Although it might seem like most self-storage operators are conducting their auctions online these days, not everyone has made the leap. While it’s true that many of the real estate investment trusts have largely adopted the online method, they only make up 15 percent to 20 percent of the industry; and even they’re not using an online platform 100 percent of the time.
If you haven’t made the shift to online auctions, you’re not alone or behind the times. There hasn’t been an overarching verdict in the industry about whether a live or online format is best. Still, online sales have become increasingly popular, with more self-storage operators are using them every day. You might find yourself thinking about your best practices for lien sales. How do online auctions compare to live ones? What changes can you expect if you move to an online platform? Let’s take a look.
The premise of an auction is the same whether it’s live or online: Property is sold to the highest bidder. Your goal is to have a “commercially reasonable” sale and recover the most amount of money you can toward the debt owed to you by the tenant.
Whether you use an auctioneer or an online platform, you’ll have to pay fees for its use. That said, you might find the fees are typically lower for an online platform. This is because it doesn’t require an auctioneer to drive to the facility, using his vehicle and gas. The overhead is simply lower for an online sale.
Whether your auction will be live or online, ask how the provider will advertise and bring bidders to your sale. The single biggest failure of any auctioneer or auction website is not selling the unit.
Many of your rules and procedures surrounding auctions will remain the same regardless of format. You’ll provide winners a certain amount of time to clean out their units following the sale. You’ll decide when and how they can access the property. You’ll ask that they respect your property, don’t use your dumpster, don’t leave garbage behind, don’t smoke on site, etc. You’ll identify which methods of payment you accept. Whichever auction format and provider you choose, you’ll want to make sure you aren’t prevented from enforcing your policies.
While some things remain the same, there are noticeable differences between live and online lien sales. First, every convert will say his favorite thing about online auctions is they eliminate the need for an “auction day.” You no longer have 50 to 100 people showing up at your property making a mess of your site. No more parking and traffic issues. You no longer need to schedule additional staff or close your office to accommodate the sale. Only your winners will visit your property, and that’s to pay for and collect their goods. They likely won’t even come at the same time. Online auctions don’t create the same disruption to your operation as live.
But maybe you don’t think this lack of a crowd is a good thing. Certainly, there’s an element of excitement in live auction calls. The reason auctioneers talk fast and chant is to create enthusiasm and inspire people to bid more.
To emulate live auctions, most online platforms have adopted a “soft-close” policy. This means if a bid is placed in the last minute of the countdown, the timer will extend another minute or two or three. This allows bidding to continue until the highest price has been reached. The soft close also prevents “sniping” or sneaking in a bid at the last second, which is a common tactic in an online auction. Bidders want to sneak their offer in last so nobody has the opportunity to outbid them.
Often, but not always, online bidders will be anonymous, which gives you a better chance of recovering the most debt. In a live auction, competition can drive up the bid, but it can also lead to collusion to save money. This happens when two bidders get together and split the cost of a unit rather than bid against each other. The anonymity of online auctions prevents this from happening.
What to Expect Online
If you’re thinking about making the move to an online platform, there are some things you should know. An online auction is most successful if the listing includes 10 to 15 clear, high-quality photos of the unit from several angles. It isn’t necessary to go inside or move items around, but the better your photos, the more money you’re likely to make. Bidders like to zoom in to examine bar codes and serial numbers on unit contents. Looking at the pictures for several days gives them a much better chance to decide what’s in the unit than the five minutes live bidders have while standing in front of the unit door with a flashlight.
Though initially hesitant to embrace online auctions because they brought more competition, bidders have come around in recent years. They’ve discovered it’s far less of a time investment. They don’t have to be out in extreme temperatures. They know if they’ve won, and they don’t spend the day in an auction caravan only to go home empty-handed.
There are many factors to consider when deciding on an auction method. What do you consider a success? Do you want the unit cleaned out as quickly as possible or to recover the most debt? Do want minimal disrpution? Do you like the human aspect of interacting with an auctioneer and live crowd? Answering these basic questions will help you decide which procedures and providers are the best fit for you.
Cheli Rosa is an auctioneer and strategic account manager for StorageTreasures, managed by OpenTech Alliance Inc., a Phoenix-based provider of self-storage kiosks, call-center services and other technology. With nearly a decade of industry experience, she helps her clients carry out successful auctions and increase their debt-recovery percentages. She regularly speaks at industry events and contributes to self-storage publications. For more information, visit firstname.lastname@example.org; visit www.opentechalliance.com.