Questions on Holding 1st Auction

[Greenville Storage]

Hello Everyone!

We are currently preparing to hold our first auction and have a few questions that I was hoping some of you could help with.

1. How do you word your auction notices?
2. Who exactly is qualified to be a bidder? Can they be an employee of the storage company?

[Storman]

Re: Questions on Holding 1st Auction

Welcome to the forum!

The auction wording in your notice may be prescribed by the lien laws in your state. Here in CA, the wording necessary to be in the notice is prescribed. If you can't find it, you might check with your state self storage association if there is one.

As for en employee of the company being a bidder, I've never seen anything that prohibits it. Since I don't have any formal employees (family owned and operated), I will often have a friend or relative show up and bid $1 on any units that don't get any other bids, just to complete the auction process with the unit being purchased at auction. I don't know of any reason why an employee couldn't be a bidder, but others will certainly have opinions to share on that.

Good luck with your auction, just make sure you follow the requirements very closely.

[Lisa T]

Re: Questions on Holding 1st Auction

Are you in Greenville, SC? If so, then the the auction wording is prescribed.

[Lisa T]

Re: Questions on Holding 1st Auction

oops...never mind. I just noticed we are in the Wisconsin state section...that's what I get for clicking on latest posts and not paying attention to where I end up at!

[A-team]

Re: Questions on Holding 1st Auction

It is not a good idea to have employees bid on units. If the bidders know that an employee is bidding they will bid more, thinking that the employee has inside information on the contents. If someone outbids the employee and the unit turns out to be a dud, then you start having problems with claims of you ripping off bidders by driving up the price. I don't agree with STORMAN about having a friend or relative bid a dollar just to complete the auction. If there are no bids, all of the people present are proof that the unit was full of trash or unwanted items. In that case I would have the property hauled to the dump and charge the tenant for the clean-up in addition to the auction costs. If a friend or relative bids a dollar, the storage has to pick up the tab to clean out the unit.

[hurlco]

Re: Questions on Holding 1st Auction

Hello Everyone!

We are currently preparing to hold our first auction and have a few questions that I was hoping some of you could help with.

1. How do you word your auction notices?
2. Who exactly is qualified to be a bidder? Can they be an employee of the storage company?

When you refer to "auction notices" we cannot tell whether you are referring to the notices mailed to the tenant, and there are two in Wisconsin, or your publication in the newspaper. The Wisconsin statutes are quite complicated and I suggest that you have an attorney look at your letter templates and an other letters or notices that you use. For example, I find the following Wisconsin code section problematic:

704.90(5)(b)2.b.
b. An itemized statement of the operator's claim for rent and other charges due as of the date of the notice and of additional rent and other charges that will become due prior to sale and the dates when they will become due.

Notice that this code section requires a storage facility to not only itemize charges in the required notice, but must also disclose any other rent and charges and the dates when they will become due. I seriously doubt that any software program in self storage does this correctly. I know that my software could not do this. Anyway, I would consult an attorney on the specific wording because there are other issues as well.

Anyone is qualified to act as a bidder, all they need is money and motivation. Wisconsin is one of the few states that allows for public and private sales of storage spaces. If you conduct a public sale, then everyone can bid, even the tenant if they attend. If you sell via a private sale, then the facility invites buyers to examine and purchase the property. Private sales are very suspect unless you are selling something unusual. Most facilities sell property via public sales.

Since Wisconsin has produced a case called Cook v. Public Storage, I suggest that you use a professional auctioneer for your first few if not all your auctions.

My good friend, Storman's practice is perfectly sound since his friends show up to purchase the spaces for minimal bids. A-Team is correct in that buyers see employee bidders are perhaps shills or by bidders for the owner and accordingly, you will quickly get a reputation for manipulative selling practices. Some states specifically forbid (Washington) employees from bidding since the practice is so wrought with conflicts of interest and inside knowledge.

Lastly, since the owner is also the lienholder and the sale if a forced sale, the owner can bid on the property without disclosure to the buying audience, however, anyone who has been in the business will tell you that if the owner begins driving the bids up, the buyers will not return to your auction and you will lose their confidence.

Hey, Wisconsin is quite complicated and I would suggest that you get as much help as possible. Wisconsin takes a dim view of self storage sell out procedures and your exposure is quite high. Do your research and proceed with the utmost of caution.

[dakselfstorage]

Re: Questions on Holding 1st Auction

It is not a good idea to have employees bid on units. If the bidders know that an employee is bidding they will bid more, thinking that the employee has inside information on the contents. If someone outbids the employee and the unit turns out to be a dud, then you start having problems with claims of you ripping off bidders by driving up the price. I don't agree with STORMAN about having a friend or relative bid a dollar just to complete the auction. If there are no bids, all of the people present are proof that the unit was full of trash or unwanted items. In that case I would have the property hauled to the dump and charge the tenant for the clean-up in addition to the auction costs. If a friend or relative bids a dollar, the storage has to pick up the tab to clean out the unit.

I agree with A-Team. All my bidders sign a bid sheet that includes units in sale. If I get no bids, I Put no bids along side of that unit and ask for some initials from bidders. My guys have no problem with this. My wife and I always junk it out over time if we have other units of that size. Sometimes we find OK stuff. She hangs onto it and goes to a flee market every once in a while. A $100.00 here and there never hurts. Mostly junk though.

[Storman]

Re: Questions on Holding 1st Auction

It is not a good idea to have employees bid on units. If the bidders know that an employee is bidding they will bid more, thinking that the employee has inside information on the contents. If someone outbids the employee and the unit turns out to be a dud, then you start having problems with claims of you ripping off bidders by driving up the price. I don't agree with STORMAN about having a friend or relative bid a dollar just to complete the auction. If there are no bids, all of the people present are proof that the unit was full of trash or unwanted items. In that case I would have the property hauled to the dump and charge the tenant for the clean-up in addition to the auction costs. If a friend or relative bids a dollar, the storage has to pick up the tab to clean out the unit.

Good point that employees bidding may cause some concern among bidders, that's why I pointed out in my case they only bid when there are no other bidders.

As for the $1 bid to complete the auction, this is my reasoning; suppose the delinquent tenant comes in a day or week or month after the auction and asks you what happened to his stuff. Would you prefer to say:
1)It was sold at auction to highest bidder, per the lien laws of this state. I cannot and will not tell you who the high bidder was due to privacy laws..

or

2) We held the auction, nobody bid on the unit so we as a company just took most of it to the dump, but we did go through it and kept some of the stuff that seemed worthwhile... recognize that chair?

or

3) We held the auction. (many more questions ensue from the unhappy customer)

Answer #1 stops the discussion right there. Answer #2 would infuriate the customer and, in my opinion, risk him making more of a mess for you and your company. Answer #3 would not end the discussion, many more questions would follow that would likely lead to answer #2. I would prefer to tell the truth straight up the first time, and use answer #1.

Also, I don't understand your argument that if the unit is not bid on that somehow absorbing the cost as a company and charging it to the delinquent tenant is better? The tenant is delinquent and allowed his unit to go to auction, do you think he's going to come in and pay the balance due in addition to dump fees after the fact just because you incurred them? Either way you're paying dump fees, putting it on the delinquent tenant's account doesn't make a difference, does it?

I like to button everything up by following the lien laws every step of the way, ending with a sale to a high bidder. For me it feels more "arms length" with the tenant should he come in after the auction asking questions.

Your mileage may vary

[hurlco]

Re: Questions on Holding 1st Auction

Hello Everyone!

We are currently preparing to hold our first auction and have a few questions that I was hoping some of you could help with.

1. How do you word your auction notices?
2. Who exactly is qualified to be a bidder? Can they be an employee of the storage company?

One thing that you did not mention was whether you are going to conduct your own auction. Wisconsin does require that auctioneers be licensed and after looking at the exceptions to licensing, I did not see any definition that exempted self storage owners/managers. Are you using a licensed auctioneer?

[Greenville Storage]

Re: Questions on Holding 1st Auction

One thing that you did not mention was whether you are going to conduct your own auction. Wisconsin does require that auctioneers be licensed and after looking at the exceptions to licensing, I did not see any definition that exempted self storage owners/managers. Are you using a licensed auctioneer?

Thanks everyone for the posts. We are still working on this one and everyone has been very helpful!

hulco: I did not find anything about needing a licensed auctioneer. Where did you see that information?

[hurlco]

Re: Questions on Holding 1st Auction

Thanks everyone for the posts. We are still working on this one and everyone has been very helpful!

hulco: I did not find anything about needing a licensed auctioneer. Where did you see that information?

Under Wisconsin statutes, Chapter 480.01 thru 480.26, you are required to have an auctioneers license. There is a paragraph that has exclusions from licensing requirement, but I do not see that any apply. One provision states that if the property is valued at less than $500, a license is not required. The problem is that we now sell units for more than $500 occasionally.