Kelly Lovegrove, as director of operations at the LFC Group of Cos. here, has a front row view of these trades. Increasingly sellers are turning to online auctions to market their inventory -- as opposed to more traditional means of using brokers or even 'outcry' auctions where parcels would be sold off to the highest bidder present at the auction.
Lovegrove does not claim that sellers realize a greater price by putting parcels to bid online. What she does claim is that the technology allows more investors to participate -- especially from such areas as Singapore or Hong Kong -- and thus gives the seller a better picture of the land's true value. For this and other reasons, she tells GlobeSt.com, "we have definitely noted an increase in sellers using our services since the credit crunch began."
GlobeSt.com: Online auctions aren't a recent development. When exactly did they become part of the commercial real estate landscape?
Lovegrove: About five years ago these auctions began moving to the internet. I know we haven't done an outcry auction – that is, an auctioneer wielding a gavel – for the last five years.
GlobeSt.com: I understand the advantages for the seller; more participation. What does the buyer get?
Lovegrove: More information. The bidding is online so buyers can see how high a competitor is willing to go.
GlobeSt.com: Since the bids are placed using system generated IDs -- not the real names of the bidders -- how do the buyers know that a competing bid isn't just the seller trying to drive up the final offer?
Lovegrove: People have to put up a deposit to bid. It can be as much as $100,000.
GlobeSt.com: You are seeing an increase in residential builders putting up their land inventory for sale online. How long do you think that will last?
Lovegrove: Builders understand this housing crisis is not a short-term problem and that the markets will take a while to recover. Auctions give them a way to dispose of their assets at a fair market value.
GlobeSt.com: In this market are sellers frustrated with lower offers than they expected in online auctions? I know that has been the case in traditional trades.
Lovegrove: Yes, sometimes they realize that a property is not sellable or marketable right now. Online auctions give them a better understanding of the market right now.
GlobeSt.com: What is the biggest transaction you have completed thus far?
Lovegrove: Timber West put up 14,000 acres to bid on our system, including a mountain.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
