Published January 9, 2006
Auction companies grow revenue with live, online sales events.
Orlando Business Journal – January 6, 2006by Jill KruegerStaff Writer
Selling land by auction is becoming one of the hottest trends in real estate.
Consider: All types of land auction sales represented $48 billion in gross revenue in 2004, up 13.5 percent from $42.3 billion the previous year, according to the 6,000-member National Auctioneers Association in Overland, Kan.
In 2004, commercial and industrial real estate make up one of the fastest growing segments of live and online auctions. Those types of auctions rose 11 percent to $13.1 billion in 2004 from $11.8 billion in 2003. Residential real estate auctions climbed 14 percent to $13.1 billion from $11.5 billion the previous year.
Gross revenue from land and agricultural real estate auctions rose nearly 15 percent to $21.8 billion from $19 billion in 2003, the NAA says.
“The auction industry is increasing overall as baby boomers see real advantages,” says association spokesman Steve Baska.
In fact, a number of metro Orlando companies now are increasing their own land sales via live auctions, which are simulcast over the Internet.
Take Celebration-based USALandsale.com. The company’s sales grew 300 percent in 2005 over 2004 by selling 3,000 properties at live auctions and through its Web site, says founder David Waronker, who would not disclose the dollar figure of those sales.
And heavy equipment auctioneer Ritchie Bros. launched live real estate auctions in Canada and Tennessee based on clients’ requests, says Will McLemore, sales manager of the real estate auction division of Ritchie Bros. Auctioneers Inc., which has an Orlando auction site.
In the last two years, Ritchie Bros.’ land division grew to $100 million in sales, McLemore says.
In addition, Fred Johnson, area developer of QuikDrop’s 10 eBay drop-off stores in Central Florida, recently began running online ads for land auctions on behalf of his clients.
After starting with ads for high-demand residential land parcels, he is expanding the pilot program to include commercial real estate. “This is going to be a priority target over the next six months,” he says.
Baby boomers are the driving force in the growth of the industry, says the National Auctioneers Association’s Baska. “They like to choose this method as a quick and efficient way to dispose of property, from houses to automobiles,” he says.
To meet that demand, auction companies increased their marketing and advertising in 2004 by 7.7 percent to $2.8 billion, up from $2.6 billion a year earlier, the association says.
While live and online auctions may offer a convenient, effective way to buy and sell land, there are both pros and cons to using them, Baska says.
Among the advantages: The seller sets a specific sale date and can set a minimum price.
This method works well for valuable and unusual properties that are less efficient to sell and harder to price, such as industrial, trophy ranches, mansions, properties with specific uses like mines and quarries, and waterfront and beachfront properties, he says.
Live and online auctions also reach more people.
For instance, eBay has 167 million active users, says QuikDrop’s Johnson: “There’s nowhere in the world where you can reach as many people.”
In comparison, local daily newspapers in a market the size of Orlando have just several hundred thousand subscribers, according to Orlando Business Journal research.
Online advertisements also cost substantially less, says Johnson. A regular newspaper ad for one day can cost as much as $6,000-$7,000 to reach a few hundred thousand people, he says. In comparison, the same land can be advertised online to 167 million people for 30 days for a mere $450.
Another advantage is that live and online auctions present an easy way to buy inexpensive land, say local experts. For example, 35-year-old Davenport resident Jackie Wilson bought 3 acres of vacant residential land in Putnam County on USALandsale.com for $2,400 and resold it for $7,000 on Bid4assets.com, another land auction site. “That land is probably worth even more now,” she says.
But live and online auctions aren’t without drawbacks, cautions Baska.
Among the disadvantages: A buyer can waste a lot of time going to a reserve auction, where the seller reserves the right to accept or reject the high bid; or one that requires a minimum bid that isn’t advertised.
In addition, many auction companies also charge a buyer’s premium — a percentage of the high bid — typically 5 percent-15 percent.
And certain commercial properties sell better using other alternatives. For instance, the sealed-bid process — which sets a time frame for a sale but doesn’t set an asking price — works well when a commercial property has multiple potential uses, says Matthew Messier, senior vice president of Trammell Crow Co.
He put this method to use in the sale of North Baptist Church on 17-92 to Lake Highland Preparatory School for a new middle school. Says Messier, “Their use determined they could pay the highest bid for the property.”
More growth expected
Despite any disadvantages, the National Auctioneers Association expects continued growth in 2006 for live and online auctions, Baska says.
With that in mind, local auction companies intend to capitalize on that growth.
Johnson, for instance, plans to roll out land ads to his other QuikDrop locations in metro Orlando and southeast Florida.
USALandsale.com opened a Scottsdale, Ariz., office in 2005 to meet West Coast demand.
And Ritchie Bros. is considering launching land auctions in Florida and other parts of the United States where it makes sense, says McLemore.
After all, says Johnson, given Florida’s growing population –18.87 million by 2009 — “The market potential is astronomical.