Last August, I wrote about hard times in the auction patch. We were then two years past the beginning of the “Great Downturn” which came about in 2008 with the bursting of the housing bubble and resulted in the financial bloodletting and economic calamity that followed and continue today. Another year has passed and I am sorry to report that the situation is no brighter now than it was then.

Auctioneers are scratching their heads and talking about how the slide downhill has adversely affected their businesses. We are in an unprecedented situation in the memory of the practitioners that I have spoken to about the current state of auctioneering.

The conventional wisdom used to be this: “When times are good, the auction business is good. When times are bad, the auction business is great.”
Unfortunately, that axiom was coined in a far different era and does not apply now as it did then.

Times are plenty tough across the country and the auction business has not bloomed as a result. Instead, the opposite has occurred and, in many quarters, these difficult times have significantly depressed auction business. 
There is no need for me to try and explain the economic predicament that grips us. You know it the same as I do, because it is front-page news everywhere. Much of the modern world is suffering severe economic challenges, including such mainstream players as Greece, Ireland, Italy, Japan, and Great Britain. Of course, the U. S. economy is also in this unstable and volatile mixing bowl of trouble.

Many would-be sellers seem to be too frightened to sell at auction. This is because they fear buyers will not attend the auction or offer only fire-sale prices for what crosses the auctioneer’s block. As a result, many of these sellers are sitting passively on the sideline and holding onto assets that they need to liquidate. They hope times will improve and their patience will be rewarded when the losses they see looming are blown away by the fresh breeze of a new prosperity. The problem is that hope can be filed alongside my dream that none of my kids will cause me any trouble or expense during the new school year. That file is labeled, “Wild and Crazy Fantasies … Pure Fiction!”  

The two words that I hear auctioneers use most to describe the state of auction business are “down” and “uncertain.” It is easy to understand them using these adjectives when sellers are reluctant to sell, consignments have fallen sharply, and commission revenue is decreasing. These are factors that can put auctioneers out of business and that has happened with some and the number continues to grow. Meanwhile, others are working a lot less and struggling to make what is needed to keep operating their businesses. Still, even against the backdrop of these dark storm clouds there is hope.
I just returned from teaching another eager-to-learn class of auctioneering students at Mendenhall School of Auctioneering in High Point, N.C. All of the concerns about the economy in general, and the auction business in particular, were nowhere to be found within this excited and optimistic group of world beaters. Instead, these bid-calling youngsters were ready to ascend to the auction block and let the good times roll.

What I know that these almost-new-auctioneers do not (yet!) is that all auctioneers can call bids and cry “Sold!” That skill will not carry the day. It is the unique and valuable ability possessed by some that enables them to find quality sellers with desirable goods and sign them up for real auction sales that separates the men from the boys and the women from the girls in auctioneering. The students will learn this soon enough. Nevertheless, the confidence, optimism, and excitement that they exuded flashed a beacon of promise that pierced the gloomy shadows darkening the auction markets – a bright light that showed things will get better for auctioneers, even if the economy follows and does not lead this turn.

Four factors make me confident that change for the better is out there and getting closer for auctioneers. Here they are.

First, auctions have been around since before economists ... even before there was greed on Wall Street. That spans a lot of economic cycles and auctions are not going to wither away now in the face of some modern economic gloom. Consequently, auction activity will not spiral down to zero and no matter how low it does go, it will not stay there. We are not talking about the law of gravity and what goes down in business usually comes back up and auctions will eventually bounce back.

Second, auction marketing is deeply entrenched as an accepted selling option in both mainstream commerce and the law. An auction is the lawfully-prescribed method of sale in numerous situations (e.g., foreclosures, court-ordered liquidations, trustee sales, bankruptcy, etc.) and the preferred method of sale in numerous other cases (e.g., business dissolutions, deceased’s estate sales, livestock, used motor vehicles, antiques, collectibles, and bank real-estate owned liquidations to name a few). These sellers will return to doing what they have always done – take their assets to auction.

Third, auctions work where other methods of selling fall short and they have no equal in liquidating assets of every type quickly and with certainty. Our company is commonly called upon to auction and sell properties that have been marketed for sale for several years and have not sold.

We also are frequently hired to sell large portfolios of real-estate owned by banks, developers, and investors that is comprised of scores of parcels and millions of dollars of value. When a seller is motivated to sell, an auctioneer can conduct an auction with a crowd of enthusiastic bidders and see such assets sold in a matter of hours, with closings occurring within 30 days thereafter.
Fourth, changing needs and other reasons will continue to dictate the need for assets to be sold and sellers will persist in selling to buyers who will keep purchasing what they want and need. This process is older than money and it ensures the survival and prosperity of auctions and the auctioneers that conduct them.

I have come to the end for this week, but next time I have some suggestions for worried auctioneers that will help move them from where they are to where they want to be.

Steve Proffitt is general counsel of J.P. King Auction Co. Inc. (www.jpking.com).  He is also an auctioneer and instructor at both Reppert School of Auctioneering in Auburn, Ind., and Mendenhall School of Auctioneering

in High Point, N.C.  He welcomes questions from readers about auctions and auctioneering.  Readers’ communications may be reprinted in whole or part. Mr. Proffitt will answer selected questions but cannot provide personal
answers.  His answers do not represent legal advice or the formation of an
attorney-client relationship and readers should seek advice from their own
attorneys on all matters.

The views and opinions expressed in this column are those of the author and not necessarily those of Farm World. Readers with questions or comments for Steve Proffitt may write to him in care of this publication.