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AUCTIONS

AUCTIONEERING; IS THERE A ROLE IN TODAY'S SALE OF COMMERCIAL/INDUSTRIAL PROPERTY?
There is no doubt that through the past few decades, the role of the auctioneer has had a positive influence on the sale of property in South Africa.

The present status however, of the property auctioneering house is uncertain. I believe that the whole sales process of auctioneer/brokerage/client is ill defined, and as such does not meet the needs of any of the parties.

To be honest; both the role of the broker and auctioneer have not had a marketing rethink for years, and we continue to backbone our marketing through boards, listings, referrals, mandates, seriously expensive media advertising, etc. Success in this industry is determined by the quality of the broker and not through innovation of product or service. A combination of both could really spark the industry.

I believe that there could be a new product created specifically to combine the forces and talents of both broker and auctioneer.

The basis of the proposed product is detailed below, and I look forward to your comments, critique and suggestions.

The proposal is for Broker Junction to provide an auction platform for Brokers to place their properties on Auction.

  • Property auctions are planned to be held every month at the same time and venue.
     
  • Auctions will also be held outside the main centres as per demand.
     
  • A maximum of ten properties are put up for auction
     
  • Qualified, experienced auctioneers will be appointed to facilitate the auction and drive the auction setting up process.
     
  • Brokers are invited to put forward their properties for auction, and the viability of these properties will be discussed with the auctioneer.
     
  • The property mandate remains at all times the broker's mandate.
     
  • All Brokers with auction properties will be encouraged to network the complete ten property auction prospectus to their database.
     
  • Brokers must provide a branded prospectus and any other information for potential clients.
     
  • On auction day, brokers will be given a table each to brand their companies and lay out their individual property presentations.
     
  • There will be no referral commission payable if your ''client'' decides to purchase another property on the auction.
     
  • All sales will be signed on the broker's paperwork.
     
  • The broker will drive his sale and refer to his preferred attorneys or bond originators if necessary.
     
  • After the auction, the auctioneer has no mandate to market any of the auctioned properties. The auctioneer can assist the broker however in the taking of preauction offers.
     
  • Commission will be on a predetermined sliding scale,
     
  • No auction commission is payable at the auction. Brokers may insist on a deposit in the sale agreement. Should this be paid it will be lodged with a trust account of the broker's or client's designation.
     
  • Commission will be payable to all parties on transfer.
     
  • Brokers will negotiate commissions if needed.
     
  • Commission split to be 70/30 in the Broker's favour; after expenses.
     
There is no reason why ten single brokers can't have properties up for auction in a given month; or one brokerage book all ten slots. The idea is also to give those smaller outlying brokers chance to brand their businesses.

The cost of advertising has always been a contentious issue. With the internet and buying from all those auction brokers/auctioneers, surely there is the ability to generate a major advertising campaign without the huge cost of media adverts. This aspect of the new auction product needs to be discussed. Ideas please! Pretty sure that having the auction on a recognised monthly date will contribute to general interest.

What I am trying to accomplish is for the broker and auctioneer to work much closer together. The key is that the broker still has full control over his property, and is able to brand both the auction and any advertising. The auctioneer on the other hand will drive the setting up and auction day action.

I have always thought that there has never been the full buy in by the broker to property auctions.

In summary then, this proposal would see Broker Junction, through its network of brokers, provide a platform for the broker to take his property to auction under favourable terms.

I look forward to your comment on the viability of the proposal and we encourage any suggestions as to how we may ultimately define the product.

Regards

Garth Botton

Member SAIA
garth@brokerjunction.co.za


Your comments and suggestions are invited:
Please use the Suggestion Form to post, comment and respond. If suitable for publishing, we will use the name as supplied on the form and mail addresses will not be displayed. Please indicate if you would rather that your reply is not for publication.

Jennifer
 
I have noted the content of your mail. I am certain that eg. Numerous auctioneers, do pay referral commission to agents. However your suggestions need to be worked through, by the various agencies. Hopefully once you have received feed back from other agents, we can all decide on how to work in a mutually supportive way.

Perhaps you could communicate what ideas are put forward on this issue as well.

Not sure, if you are aware, that one can advertise on Prop24, without paying upfront and only pay the monthly fee, once the sale is concluded. I haven’t gone this route yet, however I do know, that it draws a tremendous response from the public. I have colleagues who get many replies to their adverts on this site. Not paying an upfront fee, is of enormous benefit to any agent.

posted on: Saturday, November 17, 2012 - 06:15 PM

Dooley
 
Please advise what "after expenses" means in your commission split clause?

How much are we talking about?

posted on: Friday, November 16, 2012 - 07:23 PM

Rob
 
We do work with our franchisee base of about 200 offices around the country and have a very effective referral system - controlled by our back of house management platform.

I have always believed in partnering with Brokers - we operate on two sides of the same coin and if we can help each other with stock and sales - it’s a win-win.

I think you will have buy-in from Auction Houses - it’s the Brokers you need to convince.

COMMENTS FOLLOW..............

Property auctions are planned to be held every month at the same time and venue.
  What type of venue? Hotel? Who pays up front?

A maximum of ten properties are put up for auction.
  Why is this limitation to number on auction? You could have 10 props at 1m each or 10 at 10m each - big difference in covering costs.

Qualified, experienced auctioneers will be appointed to facilitate the auction and drive the auction setting up process.
  By "drive" - what does this entail?

The property mandate remains at all times the broker's mandate.
  Fine - but must have facility to accommodate buyer commission.

All Brokers with auction properties will be encouraged to network the complete ten property auction prospectus to their database.
  Even if they only have 1 property in the auction?

Brokers must provide a branded prospectus and any other information for potential clients.
  Whose brand? Will they all put their own brand on the prospectus? Maybe should be a generic or white label brand should be used?

On auction day, brokers will be given a table each to brand their companies and lay out their individual property presentations.
  What about the Auctioneer? Do they have branding?

There will be no referral commission payable if your ''client'' decides to purchase another property on the auction.
  Why not - they brought the client - without him there would be no sale. Suggest all brokers list own clients before auction takes place and sign broker referral form - giving them 10% if client buys another property.

All sales will be signed on the broker's paperwork.
  Again - fine - but must include Ts and Cs of auction as per CPA / no suspensive conditions / Voetstoots clause in there / comm. paid by buyer on fall of hammer etc.

After the auction, the auctioneer has no mandate to market any of the auctioned properties.
  The auctioneer can assist the broker however in the taking of preauction offers. Comm split the same - Ts and Cs same as if at auction etc etc

Commission will be on a predetermined sliding scale.
  Which is?

No auction commission is payable at the auction. Brokers may insist on a deposit in the sale agreement. Should this be paid it will be lodged with a trust account of the broker's or client's designation.
  The industry norm is for buyer to pay comm. on fall of hammer - they are used to this and accept it. It ties them in to the OTP so they can’t simply disappear after the auction.

Commission will be payable to all parties on transfer.
  Suggest all comm. to be lodged with reputable neutral attorney. Who will monitor transfer process? Should be listing agent.

Brokers will negotiate commissions if needed.
  We have never negotiated comm. - but if Shopping Centre sells for 100m - then there may be some leeway - but this is why we are all here isn’t it?

Commission split to be 70/30 in the Broker's favour; after expenses.
  Who pays for expenses upfront? Expenses need to be clearly documented as there can be arguments down the line.

posted on: Friday, November 16, 2012 - 12:59 PM

Derek
 
Thanks for the e mail, you are bang on with your assessment and it is something we have seen for some time as well.

I did the auctioneering course in 2001 and bought the business brokerage in 2003.

From a cost effective point of view I have found it more beneficial to work with and through bigger auction houses than doing the auctions myself, hence why I had a working relationship with Auction Alliance, I now work with High Street and Consolidated and will be more than happy to work with you to.

posted on: Friday, November 16, 2012 - 12:34 PM


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