Auction Action Forecast To Change

By John Kamin
The Forecaster

        During the Clinton years and the Bush years, profitable auction action deteriorated as interest rates were pushed down to near 0% for many years. Savers rebelled and began to save less and live larger. It was like borrowing nearly-free money!
        During the good years caused by cutting taxes, businesses flourished, political rhetoric aside.
        But auction moneymakers diminished.
        For example, at Tax Lien Certificate auctions, people were willing to accept lower interest rates on the TLC's, on the ordinary 3BR 2BA houses where taxes were delinquent. In certain states such as Indiana, you could still earn 10% on short-term money. But in other states, such as Arizona where you could earn 16% max and Illinois where you could earn 18% max interest, bidders were willing to accept 7%, 6%, 5% returns on ordinary homes, on TLC's, because that was more interest than they could earn down at the bank on CD's, savings accounts, T-bills, and similar. Oh, you could still earn 15% or higher in Arizona and Illinois on TLC's, but usually on TLC's backed by vacant land, building lots, strip malls, and vacant commercial properties or gas stations, not on the ordinary homes in much demand.
        Forecast: that's all going to change, auction actions will increase, giving you the opportunity to make money.
        Example: www.ushomeauction.com run by Real Estate Disposition Corp. has been selling foreclosed homes for as little as $40-$50 per sq ft of construction, sometimes more, sometimes less, and you get the lot free. Many of these homes cost $150-$250 per sq. ft of construction, plus the cost of the lot.
        During the recent gas price run up summer 2008, The Forecaster suggested you buy at auction or other distress sales your favorite adult toy such as a boat, RV, motor home or other vehicle, say at 20¢ to 30¢ on the dollar. Those who did so saw gas prices drop from $4.59 per gallon to the current under $2 range, and such "guzzlers" are now popular once again.

Why Would Money Making Auctions
Improve and Increase In Frequency?

        Physical auctions where you can make money are usually those auctions where the items are being sold without reserve...where they have to be sold. This can include creditor seizures, foreclosures, US customs auctions, bank repos, company failures, bankruptcies, court ordered sales, even estate sales.
        I do not include in money making auctions the online auctions on e-Bay and Amazon.com. No way. I do not even bother participating in online auctions. I do not include coin auctions, which are an entirely different situation.
       I'm talking about where you can buy property, vehicles, adult toys such as boats, RV's, motorcycles, even small planes; furnishings, antiques, artwork, musical instruments. You get the idea. These are tangibles, and I'm only interested in resalable items, hopefully at or higher than what you paid, for a profit.
        There wasn't that many bankruptcies and business failures during the Clinton and Bush years, so auction action deteriorated somewhat.
        Prediction for 2009-2011: there are going to be a lot more firms and individuals filing bankruptcy, so there are gong to be a lot more physical, tangible items for sale at distressed prices that must be sold (e.g. car dealers going under. That's where the opportunities surface.

Sources of Moneymaking Auctions

        You can find the auction notices in several places.
        Try your major metro Sunday newspaper. Example: Chicago Tribune, Los Angeles Times, even the New York Times has an auction section. US Customs advertises auctions online.
        A second good source, especially if you live in medium size population centers is your county courthouse. Somewhere in that county courthouse you will find sheriff sales posted, foreclosures notices posted, other such notices. You may have to ask the clerks where they post those notices, but they are posted there somewhere, for the public.
        Another source is the little county legal newspaper, that all the attorneys read but of which you may never have heard. Usually these legal papers are sold near the courthouse grounds in machines.
        You can also check the legal notices classifieds in newspapers, but that can sometimes be troublesome to track down.
        These are just a few of the auction notice sources. The Wall Street Journal, often carries auction notices for properties.

Final Auction Tips that
Cost Me $10,000's to Learn

        1. Physical inspection of the items to be auction is a must, before the date of the auction. Do not depend upon catalog descriptions, nor upon online descriptions. If you don't physically inspect the goods, the photograph won't show you the dents where that expensive $35,000 machine was inadvertently dropped off the back of a truck and damaged. The online descriptions won't show you where the little hairline cracks are on the artwork and sculptures that are not visible in the photos. Got it? Don't take shortcuts on physical inspections.
        2. When you go to inspect, make sure you have a strong flashlight (for dark corners and odd angles). You also need a good magnifying glass, to bring up smudged model numbers, serial numbers, inspection of damages, etc. Also, you might need a pair of good gloves.
        3. Allow plenty of time. If you try to inspect 1 hour before the auction, say on advertised gold jewelry, there may be a line of 91 people ahead of you, and your inspection time may be limited to 5 minutes on $10,000's worth of valuables; insufficient. Don't take shortcuts, don't show up late. If you can't afford to inspect it, you can't afford to buy it.
        4. I've already mentioned that I'm not fond of online auctions. In my opinion, you are less likely to get a bargain there; especially if reserve prices (open or hidden) are high. You want NTS (Need To Sell) auctions without reserve.
        5. Elicit payment terms early. Cash is very useful. Personal checks are not, may not be accepted. Credit cards may not be accepted. Cashier's checks may have to be made out a certain way. Always check the payment terms in advance. Money wires may or may not be accepted. If you're the high bidder, but have not got the right kind of payment, at the very time you need it, your high bid could be thrown out instead of providing you with $1,000s in potential profits.
        6. If on your inspection you don't know how old a certain machine or vehicle is, be prepared to call the manufacturer, give them the model number and serial number, and find out. I often do, especially when buying machines that may run $20K, $35K or over $50K new. E.g. all the postal machines prior to 2008 are now obsolete by direction of USA Post Office. Careful.
        7. Do not buy perishables unless you know exactly where to sell them fast, and at what price. Do not buy objects that go obsolete fast, such as computers, PCs, printers. Something 3 years old may already be obsolete, unresalable, even though it has been sitting in a warehouse new and unused for 3 years.
       8. Watch out for items that are required to be exported, cannot be resold in the USA, must be shipped out of the country. This is very common at Us customs auctions on items that have been brought in illegally. It may also apply to cars that do not meet USA safety standards. It may apply to foodstuffs, and other items.
        9. Don't buy sealed boxes, sealed suitcases etc. It's OK to take a chance now and then, but you really must see some value there, or you're just gambling.
        E.g., when I was redoing some rental properties, I bought several visible air conditioners, new, on pallets. But in the big boxes underneath, unbeknownst to me and other bidders, were valuable artworks, chandeliers worth thousands. I bid for what I could see, what was inspectable, the rest was a bonus.
        Another time I bought some rental properties that needed new carpets, so, I went to a bankrupt carpet sales auction, and bought a truckload of new carpets. Over the next year or so they were installed in our other properties, but I still had lots of carpets left over, had to donate them or pay for storage.
        10. If you get large lots, at 3¢ or 5¢ on the resale dollar, don't be afraid to use temporary Public Storage units or other places to safeguard your merchandise until you can either resell it, use it, or figure out what to do with it.
        The thing with using public storage units however, where you think you may solve the disposal problem in 3 months or 6 months of storage rentals, you may end up paying rent there for 12 months, 18 months or even longer. Be sure to dispose of the extras rather than pay the long-term rentals, which eats into your cashflow with unanticipated expenses. Often it's cheaper to donate items with or without a charitable tax deduction, than to keep storing the "new" merchandise.
       Summary: Look for greater auction action in upcoming sales this year, next year, and the following year. Often there is a time lag between the time the economy goes into recession, plus another 12-18 months before the bankruptcy auction scene heats up where you can make a lot of money. That time is fast approaching! NTS auctions can be great money making adventures!
        Editor's Note: John Kamin is editor of The Forecaster, 19623 Ventura Blvd., Tarzana, CA 91356. 1 year, 40 issues, $180. He has authored 15 books on money, high finance, property, and collectibles. Among his bestsellers is How To Make Money Fast Speculating in Distressed Property.
        Are you ready to become very, very rich? Kamin provides facts to make it rich in real estate. Main sources of distressed properties for buying/selling. How to get money you need. Inflation hedging. Buying foreclosures. How to negotiate. Best bets in USA. 343 pgs. $25+$5 S&H. CA add $2.06 tax.