Quarterly Newsletter - Spring 2007

The Tranzon Auction Leader is published quarterly by Tranzon LLC, national experts in accelerated marketing and auction sales. This E-newsletter focuses on trends, auction highlights, and expert analyses on how a professionally marketed auction may maximize an asset's value.
The Big News in the Residential Market- Lenders Tighten Their Belts
The big change in the residential markets that we have noticed in recent months is the tightening up of underwriting standards by residential lenders.

The "front page news headlines" of trouble in the sub-prime market and regulatory pressure seem to have sparked this tightening.

We have started seeing loan commitments cancelled, appraisals questioned and sent back to the appraiser for more research, and requests for more borrower documentation.

One of the reasons we have been so sanguine about the residential market and its ability to navigate a soft landing was the huge liquidity in the markets. We noted the initial response to difficulties among lenders in certain residential markets was to become even more aggressive in their lending practices.

If our recent observation about lender practices continues, or if lender practices tighten even further, the chance of a harder landing for the residential real estate market increases significantly.

Most troubling, if liquidity continues to retract, RE problems will start surfacing in certain markets that heretofore have been pretty healthy.

We have read with some amusement the pundits declaration that the worst of the residential downturn has passed. We discount this observation for two reasons. First, any generalization of the residential market cannot be accurate because of the many sub-market economic factors that impact each residential market. We also continue to see certain markets, like the NC and TX non-coastal cities perform quite well.

At the same time, we continue to see other markets that are going to require years to correct the excesses of the 2003-2005 bull market. One year of moderately down volume and prices is not going to correct imbalances created by the huge multi-year run in some of the zany markets.

In summary, we see the risk in this area increasing due to the lenders' reaction to the sub-prime problems and regulatory pressures.
A Tale of Two Markets
The newspapers trumpet the slowdown in the residential real estate markets. News of collapsing sub-prime borrowers and white knights scooping up these distressed entities makes front-page news in business sections furthering the general public's perception, or actually, their misperception, of continued real estate troubles.

Beyond the headlines, reality is very different.

Commercial property markets remain quite buoyant in general. There are always pockets of weakness geographically or by certain property types, but overall, liquidity is still strong, as is demand.

There clearly is an adjustment in residential markets, but things in general are not that bad in most markets.

True, some of the markets that went overboard are in trouble. Florida, Las Vegas and Phoenix come to mind. But those markets got so frothy that any correction to a sustainable situation would require a major downturn. If things went on any longer, the correction would have been that much worse.

Our strong suggestion is NOT to generalize about the current real estate market. Because the current "correction" is caused by regional factors relating to supply and demand, and not national factors related to availability of loans (still plenty of money for creditworthy borrowers), cost of money (still low), or the job market (still strong), any generalization of the real estate markets have limited validity.
National Selling Power
A recent sale of convenience stores in Kentucky illustrates the power of Tranzon's local-national business strategy.

We sold at absolute auction seven operating convenience stores in SE KY for $4.95m, above the pre-sale appraisal values. Utilizing our national database and marketing reach, the auction attracted 13 bidders and 168 inquiries. Here is where the "national" comes in- the 168 inquirers were from 24 different states.

Another example relates to a modest multi-family property in NC. The local bidders topped out at $250K. The property sold for over twice this number to a FL buyer who learned of the auction on www.tranzon.com <http://www.tranzon.com> , and both of the next two bidders were from out-of-state.

These are just two examples of many that show how working with a firm that has national marketing reach can add value for property sellers.

If you are selling a property that would have appeal to buyers outside of your local marketing area, and you are not auctioning your property with Tranzon, you may be leaving dollars on the table.
Energize Your Property Listing With a Tranzon Auction
In a slower market, an accelerated marketing campaign can focus the spotlight on your property to the exclusion of others.

In neighborhoods with multiple properties for sale, our experience shows that properties marketed for auction always get the most buyer traffic. An intense and focused auction marketing campaign has the effect of shining the sales spotlight on your property. Others are left in the dark!

What would make you a good auction seller? First, you should be "willing and able" to sell your property at market value on the day of the auction. "Willing" means that psychologically, you have reconciled yourself to a realistic view on what your property is worth.

"Able", on the other hand, is a more objective measure. It means that financially and practically, you can sell your property at fair market value. Unfortunately, in some markets, prices have declined to the point that there may be little, if any, equity in your property. As such, some property owners may not be able to sell because the net proceeds from a sale would not cover the mortgage.

Similarly, a corporation or financial institution would have to examine the ramifications of a sale at a market price and make sure they are in a position to accept any financial impacts of a sale.

In addition, because any accelerated marketing sale involves a fairly quick timetable, property owners must be in a position to turn over the property quickly. If you are in a position where you are unable to vacate your property quickly, this could be an issue. Or if there is some ownership (title) issue with your property that needs to be cleared up that will take some time, you may not be in a position to list your property for auction right away.

Another thing to keep in mind: auction sales generally do best when a sense of urgency is conveyed to the buyer market during the auction marketing.

Effective auction marketing communicates the motivation behind the sale. The best-attended auctions are absolute (property will be sold regardless of price) and bankruptcy sales. In both scenarios, bidders see a highly motivated seller. This "need to sell" telegraphs a potential opportunity to the market that bidders cannot resist.

If your Tranzon marketing consultant recommends positioning your property sale as "lender ordered", or "transferred, owner must sell!" or with some similar marketing position, remember this is to convey to the market a sense of urgency. You, the property owner, will benefit from this.

Often, property owners do not want their sales to be positioned as "urgent" sales. The natural inclination is to want to be perceived as NOT needing to sell. BUT, this works against you in the accelerated marketing process. Perversely, the more urgent the situation, the more interest there will be in your property - and the higher the eventual sales price is likely to be.

With the property markets slowing in many regions and time on market extending, a Tranzon auction structured specifically to address your needs is an option worth exploring. The average period between signing of a listing agreement and the Tranzon auction date is five to six weeks.

Foreclosures Are Back- Financial Institutions Should Consider Tranzon Marketed Foreclosure Auctions
The weakening real estate markets in many areas is resulting in an increase in foreclosures. In many states, foreclosure laws make it feasible for financial institutions to engage Tranzon to market their foreclosure auctions.

Professionally marketed foreclosure auctions provide a win-win for the financial institution and the debtor.

Putting the power of Tranzon behind a foreclosure auction can increase the visibility and demand for a foreclosed property, which could result in a higher bid for the property and a third-party buyer. A financial institution benefits by not having to take ownership of the property, and the borrower benefits from the higher proceeds.

We have had a number of recent foreclosure auction successes, particularly in the northeast and the Mid-Atlantic States.
Tranzon Continues to Expand
In recent months Tranzon has brought on a number of new auction professionals:

Joe Jackson and Sonny Weeks have joined our team and will be marketing their real estate auction services under the trade name Tranzon Metrolina. They are located in the Charlotte, NC-metro market.

Fernando Palacios has joined Tranzon Fox and will be working out of the Fairfax, VA office.

Suzanne Famelette has joined Tranzon Fox. Suzanne is working the Washington, DC market for the firm.

Todd Aylward has joined Tranzon Asset Strategies and will be working the northern California market.

Bob Brittain has joined Tranzon Driggers. Bob is an industry veteran and will be working the Tampa-St. Pete market.

Suzanne Zuniga has joined Tranzon VenueBid and will be located in the Houston metropolitan office in Cypress, TX.
About Tranzon
www.Tranzon.com
Combining an auction marketing program with Tranzon's national buyer database and listing on www.tranzon.com <http://www.tranzon.com> exposes your property to interested real estate buyers across the country. Tranzon's website, averaging over 60,000 hits per day and listing over 100 auction properties recently, is one of the most viewed real estate auction websites in the country.

We are a real estate auction group founded on the premise that combining the powerful auction selling process with a highly professional organization with national resources, and regional member companies having local market knowledge, offers a compelling value proposition to sellers of real estate desiring to sell their property for the highest price possible in the shortest time possible. The member companies of Tranzon have experience in selling virtually all types of property, and our staff includes among the most respected names in the industry with backgrounds in finance, law, and accounting, to name just a few. Tranzon member companies auction over 1,000 properties every year. Since our founding in November 2000, we have conducted auctions in 46 states and the District of Columbia generating over $800 million in sales proceeds for our clients.

Tranzon member companies are independently owned and operated. References to "Tranzon" refer to Tranzon, LLC, and its member companies collectively.

CLICK HERE <mailto:jlevin@tranzon.com> to send an email to request more information on Tranzon or to have Jeff Levin contact you.

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