How do storage auctions work?

Self-storage auctions explained

A self-storage company earns income mainly from renting out storage units. It uses that income to cover its operating expenses, like utilities, employees’ wages and taxes. When renters don’t make payments, especially for an extended period of time, it can cause the company to lose profits. To recoup some of those losses, many self-storage companies hold auctions for the contents of an unpaid storage unit.

A storage auction can be held either at the storage facility or online. Attendees are usually required to register prior to the auction and must bring cash to pay for winning bids. In a storage auction, all of the unit’s contents are bid on as a whole. Bidders aren’t allowed to look inside boxes and can only place bids based on what they see from outside the unit.

After the auction is complete, the winning bidder usually has 24 to 48 hours to collect the belongings and clear out the unit. With the unit empty, the storage company can turn around and rent it out promptly. Auctions can save storage companies the disposal costs of cleaning out an occupied unit.

Pros and cons of storage auctions

Is it worth it for you to bid? Or, if you’re paying for a storage unit and you end up unable to make rent, is a storage auction the end of the world? It depends.

The phases of a storage auction

Before a storage company can schedule an auction, it must adhere to state laws and regulations regarding unpaid rent. The rental agreement — the legal document the renter initially signed to receive the storage unit — details the steps a company can take in that scenario.

For example, the rental agreement states a specific number of days the rent must be past due before the renter is considered in default (usually 30 days, but this can vary). During this time, the company will try to contact the renter and secure payment. Most state laws dictate that companies must notify the renter in writing of missed payments within a certain time period.

However, if the renter remains delinquent on their payments, the storage company can cut the lock and replace it with one of its own so the renter is denied further access to the unit. The company may then proceed with scheduling an auction.

Auction dates are advertised to the public online through various websites or posted in local media sources, like newspapers or magazines. Typically, the renter is also notified of the upcoming auction in writing before the event occurs.

The auction period

Storage auctions can be held either at the storage facility or online. Both have their own pros and cons.

At an on-site auction, the company will open the unit door so bidders can see what’s there from the outside. Plan to bring a flashlight with you so you can see items in the back more clearly. You won’t be able to enter the storage unit before bidding, so be prepared to quickly scan the unit for the number of items it may have. Typically, the more visible items there are, the higher the bidding will be. You’ll need to estimate the unit’s value before bidding begins.

Also, you must bid within seconds or minutes of the last bid and you can only bid on one unit at a time. Auctions are closed out that day.

Online auctions operate a little differently. Generally, the auction company posts one to two photos of the unit from the outside as bidding begins. You can bid on multiple units at a time. In addition, the bidding period is longer, usually a few days or so, before the auction closes. Keep in mind that online auction companies may also charge an additional fee based on a percentage of the winning bid total.

The post-auction period

After the auction closes, winning bidders have 24 to 48 hours to clear all items out of the unit (up to 72 hours for some online auctions). Some items you may choose to take with you and resell, while others may be trash. The buyer must turn in personal items, such as legal paperwork, photos, tax documentation and forms of ID, to storage facility management. The company is responsible for contacting the previous owner to retrieve these belongings.

Also, vehicle titles cannot be transferred to the new owners, so you’ll have to sell any vehicles in the unit for parts only. If you find firearms or illegal items, it’s best to call the police and file a report. Do not remove those items from the unit.

You may choose to keep or resell items you purchase from a storage auction. Pawn shops, consignment stores and online marketplaces are all popular outlets for resale. Be sure to keep a record of the expenses and revenue from this new business venture; you’ll have to report this income on your taxes if it’s more than $400.

What to do if a storage company wants to auction off your stuff

In general, it’s likely a storage company doesn’t want to auction off a renter’s personal belongings. Not only does it take time to schedule and prepare for an auction, but it also costs the company money to move forward with this process.

If you’re a renter and think you’ll have to miss a payment because of a financial hardship, contact your storage facility promptly. It’s best to alert them of the situation early because the company may be able to offer a payment extension or a different payment plan to allow you to get caught up. Otherwise, the collections process may escalate.

If you can’t pay at all, consider emptying out your unit if you’re able. However, remember that any delinquent balances may be reported to the credit bureaus and could negatively impact your credit score. Make an effort to repay your outstanding balance, even if you do so over an extended period of time, so your credit doesn’t take a hit.

Popularity of storage auctions

In recent years, storage auctions have grown in popularity. The rise of online auction sites online makes these events much more accessible to consumers who may not otherwise choose to attend an in-person auction.

In fact, every year about 80,000 storage auctions are held across the country. These numbers can rise especially during difficult economic times when owners have difficulty paying rent.

So, while it may seem like good news for potential buyers to have more opportunities to attend these auctions, the increase could also be a sign of an economic decline. Keep in mind that when you purchase items from a storage unit, you may have difficulty reselling them in a difficult market.

Tips for attending a storage auction

As a buyer at a storage auction, you’ll need to quickly assess the unit's value and make a bid based on that evaluation. For example, units with several boxes piled high may have more value than those with just a few boxes. If you’re attending an auction for the first time, do some research tips for making bids.

Some tips:

• Set a firm budget and stick to it. If you plan to attend an on-site auction, only bring enough cash to cover what you plan to spend. Consider additional fees, like sales tax and online auction fees.
• Research the rules of conduct beforehand, especially if you are new to storage auctions. For example, auction attendees should not announce the specific items they see.
• Check to see if registration is required. You can also call the storage facility or the auction company for event details and preferred payment methods (cash or credit/debit cards).
• Bring a pickup truck or SUV with a trailer, if possible, with room to pack items from winning bids. It could save you a trip back to the storage unit later. It may be helpful to bring trash bags, gloves, moving boxes, furniture covers and a new lock too.
• Arrive at least 30 minutes prior to the auction start time. This gives you ample time to sign in at the front office and find the auction location.
• Be patient and don’t feel pressured to bid when others jump in. There may be other units at the auction that are more appealing.
• Try to resell items you’ve purchased as soon as possible. Many items lose their resale value over time. Make a plan to donate items that aren’t sold by a certain date so you don’t become overwhelmed with inventory.