneers Name, Buyers Premium,
etc.
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Electronic Marketing Low CostHigh Impact

• Email
• Internal Lists collect local parties email
  address build list internally always ask for
  referrals
• B to B Business Lists created from Realtor
  groups, Lenders, Community Groups much more lax
  spam rules for business email vs personal
• External Lists Can be purchased Brokers,
  Principles, Investment Groups

• Internet Marketing
• Low Cost for the amount of impact
• Post to KAA, NAA, Asset Specific Sites
• Commercial Loopnet, Costar, PropertyLine
• Residential MLS if board member
• Land LandAuction.com, FarmandLand.com, etc.

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Buyer Tracking Seller Follow-up

• Always set up website to require Information
  Package downloads to obtain prospective bidder
  information
• Contact bidders within 24 hours of download or
  call
• Successful Real Estate Auctions require 5
  contacts with prospective bidders email or
  phone (at least 2 contacts should be via
  telephone or in person)
• Ask for feedback does it meet their needs, have
  they reviewed the package, where are they
  obtaining financing, when would they

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Seller Updates Seller Conditioning

• Weekly reporting to your client
• Keeps Seller up to date Prepares them for
  Outcome
• Written Report with Notes from Buyer Follow-up
• Conditioning the Seller
• Predicting Results very difficult at an auction
• Short Timeframes Require Absolute Honesty with
  Client
• Do Not Puff or Make the marketing results Better
  than they are
• Recommend at least one in person or phone
  conversation with seller weekly in the last weeks
  prior to auction

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Closing the Transaction

• No Real Estate Auction is complete without a
  successful closing
• Title Company or Legal Office could provide
  Assistance
• Always run title update prior to auction avoids
  post sale issues such as unreleased mortgages,
  incorrect or missed signatures for prior
  transfers, etc.
• Provide Commission Statement Create paper
  trail.

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Ethical issues in Selling Real Estate at Auction

• Do Not Bid At Your Auctions Create office
  policy outlining this and enforce it with staff
• Lawfully Promote Clients Best Interests
• Provide Customer with Honesty and Fair Dealing
• Never Discriminate or Classify a Potential Client
  or Customer
• Do Not Profit from Marketing Expenses Paid by
  Client
• Do Not Attempt to Practice Law
• Maintain Separate Escrow for Auction vs Real
  Estate

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Ethics in Real Estate Auctions

• Provide Buyers with all Pertinent Material Facts
• Never try to hide a problem they always come
  back to haunt you
• Abide by all Laws Regulations governing the
  sale Local, Federal State
• If you are not familiar with an Asset Type
  Partner with a Company that has dealt with it
  Complicated Sales are Not the place to Learn on
  your own
• Always Utilize Written Agreements Statute of
  Frauds requires Real Estate Transactions be in
  writing

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Additional Materials Resources

• National Auctioneers Association
  auctioneers.org
• Loopnet Commercial Real Estate Loopnet.com
• National Association of Realtors Realtor.org
  (Auction/Realtor Committee)
• Co-Star Free Distressed Property Newsletter
  Costar.com
• Kentucky Auctioneers Association Tremendous
  Resources for Real Estate and Personal Property
  Auctioneers kentuckyauctioneers.org