How Self Storage Auctions Work
A Guide To The Auction Process:
Like auto mechanics and dry cleaners, the law grants self-storage operators a lien, i.e., a legal claim, against the contents of storage units when the rent has gone unpaid for a period of time. Ultimately, if the defaulting tenant has not stepped up, the storage facility will foreclose its lien by holding a public sale–an auction–at which the contents are sold.
Storage facilities vary in their auction practices, but generally the process is not complicated and works this way:
: Parking is always a problem at storage auctions. Look for signs or other indications of where parking is permitted and where it is not. In general, take care not to block entrances or doorways.
. Upon arrival at the auction, the facility office or an auctioneer present will advise what if any pre-registration is required in order to participate in the auction. Increasingly, facilities are requiring buyers to complete and sign a bidder terms-of-sale contract as a condition of being allowed to bid. Some facilities hand out bidder numbers. Refundable buyer deposits are sometimes required, although not frequently. You must be at least 18 years old to participate.
. Units are opened for inspection immediately prior to the sale. No advance viewing is permitted. Generally you are not permitted to enter the storage units nor to handle the contents in case the tenant pays the delinquency and rescues the property from sale at the last minute.
. Smoking is not permitted at storage auctions.
. Firearms are generally prohibited at storage auctions.
NUMBER OF UNITS
. Regardless of the number of units that may have been advertised for sale, the number of units ultimately sold may vary right up to the time of sale as delinquent tenants settle their accounts at the last minute.
. Generally the entire contents of the storage unit are sold as a single lot. Occasionally the contents may be divided and sold in two or more separate lots, in which case an announcement will be made.
. Most auctions are conducted “without reserve,” i.e., without a minimum floor price that must be reached before a sale is triggered. If a reserve is to apply as to any unit being sold, that will be announced, although the amount of the reserve will not be revealed so as not to influence the bidding.
. Open bidding is used, never sealed bids. There is no rule-of-thumb as to typical sale prices. Units can sell for as little as $5 and for as much as thousands depending upon the nature of a unit’s contents.
. The storage facility has a legal right to place bids. In order to be fair to bidders however, when the house bids, generally it will only make an opening bid.
. Settlement, that is, paying the amounts of your winning bid(s), is always due immediately following the close of the auction. Additional time in which to pay is never permitted. By law, payment must be in cash. Some facilities will allow you to settle early, before the close of the entire auction, if you are then through bidding on units.
. All auction sales in Arizona are subject to sales tax at the regular, local retail rate. Expect the amount of the tax to be added to the amount of your winning bid(s). If you are buying for resale, i.e., claiming exemption from paying sales tax, you must be prepared to present a copy of your sales tax license from the State of Arizona Department of Revenue. The facility will take a photocopy of your license for their records as a condition of not charging you tax.
. Some facilities will require you to post a clean-out deposit along with the payment of the amount of your winning bid, which deposit is later refunded to you when the unit has been demonstrated to have been emptied satisfactorily. When such deposits are required, an announcement will be made.
. All storage auctions are conducted “as-is-where-is,” without any warranties or representations of any kind. All sales are final.
. Some facilities will allow you to place your own lock on the door of a purchased unit. Some require that payment in full be tendered first. Others prohibit the use of buyer locks. If no announcement is made about use of buyer locks, you should ask before placing your own lock on a purchased unit.
. Facilities vary in the amount of time granted to you to remove the purchased contents from the premises, but generally 24 hours is allowed. If no announcement is made as to the time allowed, you should inquire. You must remove all
the contents purchased. Do NOT put unwanted contents into the facility’s dumpsters.
. The purpose of storage auctions is not merely to collect delinquent rent, but to put the storage units back into production. Failure to remove all of the contents you purchased frustrates that purpose. If the volume of property purchased is unusually large, storage facilities are usually willing to work with you and to extend the time for removal. Often buyers elect to sign leases and rent the spaces they purchased rather than move the contents out.
MOTOR VEHICLES & BOATS
. . Following the sale of a motor vehicle or boat, the facility will provide you with a special document called a “DECLARATION OF SALE.” It is to be signed by both the self-storage operator and you as buyer. The original copy is given to you and is to be presented by you at the Motor Vehicle Department (or the Game & Fish Department in the case of boats) when you apply for a title to the vehicle. By law, that is the only documentation required for a buyer to apply for a title to a vehicle or boat purchased at a storage auction in Arizona. Note: separate Declarations of Sale are required for a boat and for the trailer under it.
See more about storage auctions in this ABC News/Channel 15 news story.