August 22, 2008
Commercial Sales Outpace Residential for Cape Auctioneers
YARMOUTH, Mass. - As the number of home foreclosures increases so does the frequency of auctions to sell the generally bank-owned properties. But for one Cape Cod auction business, success isn't coming from foreclosures, which represent about 5 percent of their business, as much as it is from increasing numbers of residential and commercial auctions from people who seek out the family-run business for their 32 years of auction experience.
Only 10 years ago, Justin Manning, president of JJ Manning Auctioneers in Yarmouthport, said his company saw about 70 percent residential properties to 30 percent commercial in its business breakdown. But over the last few years, he said, those numbers have switched to 60 percent commercial and 40 residential. The Cape Cod company auctions properties all over New England and New York as well as other parts of the country.
According to Manning, there are many advantages to selling commercial properties or homes via auctions, the number one reason being speed of sale. The auctioneer said his company often deals with businesses whose employees are relocating to another part of the country. Typically, the company takes over the employee's home in order to facilitate the move and allow the worker a worry-free sale.
"They buy it for a premium but they don't want to own it or worry about its maintenance or liability so they take a little bit of a haircut to get rid of it," said Manning.
While foreclosure auctions mean potential buyers can be bidding on a property "sight unseen" or "as is," Manning said residential and commercial auctions not related to foreclosures have no such ailments.
Potential buyers can visit the properties beforehand, bring their own inspectors, and research the home or company. They just need to make sure that all happens before the auction begins because once the bidding starts, there is no backing out.
Buyers will sign the purchase and sale agreement, put 10 percent down on the building and must close within 45 days. In commercial sales, Manning said those reaching out to auctioneers could be the company's owner, its lender, or both.
"There are companies that know they will be in default soon and want to start selling off their assets. We were recently approached by a borrower and lender on a real estate subdivision where we had to explain to them what we could do to sell off some units that would allow them to continue to build," he added.
While many people look at auctions as a last resort, Manning sees it a little bit differently. "All the commodities in the world are sold through an auction," he said. "People get the fair price for their property not their wish price."
"Unlike listing a home, with an auction you have the when and the how its being sold and people who want the home have to either step up or ship out," he continued.
Manning said investors are beginning to come out of the wood works, bidding on foreclosure properties with the intention of fixing them up, renting them and then selling them when the market improves.
His company puts a great deal of marketing effort into each auction, he said, another advantage to the seller besides speed. Most auction fees are paid by the buyer; however, the seller pays a small fee for marketing costs, Manning said.
"If you want a well-marketed auction with a crowd of bidders, that's where we come in," he said, adding that sellers, in an average auction, can make between 80 to 110 percent of the value of their home or property.