I was at a Realtor's reception last night and I realized in conversation that there is some confusion as to what an auction may be. Or for that matter when auction should be considered.
History has shown us that a professionally conducted public auction is a type of “sale” that equates to the white heat of selling, fetching the highest possible fair market value for the assets offered on any given day or place. But what constitutes a “professionally conducted public auction?”
First of all, what is not an auction. At first the task is easy; a partial list would be tag sales, garage sales, yard sales, fire sales, one-day-only sales and discount/percentage-off sales. All major retailers have periodic sales: “no money down,” “no payments until…,” “no interest,” etc. However, the question becomes a little more difficult to answer when we look at words like “eBay,” “foreclosure,” “warehousemen’s lien,” and “sealed bid.” All of these terms have been associated with the word “Auction.” The question is, Are they sales or are they professionally conducted public auctions?
The answer would be revealed only after identifying and agreeing upon the elements of a professionally conducted public auction. Once that they have been established, we could test all of what we think are “auctions” against that criteria.
A professionally conducted public auction of any asset should include at least the following eight elements: 1) A viable market: If there is not a viable market of interested, qualified buyers, there is no chance of a professional Auction succeeding; 2) Auctioneer: A competent, trained person taking full responsibility for formulating and executing the overall plan; 3) marketing plan: A strong campaign with “target marketing” to the appropriate audience; 4) Good exposure to the proper market: Enough time prior to Auction Day for the buyers to find out about the Auction and do their due diligence regarding the assets for Auction; 5) A public preview: Ample opportunity for public viewing and inspection prior to bidding; 6) Published terms and conditions: Clear, concise, fair rules of the Auction that apply to all participants; 7) Full disclosure: Disclosure to all interested parties of the facts pertaining to the assets up for Auction; 8) Public Auction: On the advertised date and time, all qualified bidders or their proxies assemble and have the opportunity to bid competitively until there are no more bids remaining.
More questions
Based on the acceptance of the eight priciples, there are several questions to answer.
For instance, do the listings on eBay qualify as professionally conducted public auctions? eBay sales listings end with a clock and do not remain open “until there are no more bids remaining.” Sniper bidding programs allow participants to bid in the final seconds of the listing, but once the clock runs out on a listing, all interested buyers are locked out. eBay sales, would therefore not meet the eight point test.
eBay’s model most resembles the European 18th Century model of selling furs in a wholesale market. The 18thC model was called “Auctions by the Candle.” Bids were taken on lots until the flame went out. Experienced buyers learned to study the movement of the smoke on the flame, knowing when to submit their bid in order to snag the lot from competitors at the last second. Evidently, this bit of knowledge gave them an edge over the other competitors much as sniper programs and sites provide an edge to savvy eBay buyers. However, in a professionally conducted Public Auction, the bidding remains open until all qualified bidders have exhausted their bids in competition with each other.
Are all “foreclosure Auctions” actually auctions? Not necessarily. Depending on who is conducting the foreclosure, it may lack certain elements such as marketability, a marketing plan, good exposure to the proper market and a preview time. Depression era “foreclosure sales” referred to as “Auctions” are the number one reason why many people instinctively react negatively to the concept of selling their real estate at “Auction.” Due to this association, the public in general does not fully understand the benefits of a professionally conducted Public Auction of real estate.
What about a warehouseman’s lien sale? Can it be considered a professionally conducted public auction if the Auctioneer sells the entire contents of a self-storage unit where the contents were not listed and the potential buyers do not have the ability to personally inspect the contents? Again, I say no, because the event could lack a marketing plan and definitely lacks good exposure to the proper market and a preview.
“Sealed bid” sounds like an auction; however, in its purest form, it is merely the submission of simultaneous offers without the potential buyers having the ability to know what other offers are being made. The sealed bid sale, at the very least, lacks element #8, public auction. All participants are encouraged to submit offers, the offers are opened at a specified time, and the highest offer wins. Sometimes the sealed bids are not even opened in public to be witnessed by the potential buyers making the process even more suspicious. While certainly a valid form of sale, a sealed bid executed in the above manner does not meet our definition of a professionally conducted public auction.
There are other “sales” that have fallen under the umbrella of “auctions” which might also lack elements of a professional public auction, including sheriff sales of seized assets and court-ordered sales that utilize the word “auction.” Often these sales lack elements 2 through 5. Sometimes a small legal ad known as a “tombstone ad” is all the marketing the event will have, with little or no participation from the public.
History has shown us that there is a need and a use for all of these sales. However, history has also reflected that when these sales are presented as “auctions,” they have skewed the public’s perception of professionally conducted public auctions. Of course, I am not suggesting there is anything wrong with Auctioneers conducting whichever kind of sale they deem necessary for selling assets properly for their clients. They are each valid as selling methods and have clear advantages in certain situations.
The previos rant sumarizes some material I was studing in preparation for my text book on real estate law. Bob Doyle, current president of the National Auctioneers Association states, "I am simply suggesting that as practitioners of a relatively small profession, we should utilize the word 'auction' when it truly satisfies the definition, and we should use the word 'sale' when it does not.
For if we as auction professionals do not promote a clear definition of the word 'auction' and the auction method of marketing, who will?"
This is pretty exciting. I lobbied for licensing for auctioneers in the eighties. I thought I would never see this day. My predecessors had been working on it for decades. This just in: STATE AUCTIONEERS MOVING AHEAD Lansing, Michigan - State Capitol - On Friday, December 29th Governor Jennifer Granholm signed into law a set of bills now referred to as Public act 489 and Public act 490 of 2006 respectively. The Auctioneer Registration Bills were introduced by Senator Ron Jelinek of Three Oaks and Representative Hoon-Yung Hopgood of Taylor. Since 1958, the Michigan State Auctioneers Association has struggled to enact legislation to protect the public and to allow the association to form a bond of reciprocity with other states, namely ones which surround Michigan. It is the intent of these bills to help organize the membership of the MSAA in a concerted effort to better serve the public in a professional and lawful manner. A Few Highlights of the Act include: • Creates a new voluntary registration program for auctioneers • Auctioneers would not be required to be registered through this program • Record keeping requirements imposed on registered auctioneers • Requires a written contract between a registered auctioneer and client • Requires a registered auctioneer to establish a trust account • Includes numerous consumer protection provisions Chairman of the Legislative Committee of the MSAA, Michael Bliss GPPA of Mt. Pleasant, says “The bills will enable the auctioneers of the state and also of other states to work together in a more uniform manner. It brings more easily regulated consumer protection measures to clients who hire Registered Auctioneers and creates a higher code of conduct to give more assurances to the public.” Any Auctioneers that wish to know more about the new legislation or becoming members of the Michigan State Auctioneers Association are urged to attend their Annual Conference held at the Radisson Hotel in downtown Lansing the week of January 31 to February 4, 2007. The Conference boasts the MSAA State Bid Calling Championships and several days of educational seminars and classes designed for the aspiring auctioneer. You can also get more info Online at www.msaa.org or by calling the MSAA Office at (616) 785-8288 or by calling Mr. Bliss at (989)772-7066 in Mt. Pleasant. *** With approximately 400 members, the Michigan State Auctioneers Association is one of the leaders in the industry, and is proving to continue in that direction in the future. The Michigan State Auctioneers Association is the largest representation of auctioneers in Michigan. The MSAA represents the interests of the Auctioneers, providing a forum for networking, sharing ideas and experiences. The MSAA expects to grow in membership with the passing of these bills. For more information about the Michigan State Auctioneers Association, the auction industry in Michigan, and to find auctions or auctioneers, log onto www.msaa.org.
I have one major flaw. I am a bit too goal oriented. When I establish a goal and someone or something chooses to interrupt that goal, I have very little patience. I reasses that goal and consider if I could be just as satisfied with a substitution. If I answer, "Yes", I set a different goal.
A couple of years ago a book came out entitled, Who Moved My Cheese? by Spencer Johnson,MD. It is about is about change and how people react and respond to change. Briefly, the book talks about four people who find their way through a maze to a large cache of cheese. Each day they find their way back to the cheese and eat happily away. They become accustomed to finding the cheese in the same place, and come to expect it. One day, as you might have guessed, the cheese is gone. No more cheese. The four people, Sniff, Scurry, Hem and Haw, react quite differently to the new situation. As you read through the book, you see yourself in one or more of the people. It allows for some interesting reflection.
In my youth, I was "Scurry". I would panic and throw a bit of a fit. I was hoping to knock down the walls of the maze and any windmill in the way. Now, I do not waste my time. I reassess my goal and set my path down the new maze. In short, I change the obstacle to an opportunity.
I would have liked to have posted my classes for 2007 to the web weeks ago, but I have encountered obstacles. I have written material for some new classes and it frustrates me that I cannot even talk about them until the Department approves them.
I have encountered sales and catering at banquet facilities that never return calls or emails. I was going to use one recommended facility in Toledo, but after 6 days of non-returned calls and emails I chose the Wyndham. The director of sales was most accomodating on the phone (at 5:05pm) . This renovated riverside hotel looks charming on the internet. I am goin to give it a try.
I feel sorry for those folks that don't wake up excited to start the new day. For me, it seems that every day is exciting. My goals from yesterday did not get accomplished. I was relying on the sales departments of the various conference facilities to check their messages. Silly me. I will start that one over today. I am 80% done. Of, course, nothing is as constant as change. I may have to revamp my schedule a bit to work in Code of Ethics training for Realtors. That is exciting. I will get to meet some new people. Some people hate online continuing education, so we can accomodate them in person. I have verbal approval from the National Association of Realtors (where did I put that "Easy Button"?) to use their material. We must submit it to the Department so it will also count for continuing education and we are good to go. Today's goal is to go out to the various offices in the Antrim county area to promote a motel I am selling at auction on January 13. Hopefully, the call backs from the conference facilities can reach me in the remote cell area. Do any of you have a buyer that needs a motel in Mancelona, Michigan. Go to www.besnerauction.com/cornellauction.htm for more information.
Things are going to be great in 2007. I am serious. It is all about perception. I attended a seminar about 20 years ago in Sagin aw, Michigan. Mortgage rates were about 18% at the time. The average days on the market for homes that sold was about 210 days. The speaker said that "Your perception is your reality." He passed out pins that said, "Business is Good". I just came across mine a few weeks ago and I am going to start wearing it on a regular basis. You have to set goals. I don't mean goals for today. You need to have a today plan and also ask yourself where you want to be in one week, one month, one year and one decade. If you don't know where you are going, how will you know when you get there? If, however, you know where you want to go, you will find doors opening for you. This day, I will complete my schedule for this year. This week, I will determine what it takes to get my real estate fundamental text book published. This year, I will strive to be the very best teacher possible. Hopefully, I will be able to get many new salespersons and brokers on the right track. I will also write an online prelicense class and maybe some broker classes. This decade, I will work toward being able to relax more. Hopefully, I will be able to remain up to date on new methods of learning. I wish to make a difference. If I can continue to pass along my enthusiasm for life by sharing information, I will be a happy woman.
I have been very busy the past few weeks researching material for two real estate law books. In my research, I have read many interesting facts that I believe my students may wish to know. I am starting this as a platform to share ideas and also to keep my friends posted as to my class locations.
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