Land Auctions Need to Get a Lot Better in Order to Help Us Get Out of the Recession

The importance of land auctions can not be more important than they are right now to the real estate market in general and more specifically to the recovery of the US economy. Since investment banks and the federal government can’t determine the ‘true bottom’ of what land is worth, than significant, well orchestrated land auctions over the next several months can yield a benchmark indicator based on consistent sales results of true valuation. From there, economist can prepare their charts and can reasonably predict our climb out of the cellar and get going again. To do this, the auction process itself must become more credible and distinguished to earn the right as a benchmark indicator. Here’s why, followed by what needs to be done:   

Typically, when the general public hears or sees anything about land auctions today, the word foreclosure is close behind. Television infomercials advertise bank owned properties available at low ball bids and portray previous owners as losers that left lenders holding the bag. Although often true, this perception of mistrust permeates throughout the industry and leaves the impression of a depressing atmosphere to buy and sell property.

The frightful image of an auction event set up in a mediocre hotel ballroom hosted by a cigar chopping auctioneer in suspenders, flanked by two fold up projection screens showing aerial photographs of one property after another must be supplanted with a dignified process that aspires to the highest level of what an auction can be.

Instead, auction houses should use property sales as an opportunity to celebrate. The notion that the seller somehow failed and that the auction house will manage the process of buyers expecting a feeding frenzy based on low bids must be dispelled. Simply portraying individual properties as "a once in a lifetime chance to buy" is not the answer either.

Get the results of the auction published in a national business magazine. Three or four portfolios of important properties owned by credible land development companies or owners make news versus a typical auction of many small individual properties that have been cobbled together.

Auction properties must be of high quality, significant scale and recognizable to the general public based on name and location. This is important in order to draw the attention of the purveyors of the US economy and make a meaningful statement of land value.

The auction event itself should be unique and adopt a new format. The process should be slowed down to a cozy, casual and comfortable pace, by eliminating pressure and allowing a chance to get a deeper understanding of the significance of the sale. Therefore, don’t rush it – savor it for as long as possible. Make the auction event business friendly and engage not only the bidders, but also invite curious real estate industry leaders to watch and even participate in the process with informed opinions and knowledge.

One example would be to change the graphic format altogether. Instead, allocate a portion of the auction marketing plan budget to engage land planners to draw simple site plans or sketches for each property to show a vision of what is reasonably and physically possible, supported by market conditions and may return the highest values. A picture paints a thousand words.

Another example would be to create an overall theme and brand for important auctions. Words like ‘Worldwide’ or ‘Florida’s Biggest’ miss the point. By engaging the services of graphic designers that specialize in branding and not relying on the auction house’s in house staff that is use to template, each auction becomes unique with properties sharing a common, positive identity. By adding a level of emotion and vision, it may be easier to attract other sellers and buyers to participate that share the same values.

Last, when auction houses use related professional services to change the marketing and event atmosphere two important results occur. First, the quality of the event itself will become relevant to the general public and allows the auction house focus on what they do best, which is the technical nuances of property disposition. Second, the circle of opportunity widens for the auction house in the future – more informed industry people become advocates of the auction process and talk about the success, more leads are generated and depending on the caliber of the professionals engaged, more investment banks and government regulators are interested in the results.

 

Rick Abelson,

Director
Online Land Planning, LLC
www.onlinelandplanning.com

 

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  • 7/6/2008 9:23 AM Jim Ford wrote:
    Since the comments only allows 3000 characters, I will provide a condensed version of my full response at the Auction Community Forum, which I hope everyone will take time to read:
    http://www.auctioncommunity.com/index.php?topic=575.msg2863#msg2863

    While you may have some good ideas, in some respects, I can't quite agree with the overall consensus of your message. Of course, you would certainly like to be involved in the marketing aspect and have us utilize your services, however, one of the first questions I would propose is "who would pay for this?" After all, according to your website, it appears that your fees start at ~$9000, which could be a sizable chunk of available advertising funds.

    An auctioneer is going to utilize the best means of attracting buyers, based on the features of the property and its' target market. The auction method of marketing is quite effective in what is normally achieves, given those variables.

    If the Seller is interested in putting out the money to draft "potential" uses for the property, in an effort give buyers ideas on how they might utilize the property, it may help to bring in other potential buyers and might even help to get a better price. However, whether the costs of developing such proposals is worth the "potential" benefit is still questionable.

    Now, we have to consider the Auction Method Of Marketing and the "hows" & "whys" of its' effectiveness and who it attracts. While there are some very well-funded people that will attend property auctions, often it must be a chance to either, get an exceptional deal or a prime piece of real estate that is in very high demand, in order to get their attention. This includes both, investors and end-users.

    For the general public and "general" investors, it is usually those that are looking to get a "deal" on a property or home. While sometimes, that "deal" may only be a little less than the "market price," it is the lure of an auction that gets them there, in the first place.

    If you already own this land and have these plans or have developed properties, then you have features that could certainly aid in developing the marketing materials to attract potential buyers to an auction.

    If you are looking for an Auctioneer that can help you put together your own Auction Marketing Plan for such properties, feel free to give me a call and I'll be glad to discuss this with you. If you have clients, that you feel could benefit from the Auction Method of Marketing, we can set up a meeting to discuss this with everyone involved.

    Jim Ford
    Professional Auctioneer & Auction Marketing for the 21st Century

    Texas-National Auctioneers - TX Lic. 12478
    Professional Auction Services for Houston & Texas
    Auction Marketing for the 21st Century
    Estate & Business Liquidation, Real Estate, Charity Fundraisers
    http://www.t-na.com
    281-479-7848
    Reply to this
  • 7/10/2008 10:53 AM Billy Burke wrote:
    Rick:

    I totally agree that the standard of real estate auctions can and should be raised.

    As Jim Ford pointed out the biggest obstacle is the expense involved.

    Personally I am the first real estate auctioneer to publish a price list so that sellers can decide what they want in an auction.

    The biggest problem with auctions is the sellers.

    You see most sellers think they are "smarter" than the marketplace so they put minimums or reserve prices on property.

    Sophisticated buyers who are in a position to write a six, seven or eight figure check think that reserve auctions are a waste of time and not worth attending.

    Auctions with published minimum bids simply do not work unless the prices are so low as to be suspect.

    Then they (published minimum or reserves) create a low level of expectations in the minds of potential buyers artifically holding down the price.

    Why? Because the seller thought they were smarter than the auctioneer or the marketplace.

    As to publishing results that is a great idea, as a matter of fact it has been incorporated into the National Auctioneers Association, AuctionMLS system.

    http://www.naarealestateauctions.com/consumer/index/mls

    The system has been live for less than 6-months so there is really no meaningful data available.

    Themes and consistency are a corporate decision based upon the individual company. Again this is back to who is going to pay for the marketing?

    Right now its amateur hour for real estate auctions with realtors getting into the mix doing what they "think" an auction should be, thus giving the industry a very bad name.

    Land planning projections are a great idea. I have sold lots of property where we had the advantage of having developer plans, artist conceptions, dioramas and the like. The main factor is cost & expense of who will pay for these projections; it’s not fair to ask the auction company to spend tens of thousands of dollars on land use plans for a seller who is “smarter than the market” and has demanded a minimum or reserve price.

    The way my company has overcome that is by preparing s Digital Bidder Information Package (DIGIBIP) that potential buyers download from the internet.

    With raw land we obtain a copy of the county zoning ordinances with all of the acceptable uses and include it in the due diligence along with site maps, topos, aerials, soil maps, etc. When selling subdivided land the use has usually been established so there is no need for anything more than the restrictions of record and the usual documentation.

    Yes I agree that the Industry Standard for real estate auctions needs to be raised, which is why the tag line for my company is…

    The Industry Standard.

    Because we have raised the bar from coast to coast.
    Reply to this
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