By Chuck G
Whether or not to use an online auction service isn’t the question self-storage operators should be asking themselves when it comes to lien sales. The real question is, what should you look for in an online auction provider?
Not all storage facilities are created equal, and neither are online marketplaces. An auction service isn’t a cookie-cutter operation. Diversified offerings separate one from the other. Following are some considerations to make the right choice for your next lien sale.
Credit Card Requirement
First, does the auction website require a credit card registration to view or bid on units? If it does, this could restrict the number of buyers available to you. A public lien sale should ensure the disposal of a delinquent storage unit in a commercially reasonable way. In compliance with the lien laws of 49 states (Alaska doesn’t have a self-storage lien law) and the District of Columbia, it should allow open viewing of the unit contents.
But what if a bidder doesn’t have a credit card? Princeton Survey Research Associates International reports that 63 percent of Americans ages 18 to 29 (also known as millennials), don’t have a credit card. The U.S. Census Bureau estimates millennials represent more than one quarter of the nation’s population, or 75.4 million Americans. That’s a loss of 47.5 million potential auction buyers, and that’s just the millennials. What about the rest of the nation’s population? About 35 percent of adults age 30 and older don’t have credit cards either.
Even prepaid credit cards aren’t a solution, as must credit card registration requires a person to enter the three- or four-digit security code from the back of the card, which most prepaid cards lack. Will an auction buyer go to the trouble of applying for a credit card just to bid for storage units online? Not likely.
Does the online auction provider charge a buyer’s premium or deposit fee in addition to a refundable cleaning deposit? These additional fees, paid by the auction winner, are collected by the online marketplace, not the storage facility. Usually, they go toward administrative expenses. A buyer’s premium is usually 10 percent to 15 percent of the final sale price. A deposit fee is just another miscellaneous charge. The auction provider may increase these fees at any time, without notice, per its “Terms of Sale.”
Consider all the charges to the winning bidder: the buyer’s premium, the deposit fee, the cleaning deposit (refundable but required upfront), plus the cost of the unit. How many auction hunters can afford all these costs? Does it affect your ability as the seller to generate enough revenue to recover losses?
Storage operators often delight when a unit sells, which allows them to not only recoup their losses but to re-rent the unit. What’s better than a successful auction? When the delinquent renter pays off his account balance. In this case, you can cancel the sale. But did you know some auction companies will charge a cancellation fee? Then it’s up to you as the operator to pay it or pass it on to the tenant.
Units placed for auction on the Web get high visibility, both from potential buyers and delinquent tenants. Often, once a tenant sees his valuables up for sale, he’ll contact the storage company and settle the bill. Do you really want to hassle a few more dollars out of the customer to satisfy an auction-cancellation fee?
The End Goal
Self-storage is one of the fastest-growing segments of the commercial real estate industry. With a rise in storage facilities, you can also expect to see an increase in online auction providers. The websites will differ, as will their terms of sale and features. Before you choose a marketplace, ask these three questions:
- Does the site require a credit card registration to view or bid on units?
- Does the site charge a buyer’s premium or deposit fee?
- Does the site charge a cancellation fee?
Once you have this information, you’ll find the right fit for your debt-recovery needs, coupled with a greater understanding that not all storage-auction services are created equal. At the end of the day, the use of an auction website should cut the stress of live auctions and ease the efficiency of recouping debt from your delinquent renters.
Chuck G is the content developer and social media manager for iBid4Storage, an online auction-services company serving North America. For more information, call 855.424.3669; e-mail [email protected]; visit www.ibid4storage.com.