Spotlight On: Max Spann, Jr., President & CEO, Max Spann Real Estate & Auction Company

July 30th, 2012 by melissa

Spotlight On . . .Max Spann, Jr.

This month’s Spotlight On profiles Max Spann, Jr. of Max Spann Real Estate & Auction Company. A renowned presence in the industry for decades, this company deals with all types of real estate nationwide with a focus on the Northeast sector. We spoke to Max Jr. on a variety of topics including online sales, determining marketing budgets and the current market landscape.

PA: How would you describe your organization?
MS: We’ve been in business for over 50 years. My father started it way back when, and we have locations in Manhattan and Northern New Jersey. We basically operate along the entire East Coast, although we have national affiliations to do work across the country as well.  We are exclusively oriented towards real estate, and we’re interdisciplinary from the standpoint that we handle every type of real estate including industrial, office, retail, residential, land and development rights. We’ve worked with a diversity of sellers, both private, public, and institutional. We’re considered one of the top auction firms in the nation, and have grown exponentially over the past 10 years. We love this industry and are big promoters of it. We have a staff of some 40 people, and they come from all different, varied backgrounds, which is great for what we offer clients. We have attorneys, bankers, agricultural specialists and former builders. We have a vast variety of disciplines which we all can bring to bear on different projects and different assignments.

PA: Your firm seems to handle properties from varied sellers – municipalities, financial institutions, etc. Do you see an increase or decrease of inventory going for auction by a particular type of seller in the past 12 months?
MS: The real estate auction business is always evolving. The attributes that attract sellers to our forum of creating transactions are that auctions allow them to control the timing, and dictate the terms and conditions. With creating competitive forums, auctions optimize prices and also create a sense of urgency.  So depending on the particular market, it’s evolving where early in this correction, it seemed we did a preponderance of new construction where we had developers that had accumulated inventory standing, condominiums or what have you, and we were able to accelerate that process. Now it’s evolved to where we seem to be doing a lot more commercial.  Office, retail, things of that nature. That’s basically what we’ve been seeing in the past 12 months.

PA: How has the state of the current economy in the real estate market affected your company?
MS: Well, it’s changed our clientele.  We are dealing with more workout situations and distress situations. We’ve been around 50 years. When times are good, we tend to gravitate towards more wealthy individuals and corporations that like to control the sales transaction process. Now we seem to be dealing more with people that need to sell, or are in a workout situation with their lenders, so that side of the business has increased dramatically.

PA: What types of properties do you think are doing well overall in the Northeast?
MS: Properties that are located near the major central business districts, so that would be the New York Metro, Philly Metro, Baltimore, D.C., well-located resort-type properties. That runs the whole spectrum, whether residential or commercial. If it’s well-located, residential seems to be the strongest of the market types right now.

PA: Do you have a high percentage of broker participation at your auctions?
MS: It varies. It’s been growing through us building awareness of it. Brokers do tend to cooperate more when the transactions are higher unit price. In other words, when we do condominiums we might sell 40 of them, but they’re $100k, $200k condominiums.   We have little broker participation with those, versus if we’re selling $400k or $500k residential units. Then there tends to be greater broker participation, but it’s also education as well.

PA: When brokers are involved, do you see a greater success at the auction?
MS: I don’t know that there is. We’re able to drive high awareness. We don’t want to preclude the brokerage community. I don’t know that I can assign a value saying “we’re getting X percent more because there’s a broker participation.” It’s just another venue by which we’re promoting the property, and ultimately we’re working for our seller to drive as much awareness as we can. But I can’t really say that when there’s a higher broker participation that we have better or worse results. I don’t know that there really is a correlation.

PA: Do you offer online auctions?
MS: Yes.

PA: What properties do you think work best with an online sale format?
MS: Let me describe the capabilities that we have to offer. Virtually with all of our auctions, we offer a simulcast online component where we have a live audio/visual feed to the live event – the actual auction – so people can bid remotely. They can put a start and not-to-exceed bid where the platform will bid for them. We do some online-only, but usually that’s where we have more of a commodity like a liquor license or something like that. We like the anonymity of bidding that comes with online when you have a marketplace where everyone knows each other, again, like a liquor license. One time we auctioned off a funeral home, and that’s a marketplace where everybody knows each other, so the anonymous component of it worked nicely. Where we find that online works well is, once again, when you have commodity-type of real estate. These might be fixer-upper homes in large metropolitan areas where we have a bigger participation from people all around the country. When they’re buying sight-unseen, we find that online does well with that type. There is also the convenience of online when we’re doing resort-type properties, where the potential purchasers live far away from where the actual real estate is located. It’s a convenience that gets utilized more when we’re selling those types of properties.

PA: Do many of your properties tend to sell prior to auction?
MS: We don’t encourage that. The whole psychology of an auction is that you need to get all your ducks in a row to be prepared to compete at the event. If you signal to the marketplace that a transaction can happen ahead of time, it can derail that whole thought process of not having people focused on the day of the sale. Therefore, we don’t encourage pre-emptive bids. Does it happen? Yes. If somebody wants to submit an offer, we will have them do it. We will translate that to the seller, and obviously it’s the seller’s decision. But as a matter of course, we do not encourage that. We think it undermines the psychology of an auction, and also takes away from the legitimacy of the offering.

PA: What would sellers need to know about how you determine a marketing budget?
MS: Every one of our budgets is tailored to what we think is necessary to optimize value for that particular situation, so our budgets are detailed along that front. From the seller’s perspective, we do not exceed budgets where we quote a budget and live by it. If we go over, that’s our problem, not theirs. The budget is also put together to maximize values and be sure that we’re penny-wise and not pound-foolish.

PA: What criteria do you look for in a property to make it a good candidate for auction?
MS: Basically two things. One is understanding that there is a market for a particular property.  Secondly, it is a seller that will allow us to present that property in a format that is going to assure success, being certain properties will do best, or maybe only be saleable when presented in the absolute auction format. If the seller is not in a position to allow us to do that format for certain properties, you need to know when to proceed and when not to proceed. So it’s understanding the market and understanding what format is going to be best for that seller, and what will help them optimize the value of their asset.

PA: We’ve seen a lot of taglines where auctioneers are trying to state that they are offering absolute sales, but in fact it seems that they are not. So what information should a buyer be looking for if they are interested in an absolute auction?
MS: They need to read the Terms and Conditions as defined by the National Auctioneers Association. An absolute auction is when a property is guaranteed to be sold regardless of price – not subject to a minimum bid, not subject to an undisclosed reserve. It can literally go for a dime or a dollar. A lot of auctioneers incorrectly say a property is selling absolute at or above a published minimum. That is incorrect use of the term. Prospective purchasers have to understand the difference, and also read the Terms and Conditions. We use absolute where it truly is – when we use it, it truly is guaranteed to sell regardless of price. We also use the minimum bid auction format where we have a published minimum bid, but we don’t call it absolute. It’s a published minimum bid auction, and there is a difference.

PA: What would your top two or three tips be for buyers and for sellers?
MS: For buyers, do your homework, understand the real estate that you’re buying, formulate what you think the value is, and bid accordingly at the auction. I’ve been in this business for over 25 years, and I’ve been through a couple of market corrections. The firm has been in business for over 50 years and been through a whole bunch of corrections, and this has got to be one of the best buying environments out there. There’s tremendous opportunity. So just do your homework and know what you’re buying.

For sellers, the best advice I can give them is just do your homework on the auction process, and understand the different formats and what’s best for you as a seller to help you maximize value. When done correctly, auctions are really a market-maker. They restore confidence to the marketplace because it’s a communally bid event, so it validates buyers’ decisions. And it’s a very efficient, clean way of transacting real estate. So from a seller’s point of view, do your homework. Auction marketing works unlike any other thing, especially in the market that we find ourselves in right now.

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