While long a mainstay in the Southeast for residential-type properties, auctions are now being recognized as an acceptable and profitable method by which to sell commercial and industrial real estate. From small business owners to large corporate-based entities, business people are turning to auctions to achieve optimum value for their surplus properties.

U.S. TREASURY'S FIGHT AGAINST CRIME OFFERS OPPORTUNITY TO SAVVY INVESTORS Ilya Rosson The U.S. Department of the Treasury holds approximately 120 real property public auctions each year throughout the United States to sell property seized as a result of violations of federal law. Valuable commercial properties including apartment complexes, strip malls and warehouses have been sold in such cities as Memphis, Baltimore and Miami. Treasury auctions are free and open to the public, with no buyer's premiums. Beginning in December, real estate investors can bid on selected properties online. Most properties are sold with a clear insured title via Government Deed. A 2 percent broker participation fee is offered to the state licensed broker whose client successfully closes on a property. Revenues from the sales are deposited into the Treasury Asset Forfeiture Fund, which is used for law enforcement activities and helps provide restitution to victims of fraud. For further information about Treasury Department real property auctions, call the Public Auction Line (PAL) at (703) 273-7373, or visit their Web site at www.treas.gov/ auctions/customs/ realprop.html. Ilya Rosson is a media buyer and planner for EG&G Technical Services in Manassas, Virginia.

According to an auction marketing report published in 2000 by industry analysts at the Gwent Group, the dollar volume of residential, commercial and agricultural real estate sold at auction increased from $10 billion in 1981 to $49.5 billion in 1999. Although final figures are not yet in, Gwent estimates that the gavel fell on more than $50 billion in property in the year 2000.

Until the 1980s, auctions were saddled with the image of the real estate industry's last resort for a distressed property. That image changed when auction firms proved that auctions could succeed where traditional real estate methods failed. That trend has quickly caught the attention of real estate professionals who recognize auctions as a viable sale and purchase option and promote the use of auctions to their clients.

More and more, commercial and industrial real estate brokers are also recognizing the value of adding a reputable auction firm to their portfolio of services. Coleman Boyd, an industrial land specialist with Colliers International, explains why: "Customers are becoming more concerned about the length of the sales cycle, costs of holding the property and negotiations that are full of contingencies. An auction provides a method for me to address all of these concerns and assures that the property will sell for fair market value." He adds, "Having a partner and a friend in the auction business provides me with an additional tool to add to my portfolio of professional services. It strengthens my relationship with my clients and helps protect commissions."

However, the auctioning of commercial real estate does require specialization. The key to auctioning real estate is understanding that although you will have a business relationship with a seller, there is an equally important relationship that you must have with real estate agents and brokers and, most importantly, an extensive network of buyers. An additional benefit of an auction is the recognition in the courts as a "commercially reasonable" sale, thereby eliminating many legal and lender liability concerns.

Furrow Auction Company, based in Knoxville, Tennessee, boasts successful commercial and industrial sales in every state in the region. According to Rob Strickland, vice president of real estate, " In todays economic environmentcorporate executivesbankers and small business owners no longer have the time to dedicate their resources a traditional sales cycle. Recognizing value of moneythey look broker solve problems. Savvy brokers know that by partneringwith us can deliver expediencyreduction carrying costs most importantly results.Indeedcompanies more focused than ever on bottom lineconverting surplus assets cash short frame is top priority. Adds Strickland want focus core competencies. hiring Furrow are assured sale will be handled efficiently professionally maximum achieved."

A recent example of a successful industrial real estate auction was the sale of the former Briskin Manufacturing Plant in Lebanon, Tennessee. This sale consisted of a 92,600-square-foot building and 16 acres of land and including metal stamping, fabricating and finishing equipment. The property and equipment had been on the market for an extended period of time through traditional means which had produced no acceptable offers.

In conjunction with Development Specialists Inc. of Chicago, Furrow Auction sold the property and all of the equipment and machinery for more than $2.5 million. "An auction was the most effective way of disposing of this asset in a timely manner," says James Moore, of Development Specialists Inc. "Furrow Auction handled every aspect of the sale in a professional manner, communicated every step of the way and, most importantly, delivered the results we were expecting."

In addition to large industrial properties, smaller, multi-use commercial facilities perform equally well at auction. A former T.G.I. Friday's restaurant located in Knoxville was on the market for well over a year with no activity. The owner decided to sell at auction and turned this asset into cash in 30 days. "What a pleasant surprise," says owner John Turley. "Furrow Auction marketed properly and attracted the right group of bidders. We were able to eliminate our carrying costs and the property sold for an amount that exceeded our expectations."

There are countless examples of success stories where auctions brought results that traditional methods of sale failed to do. Auctions are now used to sell everything from industrial machinery to jewelry and sports memorabilia. The buying public accepts and even seeks out auction opportunities as a way to buy property without the hassle of pressure and negotiations. There is simply no better way to sell property quickly and for fair market value. If you have commercial or industrial property that you need to sell, there is no better time to take advantage of this effective and historically proven sales technique.

Chuck Fisher is director of marketing and business development for Furrow Auction Company in Knoxville, Tennessee.

©2001 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.