Going, going … going | Tom Saturley, president of Tranzon Auction Properties in Portland, on why he's doing twice as many auctions these days, and how he'll get you to ante up
Photo/Sara Donnelly
Tom Saturley, president of Tranzon Auction Properties, says he thinks of himself as a "master of ceremonies" at auctions
I grew up in the auction business because my folks were in the auction business. And then, when I was going to law school, I was kind of bored one summer so I went to auctioneering school down in North Carolina. I practiced law for a number of years but I was doing charity auctions throughout Maine kind of as a contribution back to this great community in Maine. But it became my day job, my professional job, in 1991.
Tranzon [Auction Properties] itself has been in existence for approximately six years. We do some personal property but the fundamental focus of our business plan is real-estate based. We travel the entire state of Maine.
We typically were doing like 100 [auctions each year]. And then, last year, we did 180 plus or minus, so it has significantly grown. I think there’s a couple of reasons for that. Number one, clearly, the economy, where time has become a significant part of the analysis on the part of the decision maker, and clearly this methodology works when time is of the essence. Secondly, I think people have embraced the methodology.
I think the first quarter of ‘08 we had 18 real estate auctions that we were involved with. So far, first quarter ‘09, 41.
A typical sale is: We’re invited in by the financial institution [and] we do a variety of medias to expose the property to as many people as we possibly can. That will obviously include typical newspaper advertising, direct mail, signage, we use the Internet huge, it becomes a bigger and bigger player on a daily basis, so we use all the different types of medias that would both be paid and free, to expose the property to as many people as we can. There’s certain formalities to go through, including, if you’re interested in the property, you will present to the auction company a deposit of significant dollars in either cash, certified funds or the equivalent. It really does depend on the transaction, I mean it depends on the magnitude, but [the auctioneer’s commission] can be from 3% to 7% [of the sale price].
Some [auctions], as you might imagine, are obviously a lot more popular and have a lot more desirability than others. And currently the second-home market, if you’re doing a lakefront property or an oceanfront property or those types of things, there’s a pent-up demand for them. It’s very strong. If, on the other hand, you’re selling some “raw land” that’s all it is, it’s 40 acres, you know there are exceptions, but as a general rule that’s a relatively difficult sale.
[An auction] generally won’t take more than half an hour. It’s quick. At this point everybody knows what they’re buying, they’ve hopefully done all their homework, they’ve seen it, they’ve talked to their lawyer, they’ve talked to their bank or they’ve talked to their Indian chief so they know. We’ll make it up — we’re selling a $250,000 home, they hope to buy it for $150,000 but they’re prepared to go to $275,000 if they have to. So if you’ve got five bidders, that’d be a great little sale for an auctioneer, it would be very exciting. The auctioneer begins by introducing him or herself, they go through the terms and conditions, they ask if there are any questions at this point — there typically aren’t because [the bidders have] done their homework — and then it’s just a question of the process of the public outcry. So we’re selling a $250,000 house, it opens at $150,000, it quickly goes to two and a quarter and then there’s kind of a pause. This particular sale that you and I are using as an example is called a reserve sale, meaning that the seller — we’ll make it a financial institution in this particular instance — reserves the right to be a bidder, reserves the right to confirm the sale. So the auctioneer then takes a little break, goes and chats with the seller, the financial institution, says, “How do you feel about two and a quarter?” Maybe they really hoped for more, but it’s enough. That’s called “reserve has been met.” You go back and announce to the audience, your five bidders, that reserve has been met — it is now, wherever you guys take it, it’s up to you. Sometimes referred to as an “absolute sale,” it has now converted from a reserve now to an absolute. We’re going to sell it.
Some people will wait for that, you know, kind of holding back. It’s not atypical after the auctioneer makes that announcement for it to go another 10% because you’re waiting [thinking] “I didn’t think they were ever going to sell it, so now I’m going to bid.” So now your competitive juices are flowing so, hopefully, again I’m the auctioneer, and so hopefully from the seller’s standpoint, the competitive juices will run and you’re looking at the house and saying, “I really want it.” So you bid 250, 260, 265 and we end up finally at 275 and the other party says, “I want it but I can’t justify that, I’ve got to walk away,” and so it’s sold to you for 275.
It’s huge psychology. I love it. What you do is, you know, is you pay a lot of attention to body language. It’s a fun part of the business. So I spend a lot of time seeing if I’m going to get eye contact from you and maybe you’re good at eye contact so, as a result of that, I’m probably going to come into your range closer. On the other hand, if you and I don’t have contact and you’re really paying no attention but I’m watching you fiddle with that [pen in your hands], I’m apt to try and get away from you so that you will follow me with, if not physically, you will with your eyes, and so I’m going to try and bring you into my circle if I possibly can. I’m going to try and do anything I can to get you engaged so that you’ll participate in the process.
What I do as an auctioneer is I spend a fair amount of time talking in the beginning, and I do that for two reasons. One, if you’re too calm, I want to get you nervous. Two, if you’re really all jacked up, then I want to calm you down. And so I will chat for a while. I go through the property information packets I talked about. I don’t want to talk too long because I don’t want to bore you and so there’s kind of a nice little tension that I work for, but what I’m really trying to do is to make you tense and stressed but not too tense. I recently saw an article in the New York Times that says that stress is a good thing for us. It’s just finding that right level, so if I’m the auctioneer, the master of ceremonies if you will, I’m trying hard to bring a little tenseness into the process, but not too much.
We clearly have added folks. We’re also clearly, from [the national franchise] Tranzon’s standpoint, I’m talking as chairman of board [of the Portland-based company] on a national basis, there are a number of companies that exist and want to join our ranks because they see what we do and so on a national basis there are huge opportunities. Locally, I think that more and more people, entities, financial institutions as well as individuals, are looking at this methodology currently and are saying, “That makes the most sense to me from my perspective.” Why is that? Well, because we’re still concerned as individuals that we’re paying the right price for a property and the auction methodology gives you that confidence. Why does it do that? Because what we assume going back to our scenario is that all the five registered bidders had done their same homework and you were the successful bidder because you only bid one bid higher than the other person. That gives you confidence.
Real estate has historically been a safe bet. That’s what our fathers did, that’s what our grandfathers did, and so therefore there’s comfort in the dirt. I can touch it, I can feel it, I can sense it.
As told to Sara Donnelly, Mainebiz managing editor. Sara can be reached at sdonnelly@mainebiz.biz.
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