September 13, 2011 By Sarah Rich
In an economy in which county governments have been forced to do more with less — a cliché that seems to be here to stay — public officials increasingly are looking to rid themselves of live auctions in favor of online auctions hosted on a third-party website.
Counties conduct auctions to handle property foreclosures and tax certificate sales (a tax lien against property), and sales of surplus equipment. There are several online platforms competing in this niche of automating auctions. One example is Realauction.com, which handles county auctions in Arizona, Colorado, Illinois, Nebraska and other locations.
Lloyd McClendon, the company’s CEO, said that during the past five years the alternative of online auctions has become more widely known to counties. But not all governments can easily use them because of state statutes.
Those counties that are able to use an online auction can save money and also generate more revenue, McClendon said. By using a website, county employees no longer have to coordinate live auctions or complete the paperwork required after a live auction is completed.
Miami-Dade County, Fla., went online with Realauction.com in 2010 for foreclosure auctions. Before launching the site, 10 county staffers were tasked with coordinating live auctions, which included time for setting up the room where the auction would occur, coordinating event security, and having three county employees available to conduct the auction. After auctions, the large volume of paperwork built up so much that county staff couldn’t handle the workload, McClendon said.
“It got so bad that they had a whole floor filled with just case files [county staff] needed to process and get through,” he said.
Once the county switched to the online auction process, county staff that used to handle auctions had their duties reassigned to other tasks. Some counties routinely save $75,000 to $100,000 annually in staff time by switching from live auctions to the online auctions, McClendon said.
Aside from cost savings, the website cuts down on collusions that could occur at a live sale. McClendon said at times during live auctions, bidders would get to together to try to rig the sale.
Besides the saved time and staff resources, the live auction can also be a revenue generator. Hillsborough County, Fla., launched its Realauction.com website to assist with auctions of tax certificates. By law, every year by April 1, the taxes on properties deemed delinquent are advertised by the county, said Charlotte Luke, the county’s tax collector.
Anywhere from 39,000 to 43,000 parcels are advertised, then tax certificate sales for those properties are conducted once a year on Realauction.com during the end of May. The tax certificate then goes to the lowest interest rate bidder, Luke said.
But are counties doling out costs to pay for the website? McClendon said counties don’t spend any money to launch the site since the vendor earns money from fees paid from either the delinquent property owner or by the winning bidders.
Because the auction is online, the tax certificate and foreclosure sales are available to more bidders because they need not appear in person to participate, as is the case with traditional live auctions.
Luke said that when Hillsborough County conducted live auctions, nearly 1,900 unsold tax certificates a year would go to the county to sell on a first come, first serve basis. The first year the county went online with Realauction.com, only 200 unsold tax certificates went to the county. There were more buyers, and consequently more revenue.
Tax certificates that don’t get purchased the day of the bid go back to the county and are re-advertised later on the Realauction.com website.
Luke said since launching the site, the auction process has become more efficient. In the past, live auctions were held at the Hillsborough County Center, a county building.
Anywhere from 50 to 100 people would gather in a conference room and once the auction began, bidders would yell interest rates at the auctioneer. Luke said the method would cause confusion and the process would at times get out of hand.
Since the switch to hosting bids online, the county has seen an increase in tax certificate purchases, Luke said.
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