VOL. 126 | NO. 26 | Tuesday, February 8, 2011
Auction Biz Heats Up as Market Stagnates
By Sarah Baker
For the most part, Memphis has always been a traditional real estate town with the standard broker-seller relationship.
But that doesn’t always work, and oftentimes sellers need the process to happen quicker than the conventional market will allow, said Bill Caller, broker with Crye-Leike Commercial.
Real estate auctions force the market to react. If there’s a buyer out there, the seller gains some leverage by setting the date, time and terms. And because it’s a cash sale, there’s no negotiation, the property is sold as is and the buyer pays the commission instead of the seller in the form of a buyer’s premium.
“The auction is the next wave,” Caller said. “Five years ago if you would have told people in the real estate business that foreclosures and short sales would be standard order of business today, they would say you’re crazy. But it’s here.”
As Crye-Leike Commercial’s first principal auctioneer, Caller specializes in helping sellers gain leverage and get the best return on the real estate investments.
He chose Crye-Leike because of its known brand, name recognition, market saturation and buying power. Also appealing to Caller was Crye-Leike’s ability to hold the auction at its headquarters on Quail Hollow Road in East Memphis if it’s a multi-property and/or distressed sale.
Caller first approached Crye-Leike in September 2009 about having a full-service auction division to solicit internal agents and then external clients who have clients that may have a need for an expedited sale.
“In today’s market, sellers are at a disadvantage in negotiating as far as the length of time that the property is on the market,” Caller said. “Many sellers have realized that selling a property quickly is attractive as well as eliminating holding costs and actually taking control of the process in order to move on with their lives.”
While sources such as television and eBay have provided some exposure to the auction process, people don’t realize it is very dynamic and it can be customized to fit their needs as long as the auctioneer takes a realistic approach.
Caller’s job is to evaluate those properties, determine how marketable they are, what level of demand there is, who the most likely buyer is and develop a marketing plan that aggressively goes after those items. All auctions are implied with reserve unless it specifically states absolute in advertising.
“We try to asses what the seller’s financial position in the property is, what they would be willing to trade off in price for time and what is their risk tolerance level,” Caller said. “I make a recommendation, laying out what I think is the best approach, the best plan and the best exposure as far as marketing goes to achieve the goal, which is to sell the property within a specific time frame.”
Crye-Leike Auction Services can auction all types of real estate from residential and commercial to tracts of land, focusing on the Memphis metropolitan area, Jackson, Tenn., and Nashville. Caller has a goal of 20 properties to sell at auction this year alone, with projected growth in years to come.
In areas like Middle Tennessee, auctions are very much a part of the culture. Because natives have grown up attending auctions as a social event, selling real estate at auction is an easy segue for them, Caller said.
Crye-Leike’s new division officially opened in November and its first property sale is slated for March 17. The 31,250-square-foot, bank-owned office building, 1124 Whitehall Street, in Jackson, has potential for an investor or owner-tenant plus four ready-to-develop commercial outparcels.
“The lender has held this property for a few years, and it’s just at a point where they are ready to remove this from their portfolio,” Caller said.
While Crye-Leike does have some national exposure, it is focusing mostly on regional industry and business specific marketing such as mail outs, targeting Jackson’s economic development groups, the Jackson Area Chamber of Commerce and attorneys.
“Getting them to the auction is half the battle, the rest is getting them to complete openly for that property,” Caller said. “There are a lot of components involved with that to have a successful sale, but mostly it’s how you market the property to potential bidders.”
But the auction is not for everybody. There has to be a specific need and motivation of the seller to consider.
“It’s not a shortcut to selling real estate,” Caller said. “If the seller’s risk tolerance is very low, the more restrictions you put on selling the property, it’s going to have an adverse effect on the level of participation more than likely with the buyers which is what you don’t want. You want the bidders to know that they are free and clear to bid on that property, and if they know that, they’re willing to compete for it.”