Spotlight On: John Dixon, Founder/Chief Executive Officer, John Dixon & Associates

January 25th, 2012 by Ori Klein

Spotlight on . . .John Dixon

This month, we’re putting our Spotlight On John Dixon, Founder and Chief Executive Officer of John Dixon & Associates. With more than 30 years experience in the auction business, John has worked with all real estate property types and is now handling numerous auctions with financial institutions. We spoke to John on several topics including today’s market in relation to bank-owned properties, the success of online auction bidding, and what’s ahead for 2012.

PA: How would you describe your organization (i.e., specialties, longevity, experience, etc.)?

JD: We are strictly real estate auctioneers. If we run across equipment that somebody wants to sell along with their land, we will affiliate with someone to sell that equipment. Eighty percent of our business these days is for financial institutions – either general banks or directly for FDIC. I would say with the market we’re in now, we’re institutional real estate auctioneers.

PA:   Your website states that you’ve been exclusively in the auction industry for the past 30 years. Have you seen a pattern in auction cycles over the years, and in light of the tumultuous market now, how do you think the past few years have been different in the auction business?

JD:  Well, I got into the business in 1976 and I was in the mortgage business prior to that. Let me talk about the Southeast – in Atlanta particularly, the worst I had ever seen in the real estate market was from ‘73-’74, up to about ’78-’79 – until this one, and this one overshadows that tremendously. There have been ups and downs – the early ’90s were tough, some of the mid ’80s got tough but nothing, nothing like this. Let me give you one example on residential lots: In 1976- 77, we were selling residential lots for about $2,000 each that were retailing for $12,000 to $14,000 each. Now we are selling residential lots for an average of the same $2,000 a lot that were retailing for $50,000 to $75,000 each – you know that is how high it got and that’s how low it’s fallen. It was just tremendous over-development.

PA: Since your firm specializes in the sale of properties owned by financial institutions, how would you say the current economy and real estate market have affected your business?

JD: Well, there’s been big uptick. Typically real estate does well in dynamic real estate markets, everything selling and developing and they want to liquidate some of their products, and investors are buying property and then reselling it. They use auction so in really strong markets, we do well in good times. In the present depressed market, our company in particular does well because we have always been a leader in representing institutional sellers such as banks. When we were hurting was during the transition from late ’06 through mid ’10. We just couldn’t get things going because banks weren’t selling and they weren’t lending. Nobody was buying so it was tough during that transition period. Now we’re not doing more than we can handle, but we’re just really really busy.

PA: How successful are online auctions in comparison to live auctions in terms of final sale price?

JD:  You know, I don’t know if I can answer that. Our auctions are simultaneous. We have online bidding simultaneously with the live bidding at the auction. When we first started, maybe 20% went to online bidders. Now almost 40% to 45% goes to online bidders. We feel that there are a certain number of people out there that want the online auction. I haven’t done any kind of study on this, but it seems to me that the investor that wants to be at the auction is a seasoned investor. He has probably been around a long time, he’s not computer savvy and just wants to see that auction and see what’s going on. It’s the younger folks who would rather stay in the office, stay at home and bid on it through the computer. So I think that [probably] at one time, there are a  lot of companies who are going online-only, and there are not many companies who are just live auction only. It’s moving in that direction – we just like both.

PA: What types of property do you think are doing well overall?

JD:  If doing well is selling as close to the price that they were selling before the bottom fell out, then nothing is really doing well. But those that are doing better than most are properties that have an income stream that are cash flowing. That makes them an investment. Some houses are in the right areas where there is not an over-supplier. Things that are doing worse are residential lots – there’s just so many of them. Through the years we’ve sold tons of operating farms, and now if you get farmland, it is selling extremely well. Agriculture is doing well so if you get a farm to sell, there will be a lot of demand for it.

PA: Is there a type of property that you think does better online?

JD:  Yes, mostly investor property. When you’re selling houses, you know which ones are going to be bought by investors, and which ones will have interest from all around the block. For example, if it’s a $50,000 or less home or a $75,000 or less home, than this is probably an investor home. Pure investor properties do well online as in a live auction, and the residential lots probably do as well online as in a live auction. It’s those properties that have all the occupants’ interest, whether it is a commercial property that somebody is going to occupy, or if it is a home that has an owner/occupant, they seem to do very well.

PA: What areas of the country do you think are using the auction method of sale the most frequently?

JD: I think the Southeast, like Metro Atlanta. But also you see a lot of auctions out in  Washington state, California, Oregon and then to a lesser degree, Florida. Florida is a big auction state. And it’s because these places were hit the hardest and have had the most developer foreclosures. Banks are starting to realize that they just can’t keep holding this stuff. If they want to get rid of 100 properties quickly, how else can they do it?

PA: What are your thoughts or projections for the auction business in 2012? Are there certain areas or properties that you think will do better than others?

JD: Generally for 2012, I think the auction business is going to be better than it was in 2011. Better because there are still a lot of properties that have to be sold. There are a lot of foreclosures that are still going on, and the the longer these banks hold the property, the more pressure they get from FDIC to sell them. I think that 2012 is going to be a better year for the auction companies that are selling to banks than 2011 was. I don’t know about 2013. Plus I think in 2012 there’s going to be a few more buyers willing to buy. I think they’re going to see that maybe the bottom will be coming in late 2012 or early 2013… Whether that happens or not remains to be seen. When this thing is over is when the market perceives that it’s over, and I haven’t perceived that yet. I think it’s going to be more broad on the market than 2011. I don’t see that the supply store is going down in any one type or the other. You will see them come into the banks faster than they are going out.

PA:  What are your top 2 or 3 tips for buyers?

JD:   The top tip is do your homework. Don’t bid on a property you haven’t seen or you’re uncomfortable with because at an auction, you buy as-is. You know the earnest money you put up, which is typically 10 – 20%, is fully at risk. If you bought a property that you haven’t looked at, you show up and the back of the house could be gone, or you could get it with the back door gone, or whatever problems it has. We tell about everything we can, everything we know about. But still, if you don’t look at the property you can be surprised. So, make sure that you’ve thoroughly inspected the property that you are buying, and don’t bid unless you’ve seen it, and you’re comfortable with it. Another tip – if you need financing, make sure you’ve got it lined up before you attend the auction because the auction is not contingent upon financing. It’s an all-cash transaction within 30 days – so don’t put up a big earnest check, and then 30 days pass and you cannot close because you don’t have your financing. Your earnest money will be gone. Overall, you can get some great bargains if you do your homework.

PA: What would your top 2 or 3 tips be for sellers?

JD: Don’t offer a property for sale at auction unless you’re ready to sell it. Make sure that if you will sell it with other people’s money on the property, then you’re probably not a candidate to sell it off, because if you don’t clear that debt then the bank is probably not going to release it. This seems to fly in the face of what my marketing spiel ought to be, but an auction is not going to maximize your profit. An auction is a way to minimize your loss. It is to make that property sell and sell it as-is where it is. You get money in 30 days and it’s gone. So I would say for the seller, the primary thing is to make sure that you’re ready to sell that property before you put on the auction block.

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