Tuesday, August 12, 2014

Lock Cuts, Sooner or Later?

Probably the most debated procedure of the auction process is when the locks should be cut and the contents of the units inventoried. We ask ourselves, should they be cut as soon as possible in order to gain maximum profits from the tenant?  Or should the locks be cut at the auction to attempt to save the tenant money in fees and the purchase of a new lock? Some managers suggest meeting in the middle, and cutting the locks just before the newspaper advertisement is placed. There are reasons each facility has their own preferences on this matter, but let’s go ahead and discuss some of the benefits of cutting locks sooner rather than later.

Before we discuss which particular method may be best for you, understand that there is more to the auction process than when the auctioneer simply shows up to sell the units. Instead it is initiated on the first day the unit is delinquent; gate access is no longer permitted, phone calls are made, units are over locked as soon as possible, and the pre-liens and liens are processed. Lock cuts, advertising, and staying in touch with your auctioneers from Storage Auction Experts are a few ways you may be able to maximize your overall profit and recovery.

First we should discuss the auction buyers’ favorite part of the process, which is the process of cutting the locks at auction. Yes, it does add excitement to the buyers’ imagination as they watch the locks being cut, and smell burnt metal in the air. They love knowing that no one has seen the unit, and that anything could come from behind those doors. Even the occasional empty locker that is cut open, although at times disappointing, is still exciting, as it provides further evidence that no one has seen the unit since the day of over lock. Sites that do this method tend to be favored by auction buyers; however there are some disadvantages to cutting locks at auction. Sites can miss out on many opportunities of advertisement if there happens to be something extraordinary in the unit. They also eliminate the possibility of renting out the unit to potential clients if it is empty, along with the opportunity to collect lock cutting fees; or the sale of a new lock to those who pay up before auction time. Additionally, it is also very time-consuming to cut locks during the auction adds pressure of speed and efficiency, and possibly permits more hasps and doors to become damaged. Therefore this method is not recommended to recover maximum returns from the auction process for sites with a large number of delinquent units, or for those whom are over 85% capacity on any particular size unit.

The most common procedure manager’s use is to cut the locks before the auction, normally about 3 weeks in advance. This is a practice managers feel safe doing. They feel they’ve given the tenant every chance to avoid additional fees, while still saving enough time to do a proper inventory and prepare for auction. This may also be preferred because normally cutting the locks is the last attempt to “scare” the tenant into paying the bill. The tenant then realizes their lock has been or will be cut and they need to take this matter seriously before the next step: Auction!

Furthermore, cutting the locks before the auction is also the preferred method simply because it enables you to organize a smooth running auction on auction day, eliminating mayhem and surprises. It saves wasted time on empty units, and most importantly allows you to advertise and roughly appraise the merchandise and have a chance at making realistic auction price expectations. We recommend this method because it may allow you to better take advantage of the entire auction process instead of cutting locks the day of auction. It is important to realize the auction isn’t just about how many bodies attend, but the buyers that are present bid on the true quality of each unit, and lost earnings from defaulted units are recovered as much as possible.

We have found that cutting locks as soon as possible reduces the amount of delinquencies as well as improving the cleanliness of facilities, making it overall the most profitable measure. However, it is tough to convince others of this. Follow the law strictly. There is a reason the court system has recognized specific time periods for the storage industry; they have been proven to work, take advantage of it.

Some ways you can help the process along are to shut down gate codes from the beginning to force the tenant to walk into your office and talk to you. You can’t legally deny them access to their unit, so you’ll have to let them in, but you can shut off their gate code. Getting them into your office increases the likeliness that they will either pay you the rent and/or not leave you with a thrashed, picked over unit of garbage that contains nothing sellable. Schedule someone to do overlocks on the 30th day late assuming the pre-lien was sent out on time, or the first legally permitting day early in the morning. Be sure to make a strict routine so time doesn’t get past you. Get every delinquency in pre-lien and lien status as soon as possible. If your pre-liens aren’t ready to be mailed by closing on the 15th day then you are adding time to the process. The same goes with liens by the 30th day. While this may cost some extra money the first couple of months, it is possible to recover the money lost in your fees. Including this process in your contract may not only make you money, but it can train your customers to pay on time. Once they realize there are fees and consequences they will take you seriously. Once all the paperwork is processed, schedule to cut your locks within the same week, preferably with an outsourced insured and bonded company like Storage Auction Experts.

While every facility has a different procedure, cutting the locks at the first chance is strongly recommended. It gives you a bat to swing when these tenants’ start throwing you fast balls. You also make money by charging for the lock cuts and selling them new locks. Also, you don’t have to settle as much because you have a rough idea of what is in the unit. Take advantage of having the upper hand. If you feel uncomfortable playing hardball, you can always provide a free lock to ease the blow. At least you have the ball in your court, with all advantages in your favor.

By using a professional lock cutting company your locks, you can help eliminate the possibility of the manager being accused of stealing any valuables out of the units. Attorneys will likely agree that by having a professional insured and bonded company remove the lock will drastically reduce liability for the removal of the tenant’s lock. We at Storage Auction Experts are not only insured and bonded, but we have thirty years of auction expertise, which can only maximize your auction experience!

Travis Regalo, Auctioneer
Storage Auction Experts