Wednesday, June 5, 2013

An Ethical Auctioneer?

An Ethical Auctioneer?

A strange question. You would think that all auctioneers are ethical. We'd like to think they are, but, like any industry, there are always a few bad apples that ruin it for the rest of us.

When it comes to Self Storage Auctions, there are some things that we believe are necessary to be ethical. In many states, these ethics are spelled out by regulation. In other states that have no license requirement (such as Colorado), there is likely an association of auction professionals that require their members to adhere to a code of ethics.

Unfortunately, some auctioneers will intentionally engage in unethical behavior until they are caught. Some times, the auctioneer simply doesn't realize they are doing something wrong.

As far as we're concerned at the Storage Auction Kings, there are some basic rules that we require all of our auctioneers to follow:

Auctioneers bidding on the units they are selling

There is typically nothing illegal or unethical about this practice, as long as the bidders are told the auctioneer is bidding. But even though this is legal and ethical, we don't believe it is good business. It's our opinion that competing with the people we are selling to will always leave a little doubt in their minds, and it's not something we are willing to do. If one of our auctioneers really, really wants something from a unit, they are free to make an offer to the buyer once the unit is sold. But not before.

Getting bids from the Rafter Brothers

This is also known as "ghost bids". A ghost bid is one in which the auctioneer acts like he received a bid, but no one actually was bidding. There are many bidders who are convinced the auctioneer is "catching ghost bids" simply because they didn't see someone else bidding. If this were true, then catching their "ghost bid" would be unethical.

Usually, even though a bidder may think something funny is going on, they simply didn't see or hear the other bidders. Auctioneers work in a fast-paced environment, and are trained to see all and hear all. The "ghost bid" may actually be another bidder who is using very subtle or slight motions to indicate a bid. Sometimes it's just a wink or even a slight nod. Some bidders just don't want others to know they're bidding. Even though you didn't hear a loud "yuuuup", there could still be someone bidding against you.

Getting every penny from you...

That's the auctioneers job. The auctioneer works for the seller. Period. If she sells out too quickly, leaving money on the table, she's failing in her fiduciary responsibility to the seller, her client. But don't confuse this responsibility with strategy. There are times when it seems like we're not accepting bids to sell to someone cheaper. "You were at $800, and I offered $805"...."You should have taken my bid because it was more money!"
No. If we're at $800, our next increment will likely be $825, $850, or even $900. By taking your bid advance of only $5, we're telling all the bidders it's time to "nickel and dime" us. The better strategy is to wait for the higher increment, or sell the unit at $800 and keep the pace of the auction moving. Slowing down, taking such small increments (even though it's more money than the last bid), might cause the auction to drag, ultimately driving some bidders away or stopping them from bidding. At the end of the day, the smaller increment, although a higher bid, could actually lead to lower overall sales. It's strategy, not personal.

But it's an absolute auction, and you HAVE to take my bid!

No I don't, unless the auction was specifically and clearly advertised as "absolute". By law, in almost all cases, all auctions are "with reserve" unless otherwise advertised. A reserve auction means that the seller can have a minimum bid they are willing to accept, and has the right to accept or reject ANY bid. It's their choice. This is what gives the auctioneer the right to say "I'm not selling because we're not high enough" or to refuse to take your advance of a smaller increment than what he's asking for.

Why can't we go in the unit? Why can't we look at the stuff?

Simple. It's not yours, and in fact, it still belongs to the renter until it has been paid for (even though the facility has a lien on the contents). Simply put, once it's sold and paid for, then you can go through it all you want. But not until then.

But it looks like the Manager has been through the unit!

There's nothing in the law that says they can't. But the industry frowns on the practice, and so do we. By entering the unit in any way, management opens themselves to liability and claims of theft or damage if they touched anything.

I can't speak for other companies, but if we find out that a manager has been in the unit, and we were not told in advance that they did (and they had better have a darn good reason), then we won't sell the unit.

If we think for a moment that the manager was "cherry picking", or taking things from the unit, we'll close the door, cancel the auction, and void our contract. We just won't play that game. For many of our clients, we are the ones who actually cut off the tenant's lock and witness the inventory process to make sure no one went into the unit.

There are rare occasions when a manager should enter the unit... to verify that it's not just trash; to see if there is anything illegal or dangerous (think meth lab); or to see if there is something of such extreme value that a storage auction might not be the best way to sell the contents. But for our company, they need to tell us in advance of their plans to enter a unit.

There are many other things that could be considered ethical or unethical practices, and we will likely address them in future posts. For now, this should give you something to chew on.

Feel free to contact us if you have any questions. Schur Success Auction & Appraisal is the home of the Storage Auction Kings, an industry leader in self storage auctions.

Join our conversations and fun on our Facebook page, or simply call us if you have any questions... (866) 290-2243.


Thanks
Rich Schur, Champion Auctioneer

Chief Operating Officer, Schur Success Auction & Appraisal
Chairman of the Board, Colorado Auctioneer's Association
Director, National Auctioneers Association