Calling All Bidders - Property Auctions Bring the Market to Sellers
April 29, 2016
by Richard Foster
“Let’s start at a million! One million dollars! One bidder, one bidder, one …”
“400!” “We have $400,000! Now five!”
On a warm March day, auctioneer Tim Dudley’s rapid-fire patter rings out over a loudspeaker to a small crowd of about 50 people gathered on a grassy meadow in front of a clapboard 19th-century farmhouse.
At one time, the house was a pristine white. Now, after years of disrepair, large swaths of bare, weathered gray wood peek through the home’s peeling paint.
Still, 25 people have registered to bid on this sprawling, 288-acre historic farm in Gordonsville that has fallen into bankruptcy. It’s being sold at auction by Richmond-based Motleys Asset Group on behalf of the loan holder, Colonial Farm Credit of Mechanicsville. A private buyer originally purchased the farm estate for $900,000 in 2006 but couldn’t keep up the payments so Colonial Farm foreclosed on the property, necessitating the auction. (The property owner in the foreclosure must consent to holding the auction on the property site, otherwise the auction is held at the local courthouse.)
After six minutes of steady, incremental bidding, the auction slows to a stop. Dudley exclaims, “It’s been sold for $755,000!”
The winning bidder is cattle and hog farmer Charles S. Rosson, who bought the property with his son, Charles A. Rosson. He has been eyeing the property for years. “I’ve got cattle across the road here,” he says. “We just need extra land for livestock.”
Like other registered bidders, the Rossons had to bring a $25,000 certified check as an initial deposit to qualify for the bidding. A 10 percent deposit is due within 10 days after the auction, and the deal must close within 30 days. In addition to the Rossons’ bid of $755,000, they also must pay a mandatory 10 percent buyer’s fee of $75,500 to Motleys. As the trustee selling the property, Colonial Farm Credit had already paid all delinquent taxes on the farm prior to the auction.
“You have 25 registered bidders looking to buy a farm that’s [valued] almost at a million dollars. That’s good for all of us,” says Dudley, vice president of SVN Motleys, the commercial real estate brokerage division of Motleys. “That’s letting people know that the economy is starting to turn back again.”
Increasingly, auctions are being used to sell not only residential properties in Virginia but also commercial and agricultural real estate and high-end historic properties.
“We’ve seen a big increase [in commercial sales] over the last, I’d say, 10 years,” says Motleys CEO Mark Motley. In his industry, he adds, the preferred term for auctions is “accelerated sales.”
Though real estate auctions are a popular and accepted sales tool in nations such as Australia and New Zealand, people in the U.S. have long attached a stigma to auctions — largely a holdover from foreclosure auctions in the Great Depression. In the past, buyers might think an auction signaled that a property was distressed or damaged. Now buyers and sellers are becoming more educated about the auction process and are more willing to participate, Motley says.
Marketing and advertising
For sellers, full-service real estate marketing and auction firms such as Motleys offer more than just auctioneering; they conduct targeted marketing campaigns, create slick advertising and actively seek out buyers they believe would make a good match for the property.
For instance, when Motleys sold Meadow Event Park, the Caroline County home of the State Fair of Virginia, in 2012, it found a winning bidder in Memphis, Tenn.-based fairground management company Universal Fairs. Two weeks after buying the park and the rights to the State Fair for $5.45 million, Universal Fairs turned around and sold Meadow Farm Event Park and the State Fair to its current owner, the Virginia Farm Bureau Federation.
Last year when Motleys oversaw the foreclosure auctions of Salem-based Old Virginia Brick, it sold the company’s corporate headquarters site to a Roanoke attorney and shopping center developer for $1.7 million; a competing brick manufacturer purchased the defunct Old Virginia Brick’s Madison Heights manufacturing facility for $687,500.