Storage Battles: When storage units go into default in the ATL…

By Eddie Childs

A flurry of sparks flies, and a padlock is cut loose with a handheld circular saw. The locker’s rolling steel door thunders upward, and the group of bidders collected outside crowds closer, peering hopefully into the darkness. It’s a scene with all the trappings and theatrical value of a syndicated Geraldo Rivera special — except it happens over and over again, and each time, there exists a chance that Al Capone’s vault could be stocked with proverbial gold.

Across the nation, self-storage facilities regularly schedule storage auctions (otherwise known as “lien sales”) to evict delinquent renters and their various stored possessions, which is in accordance with state law. Roughly three-dozen such facilities exist in Cobb County alone (self-storage chain Extra Space Storage accounts for quite a few of these), and hundreds more operate within Atlanta’s greater metro area. And approximately 25 percent of these self-storage locations will hold lien sales during most any month.

Of course, each site contains a different number of units (or lots) to post for auction, but some analysts estimate that, across the state of Georgia, this little-known garden industry is one where millions of dollars are exchanged at more than 1,000 auctions annually. These lien sales are open to the public, and the majority of bidders are present with the intention of discovering hidden riches and turning a profit.

Attendees include some of Cobb County’s more enterprising individuals, including eBayers, Craigslist users, antique merchants, pawnshops, paraphernalia collectors, thrift stores, flea market resellers, salvage companies and more. This is because these storage auctions are an opportune method for purchasing pre-owned, antique or collectible goods at mere cents on the retail price.

Indeed, the get-rich-quick, scratch-off-lotto potential of this process seems resonate well with certain aspects of the American Dream. For instance, A&E’s “Storage Wars” has been the channel’s top-rated non-fiction show since it premiered two years ago, and Spike’s “Auction Hunters” has gained a popular following as well.

According to Anne Ballard — author of “Marketing and Managing Self-Storage: The Hat Lady Speaks” and president of Universal Management Company, which manages more than 40 self-storage facilities throughout Cobb County and the Southeast — the self-storage auction industry has experienced a boom as a result of these shows’ premieres. “Since those shows came on television,” she explains, “all of us in the self-storage industry are seeing more people attending our public auctions; which is good for the operators, because we lose so much money from the people whose things go to auction as a general rule, so the more bidders we have, the more likely we are to try and recoup what’s owed.”

Setting the Rules

By virtue of enforcement rights dictated by most state laws, self-storage facilities are entitled to try and recoup losses from non-paying tenants by selling their units to the highest bidder. Ballard says the process begins a month after the bill fails to be paid.

“Once the customer goes 30 days or a month with unpaid rent,” says Ballard, “then we send a lien letter by certified mail saying that [the customer has] 14 days to respond to us and get all paid up, otherwise we’ll have to advertise [the customer’s] things for public auction. It tells them the date of the auction — that’s typically about 75 to 90 days from the original due date.”

In the meantime, Ballard says, the self-storage center continues calling delinquent customers, trying to make contact with them to settle the deficit before the lot is put up for bid. “They have right up until the time the auction begins to pay and not have their possessions sold,” she explains.

Once the auction has been advertised and it’s been determined that the delinquent customer still hasn’t paid, the lien sale actually begins. Generally, the self-storage facility or auctioneer will provide a sign-in sheet along with an outline of the auctioning company’s individual terms and conditions for the sale, which tend to differ from site to site. In most cases, the auctioning process is “live” (or verbal) in nature, and it’s a rarity that they’re “silent” (a process which relies upon sealed bids). With these events, cash is usually the only acceptable currency and, if the bidder isn’t a licensed reseller, sales tax will be levied as well. Auctioneers also tend to expect the cash to be “in pocket” — or on hand, ready to be delivered immediately.

“If the customer’s things got sold and they were present at the auction, we also try to facilitate for the bidder to sell them back to that customer,” says Ballard. “We also ask the bidders, as part of our auction rules, to leave any family heirlooms or personal items like the family bible or photo albums, birth or death certificates, marriage licenses, things like that; we try to hold those for the customers to come and claim later, although most of them never do.”

Most of the time, bidders are competing to buy the complete contents of a unit or lot. The lockers are generally opened and viewed one by one, and the bidding starts after all bidders have had a chance to see the property being auctioned. Entering a unit before one has purchased it, though, is potentially punishable as trespassing, according to the rules of some companies.

“[The bidders] cannot go into the units and they can’t go through the boxes — they have to stand on the outside, but they get plenty of time to look at everything,” says Ballard. “We try to conduct a fair and even-handed auction so nobody’s tearing something up for the person who’s going to win the bid.”

In some cases, bids can begin as low as a dollar and proceed upward into the range of thousands of dollars, with the lot ultimately being sold to the highest bidder. On average, lots or units tend to sell for somewhere between $300 to $1,000, depending on the area and the competitiveness of the buyers.

“On average, most [self-storage facilities] are only recovering somewhere between 30 and 50 percent of what they lost to the delinquent customer,” says Ballard. “But occasionally, we’ll recover 120 or even 200 percent, and we hold that money for the customer to come and claim it according to Georgia Law. It isn’t very often, though.”

One thing bidders always must remember: winners are obligated to remove the entirety of their purchased locker’s contents, and this must be done within whatever timeframe the self-storage facility requires. Also, most facilities don’t allow bidders to use their on-site garbage cans or dumpsters, and the storage units usually are expected to be completely cleaned. Thus, some degree of burden is placed upon bidders, so buyers should beware.

Locating Auctions

Significantly, Georgia State Law dictates the public be informed of the impending lien sale as well. As a result, various legal notices posted in newspapers, websites and social media can often provide limited schedules of self-storage auctions to potential bidders. Universal Management, for instance, regularly publishes an auction calendar via an “e-blast” program that it emails to its listserv to keep bidders updated.

“If we don’t hear anything from the delinquent customer, then we run our first legal ad,” says Ballard. “The ad has to contain the customer’s name, their unit number and a brief description of their contents [some companies inventory the contents beforehand, others like Universal require a list to be submitted during the customer check-in process], and it has to tell them what date and time and the location for the sale. Then you have to run an additional legal ad exactly one week later, because Georgia law requires two legal ads one week apart.”

By using all these sources, it’s possible for potential bidders to determine when and where all these auctions will be conducted. Some bidders make a habit of calling the various self-storage companies in their area, while others tend to work with certain auctioneers.  “Our auction coordinator, Miriam, has a whole group that follows her from auction to auction every single month,” says Ballard. “They know we haven’t gone into the units until the day of the auction, and that gives them piece of mind. They usually call a week before the sale wanting to know how many units are in the sale and what size they are.”

Treasure or Trinket?

As most participants in this process will likely tell you, self-storage auctions are essentially a crapshoot — one never really knows what they may discover. Sometimes the lockers are packed to the rafters, other times they contain a couple paint cans and a ladder. Ballard says some units are pretty large too, so bidders can experience difficulty in determining what items the lockers contain.

“Lots of the professional bidders will bring big flashlights,” she explains. “Because if it’s a big unit — like 20-by-30 or larger — they want to see into the back of the unit to see what’s in there, so they’ll bring the lights so they can shine back in there and get a better view of the items.”

Typically, the lockers will contain general household goods and appliances, various pieces of furniture, old or obsolete electronics, old (and sometimes vintage) clothing, and boxes of old papers. However, bidders have also been known to find money, jewelry, antiques and all kinds of collectibles at auction.

The management companies do take care to protect sensitive information, however. “Of course, if it’s business or personal records, then we really don’t want to auction that off,” Ballard explains. “We want the state association who directs that profession — whether it’s a lawyer or a doctor or a dentist — to come and claim them, because you have to be so careful with customers’ records these days. We don’t really want to be selling personal information.”

People often store a whole household’s worth of possessions or all of a business’ physical assets inside these units, so the upside can be tremendous. The boxes, footlockers, Rubbermaid tubs and plastic storage containers have the potential to yield just about anything one can imagine.

As a result, it shouldn’t be particularly surprising that something akin to a mental poker match occurs between the people vying for the lockers, wherein they reportedly bluff and look for tells as they try to gauge one another’s desire to buy a certain lot. Other bidders have compared the process to sport-fishing, where one casts a line to see what bites.

Whatever metaphor one chooses for describing this phenomenon, however, stories of lockers filled with collectibles and antiques abound among the industry. Some of the more interesting and lucrative items reportedly discovered include rare still-packaged Star Wars toys, vintage player pianos, commercial deep fryers, expensive china cabinets, Civil War-era shotguns, invaluable tether cars, video poker machines, antique wooden gun cabinets,19th-century steam whistles, rare mid-1950s advertising displays and Tibetan tea pots.

“We have seen some odd things,” says Ballard. “In Fulton County one time, the body of a customer’s murdered first wife was discovered in one of the units — that’s probably the most extreme end of it. People also have found antique fake Stradivarius violins, bullion, rare antiques and all sorts of other things.”

The real trick, of course, lies in identifying trash from treasure, and subsequently figuring out what to do with it. And therein lies the real battle.

*Article will be published in an upcoming issue of Cobb In Focus Magazine

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