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

Tuesday, May 27, 2014

Live Oral Auction versus Online Storage Auctions

In recent months, many of our managers, buyers and followers have been asking about “the latest" thing to pop up in storage auctions - “Online." Due to the variety of questions and myths surrounding the issue, we decided to give you our opinions on the pros and cons.

Storage Auction Experts is in a unique position to offer some advice on the subject. Why? It's because we are one of the very few companies to offer both types of storage auctions. A few businesses offer online storage auctions exclusively. Naturally, when advertising them, these companies make their service sound most modern and convenient. These companies show only the benefits of online services versus live auctions, and none of the negatives.

On the other side of the coin, the vast majority of storage auction companies offer only live auction services. Like the online companies they only give the value in live auctions.

Storage Auction Experts has conducted thousands of live auctions; however, because of the demand, we have recently expanded into the online auction business. Our company offers the best of both worlds, giving our managers the best information on the best type of auction for their unique situation.

One of the arguments for online auctions from a competitor is there are “no crowds to deal with.” This can be a positive or negative depending on the situation. If a manager does not like crowds or is intimidated by having people on their facility then an online auction may be the way to go.

The same competitor discusses “liabilities” in having large crowds on the facility. However, in researching the issue, Storage Auction Experts has not found one instance of a storage facility being sued by an injury occurring during an auction in California. This “liability" is nonexistent and therefore NOT a “benefit.”

One of the positives of a large crowd is the intensity of the bidding that often takes place. Buyers are competitive and often battle with each other in an effort to gain control of the storage unit. Others often get caught up in the frenzy of the bid and excitement of the auction. Here's the proof in the pudding: would buyers rather have small crowds or large crowds? All buyers know that they would rather have a small crowd rather than a large crowd because they can get better prices. With large crowds the prices are often driven higher and faster. Online may have lots of “views,” but this doesn't equate into lots of “buyers.” One online company brags of “thousands of bidders.” That's not quite true. Thousands of watchers are closer to the truth. If a bidder lives in Utah, what are the chances he's bidding on a unit in Florida? The true bidder number is determined by the distance, convenience and the value.

Another argument is that online auctions have a start and stop time that is guaranteed. This is true. Although other companies have had issues with “lateness,” Storage Auction Experts auctioneers pride themselves in an on time schedule. That's not to say we're not sometimes late. But, with our scheduling, contacts with managers and relationships with our buyers, they realize when we occasionally do run behind schedule they know the reason.

One of the fun things about live auctions is the “unknown factor." This is the treasure hunt aspect of buying storage units. Buyers will often bid higher anticipating the hidden treasure possibility. Ask any buyer who has seen a partially hidden safe. With online auctions photographs are often taken of opened containers, jewelry boxes, totes and other sealed objects in order to try and obtain the highest price for each storage unit. By opening containers this removes the unknown possibilities and actually hurts prices. Buyers will bid on a closed jewelry box not knowing what is inside. If the box is opened, the mystery is removed as well as the gamble.

In addition, some buyers are an extremely suspicious breed. It is their common belief that if someone was to open a jewelry box and see a valuable piece of jewelry, this jewelry would “vanish” before the inventory pictures were taken. This is a common suspicion with no finger-pointing at any business or competition. Buyers would rather gamble with the unknown (and untouched), than trust someone they don't know.

Buyers also know that if you want to sell something, you show it in its most favorable light. On eBay, vendors show multiple photographs of individual items to show the good, bad and ugly. With online auctions, a missing dresser leg, or a huge tear in a picture may not show up in their area photographs.

At Storage Auction Experts we obtain the names, ID numbers, resale numbers, addresses and phone numbers from the person, in person. If and when a problem arises, Storage Auction Experts is able to deal with these people directly. Although there's a remote possibility of false identification, this is greatly reduced when dealing with a person face-to-face.

Most of identity theft and stolen credit card issues occur online. How do we know? Before becoming an auctioneer, I was in charge of the Identify Theft/Fraud unit at Modesto Police Department in California. He's seen more than his share of these issues and has conducted seminars and lectures about Identity Theft. Online theft extremely exceeds “in person” identity theft.

Let's suppose a purchase was made with stolen credit cards or a stolen ID, online auction companies have very little recourse. Who are they going to investigate? What Police or Sheriff’s department has jurisdiction? A year and half ago, Storage Auction Experts was defrauded in Kingsburg. California. We took the suspect and his wife to small claims court and were awarded $1850 settlement against him. It was only because we had had face-to-face contact with this person (who provided us with a false name) that we were able to follow up and win a judgment against him for the Kingsburg facility and for Storage Auction Experts. [Fresno County Superior Court case# 12CESC00785]. This would not have and could not have happened if the auction was conducted online.

Here's a another reality in the online world. Who are you bidding against? Is it a “robo-bidder,” or a real person? If you ran an online company and after inventory, knew a unit was worth $500.00, why would you let it go for $20.00? You could have an automatic bidding set up to drive the prices. Or, maybe you would have your cohorts bid it up. If you lose it, your price was met. It you win it, you got a bargain. A win-win. Don't kid yourself into believing this doesn't happen. At a live auction, an auctioneer could have a cohort, but that person sees everything the other bidders see. There is really no advantage.

What happens to those garbage units that every facility has on auction day? I can't count the number of $1.00 units I've sold to the extreme delight of the management. Will online companies take pictures of this unit and try to sell it? Of course not. Their only option is to tell the manager it's their problem. 

How about the simple problem if an online buyer doesn't clean out the unit or abandons it? Storage Auction Experts deals with this situation in several different manners. Online auction services don't have the same options open to us. We personally guarantee satisfaction on unit clean outs. If Storage Auction Experts sells a unit at an auction, we will clean out the unit if the buyer doesn’t (except hazardous materials). 

Another important issue regarding online auctions is the settlement of the bill. An online competitor of ours took over a site in the Central Valley of California and conducted an adequate auction. At the conclusion of the auction, the managers (and later the owner) realized they had a dilemma The online auction company would not settle up on the outstanding account until they received their payment at the end of the following week. The issue? Who is now the lawful possessor of the storage unit that had been through the lien process, but not paid for? The management did not want to continue to bill the previous tenant, as the unit had been sold. And, they couldn’t take it off the books either, as the account was not settled. After two auctions of paperwork “nightmares,” the facility came back to us.

Online is not all negative. Occasionally a storage facility can benefit from these services. One is isolation. A facility in Susanville, a small community located several hundred miles away from other towns and cities could benefit by showing units to potential buyers that would not travel those distances for a live auction. Most facilities however, are located near populous areas, making it easy for buyers to follow the auctioneers throughout the day.

Another benefit with online auctions is if the facility encounters a unique situation. Recently a small foothill facility opened up two storage units containing piano repair equipment. The uniqueness of this equipment may have found additional bidders with proper online networking. Instead, this equipment went to the highest bidder in the area.

Storage Auction Experts believe that online auctions do have a small niche in the world of storage auctions. Online auctions (as a competitor claims) are not the “future of the storage unit sale industry.” Some things are just better suited for being done in person. Here's an example: Would you rather buy a car in person or online. As a seller, you get more views and potential buyers, when it comes to the sale, very few buyers’ trust 100% what they see online. In the end, buyers need to lift the hood, kick the tires, smell the interior and then fire it up. It's the same with storage units. If you don't trust what you're seeing in photographs, you probably will spend less.

We hope this offers a brief look at the benefits and negatives to both types of auctions. Storage Auction Experts is continually looking for the newest and latest ideas. While online auctions have their place, for maximum return, live oral storage auctions are still the BEST way to go!

Craig Plante, Auctioneer
Storage Auction Experts

Tuesday, April 8, 2014

Storage Auctions: Who needs a Bond?

Did you know to perform a legal mini-storage auction in California; the person doing the bid calling must have an auctioneer’s bond?  According to the Civil Code 1812.600, a person who either calls for bids or make offers for the purchase of goods at an auction is required by California law to have an auctioneer’s bond.

Many acting as auctioneers believe they can “do” the job, however, history has proven otherwise. These “auctioneers” operate with little or no regard to legal repercussions.  A person driving without a license may feel they are more than adequate to drive.  In the same manner, a non-bonded auctioneer may feel he is capable of calling an auction.  In reality, both the unlicensed driver and the non-bonded auctioneer don’t fully comprehend the perils involved conducting these illegal activities.    

Codes pursuant to California Statutes, Business, and Professions Code, Section 21700 and Title 2.95 Section 1812.600-607, are required to obtain an auction bond.  Not having an auction bond will create potential lawsuits. Even the most innocent of mistakes can result in huge losses. Cases of non-bonded auctioneers conducting auctions have increased.  Lawsuits tie up valuable time and money for the owner/stockholder/manager, of these storage sites.

In the past, not having a bond may have been overlooked.  Currently, lack of an auction bond is an open invitation to take you, the owner/manager, to court. Sadly enough, the sole responsibility falls on the storage site to prove why it acted “recklessly”, by not having a bonded auctioneer that would have recognized the error immediately.
Attempting to conduct auctions without education skills, will invariably result in catastrophe. It takes years to acquire the skills of a truly qualified and bonded auctioneer. The chances of lawsuits can be minimized dramatically by simply using the services of a professional storage auctioneer.

When choosing an auctioneer to conduct your storage auctions, make sure they have experience in selling storage units. Since the TV shows have aired, several people think they can do what the TV makes look easy. Also ask to see their bond number, liability insurance and E & O insurance policies. If you are using an auctioneer to help shield you from lawsuits, make sure they have the proper tools, paperwork, insurance and education to execute this need.

A storage auction expert will focus their attention on drawing the right crowd to insure the units are auctioned for the maximum return for your establishment.  They will under all circumstances maintain total crowd control.  If you ever had the displeasure of being engulfed in an unruly crowd, you immediately understand this alone can justify having professionals on site. By using a professional, you are assured the work will be done in a timely manner, within on budget, and above all, properly.

There is an old proverb that says, “A wise man will change”. Hopefully, this article will enlighten those “auctioneers” who are attempting to work without a bond risking potential violations.    Only those who have been trained and bonded have the ability to avoid these legal pitfalls.  It is of the utmost importance you are fully aware of the responsibility you accept by not being bonded if you are conducting your own auctions!

Written by:
John Cardoza, CAI, BAS, CES, CAGA
Owner, Storage Auction Experts

Monday, March 10, 2014

Obtaining Maximum Profits from Storage Auctions

Most people involved with the storage business would agree the most challenging part of the business is how to handle the 7 to 10 percent of tenants who don’t pay rent as agreed.

Like all areas in life, there is no one right answer for every situation.  In the storage business, they have a process designed to answer from a legal point on how to proceed.  These answers can be obtained by looking at the California Statues 21700 or you can talk to a lawyer (preferably one who belongs to the CSSA) to know the correct way to do the lien.

Assuming all the legal paperwork is accurate, now decisions must be made on how to get these non-paying units empty so they can be replaced by tenants who will pay for their unit.

Some Mangers are worried if they auction a tenant’s goods off, they will end up in court with huge lawsuits.  If the paperwork trail is followed to the letter of the law, this won’t happen.  Most people are aware that Paris Hilton had her items auctioned in November of 2005.  For whatever reason, payment between Paris and the storage site did not happen.  After the auction, she hired the best lawyer money could buy to try and get her items back.  Since all the paperwork was correct and the person conducting the auction was bonded, she was not able to get any of her property back.

Another common misconception about auctions is they don’t bring enough money and it would be better to settle with 20 percent and get the tenant out.  Occasionally this is the best method, especially after doing inventory and the contents have value only to the tenant.  However, usually it is better to your bottom line to stand firm and get 100 percent on what is owed to you.   Why would this action be better?  Let’s look at some basic math.  For example, from the thousands of units we sold over the years, three out of five units the people will pay in full.  Should these five units be $1,000.00 each, and you settle all five you would receive $1000.00.  Should the average pay, you would collect $3,000.00 from the full pay, and have two units to auction.

Using a Professional Storage Auctioneer, even after paying his commissions, you will net more than a storage manger doing their own auction.  A Professional Storage Auction Company will have more buyers and handle those unique situations that auctions can bring. Should an Attorney get involved for any reason, having a Professional Storage Auction Company on your side can be priceless. It also sends a message to your delinquent tenants you are serious about getting paid which brings in more “past due” money because of your auction date.

As a businessperson, it sometimes is confusing why a company that hires an attorney for their legal work, an accountant for their financial work, a groundskeeper for their yard work, a computer tech for their computer work and then try to do their own auction because they think it saves them money. (It doesn’t)  The bottom line is what is most important in business is to make a profit (and not get sued) and not settling just for settling sake is something everyone should reconsider.

John Cardoza, CAI, BAS, CES

Storage Auction Experts