Were Selling Our Automotive Wrecking Facility; Are We Ready?

By: D'Arcy Ronan, Automotive-Properties.com

An Automotive Wrecking Facility is probably one of the most challenging types of real estate assets to sell. In comparison to other classification types real estate types (i.e., residential, commercial & investment properties) where the sales cycles are much shorter due to less environmental issues and more prospective purchasers. 

With the automotive wrecking industry rapidly changing due to contraction, merging of the wrecking and scrap recycling industries and increased government regulations and most of all lack of buyers in the marketplace.  The sales process of a Wrecking Yard has now gone from anywhere between 8 months to 2 years+ to complete a transaction. It's a process that can be both monetarily and mentally drained by the time it's all said and done for everyone involved. 

So it's during this festive holiday season that many in the industry will sit down during this time and reflect on their past year success and failures and look to the upcoming year to see how the future unfolds. It's then during this time of reflection that owners will decide to continue operations for another year or decide to go in another direction and put their wrecking yard operation up for sale. 

When that decision is made to proceed to put their facility up for sale, the very first question an owner should ask themselves is, are we ready?

There are so many different moving components in the sale process (i.e., lawyers, accountants, family, buyers, etc.) that at any given time one of these parts can delay or nullify your transaction. But it doesn't have to be this way, and with a bit of patience and planning you can minimize the risk of having a delay, or a deal invalidated the following must be down to ensure a smooth operation.

It starts with the following:

Paperwork in Order
There must be some pre-check list made up that will help save time and costs. Municipal and Provincial rules and regulations have reformed over the decades than none more than the past few years. Far too many times have deals been delayed or fallen apart because the Sellers have failed to take the time or effort to get their necessary documents in order. Their mentality is "they bought the place "as is" or "site seen" many years ago when the rules and regulations were much laxer and less stringent. But times have changed and what may have been ok 20-30 years ago won't be accepted today. 

Team of Professionals
Assembling your team of professionals (ex. lawyer, accountant, etc.) to help in the sale of your facility is highly recommended. This is a highly contested sticking point as most sellers don't like to have to use them until necessary late in the selling process. This way of thinking is very counterproductive. You can't get around not spending money when in the in the selling process. So why not get the "ease of mind" out of the way knowing that these professionals know your business. 

The alternative is waiting at the last second to hire a professional (i.e., accountant, lawyer, etc.,) who doesn't know you or your business and string you along to till they make their money and then dump you!! Far too many time this happens in this industry, more than people think!

Type of Sale
How do you want your sale "structured?" There are a least six different ways to structure a wrecking yard sale transaction. As previously mentioned about getting your team of professionals together. The Accountant might be able to inform you what the tax advantages are selling your property one way or disadvantage if you opt to sell the wrecking yard a different way. The Lawyer will be able to advise you on legal issues that you may not have been aware of or of new legal legislation otherwise you or real estate agent might not have been aware.  In situations like this is where they are the most "valuable" to you. It's in your best benefit to taking advantage of their expertise.

Expectations
Sellers have very high expectations when it comes to putting up their wrecking yard for sale.  They get caught up expecting a quick and smooth transaction and to be paid what they are asking for their facility. The two (2) most common types of expectations that have the significant impact on the sale of your property are the "asking price" & "value for the wrecking yard license" expectation;

Because there is little or no sales data to compare wrecking yard transactions. Owners will just set their asking price based on "what they need to get out of the place to set themselves up for retirement." Their decision is based on the expectation there is "value for the wrecking yard license." For whatever reason sellers have come to the belief the "wrecking license" has become a valuable commodity similar to a farm quota for dairy, meat, etc. the reason being municipalities are not giving out new licenses for new yards to be established. Therefore there will be a premium for buying their property to get the much-coveted wrecking license.

This kind of thinking sets themselves up for major disappointment. Most times their asking number is nowhere near what the market is willing to pay. Secondly, if the "wrecking license" was in such high demand why do we not see more sales transactions each year?  Only if the Seller's reviewed their permitted uses allowed for their property, they would see the property is either have the permissible use for a wrecking/salvage or recycling uses, or it is a Legal Non-Conforming Use.  Most times the expectations are set way too high that the end goal is never achieved!

Selling a wrecking yard is a very long process faced with many ups and downs along the way.  By being prepared and having an exit strategy.  The complications and aggravations that come along with selling this type of real estate will be manageable, and the stress level reduced.

Automotive-Properties.com

About the Contributor
D'Arcy Ronan is the Owner of Automotive-Properties.com;
An Online Automotive Real Estate Website Advertising Automotive Related Properties For Sale or Lease.
He has Sold or Leased Automotive Recycling Facilities For Over 10 Years+
To Contact D'Arcy for further discussion about your facility.
please call: 1.888.963.9375
please email: [email protected]