How to inspect construction equipment.

by Rick Sanchez2. December 2012 19:47

I've included a few quick videos on what I look for when I inspect a machine.  Please feel free to leave a comment on anything I may have missed, or on what I should add.  Your comments are greatly appreciated.   

 

Click on the following links:

 

HOW TO INSPECT CONSTRUCTION EQUIPMENT

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Is buying/selling at an auction the best option? The real winner is the auctioneer!

by Rick Sanchez3. December 2010 09:22

1. Nominal or stated sales price vs. actual or effective, net sales price.

First of all, the auctioneer charges anywhere from 12-18% to the seller.  Then, the buyer has to pay anywhere from 2-4%.  Not a bad return for assets the auctioneer has no money into!  So, what you see as the stated or what I'd call the Nominal price does not report these fees, which go to the auctioneer.  The actual, or effective price is an entirely different number to the contractor.  

2. Value of auctions to Sellers?

Some people think selling equipment at auctions can yield the highest most efficient return. Again, with auction fees, the seller gets between 80-88% of the "sales price."  The risk to the seller is obvious, because the transaction is completely out of his control.  Anything can go wrong--from a blown hose to someone tampering with the unit (to keep the value down).  Another hidden risk lays in the fact that the auctioneer owns many of the units in the auction.  Over the years, I’ve heard rumors of parts pulled from contractor machines to be put on auction owned units (batteries, engine panels, mirrors, etc).   This hurts the contractor and helps the auctioneer. 

So, for whatever reason, in the eleventh hour your machine hits a glitch.  The auctioneer could care less, because not only does he get paid either way, he gets paid first!  He is going to get through your piece of equipment as efficiently as possible, because it’s just another line item he has to get through.   So, depending on the equipment, any mishap can cost you tens of thousands of dollars, and to add insult to injury, you are charged between 12-18% on this possible misfortune.   

Other undesirable factors that impact return are transportation and prep costs.  There is also an opportunity cost associated with the time value of money from tying equipment up waiting for the auction--to waiting for the funds to clear the auction to be distributed to the seller. 

 3. Value of auctions to buyers?

Auction companies want the public to believe auctions are done with the utmost integrity.  I know for a fact they are not.  Let start with the fact that equipment manufactures help rig auctions.  Why?  To get their resale values up.  Cat has done this for decades. Komatsu got in on it about 12 years ago.  Now, all manufactures are doing it.  They do this by bidding on their own units that they themselves put in the auction.  The premium they pay on getting their auction prices artificially high pays huge dividends on a macro or global scale.

This aside, small, medium and large dealers do it as well, with buddy deals from the auction houses.  Machines are bid up artificially high to maximize the profit for the buddy of the auctioneer. 

The last factor I’ll site as a reason auction values are inflated at the expense of the contractor is, as I mentioned before, many of these units are owned by the auctioneer.  Perhaps you’ve noticed the same machine appear several times in the same auction?  This is extremely common, and helps no one but the auctioneer.  It’s his world and the contractor just happens to be in it. 

These inflated prices are reported to companies that report auction values.  This is one of many main reason auction values are overstated.  I call these stated auction values “a smile on a dog,” because although the dog may look like he's smiling, you have no way of knowing the condition he's really in.  

So, as you can see, I’m not a fan of auctions.  I think in many ways it is a corrupt business that is there for the benefit of the auctioneer and his buddies.  In a nutshell, auction houses win at the expense of the buyer and seller.    

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Rick Sanchez

Sales Info:
Rick Sanchez
214.683.1550
r@tractortip.com
Equipment Appraisal Services Offered
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