Stressing Distress Sales Government agencies and lenders often auction properties that have been owned by individuals or businesses in financial distress. The property is sold to raise cash and satisfy creditors. As you'd expect, sellers in such situations are usually in no position to bargain, so buyers can frequently find good deals. For example, there are over 1 million individuals and companies declaring bankruptcy in the United States each year. When you're bankrupt, you owe more than you can pay. Often, bankrupts have to sell their possessions to pay off their debts in whole or in part. The U.S. Trustee program coordinates efforts by various bankruptcy trustees to make collections, often via public auctions. Unfortunately, there are no mailing lists for these auctions. Your best source is classified ads in your local newspaper. Or you can ask local auctioneers to notify you when they're going to handle a bankruptcy sale. Government auctions can be a boon to businesses as well as to consumers. You might, for example, buy low- cost company cars, trucks and vans. Sometimes you can find odd pieces of equipment that are not readily available through traditional marketing channels. If you're a business owner looking for equipment you can use in your business, don't neglect bankruptcy auctions as a source for furniture, fixtures, and office machinery. Business items are often auctioned after a bankruptcy or a loan default in which a bank or other lender takes possession of property pledged as collateral. Here are some brief descriptions of recent bankruptcy auctions: * The U.S. Bankruptcy Court, administering the liquidation of Russ Togs, Inc., served notice of an auction of 280,000 garments under the "Russ," "Crazy Horse," and "Manhattan" brand names. * The Federal Deposit Insurance Corporation (the FDIC, which insures bank accounts) and the Resolution Trust Corporation (or RTC, the S & L bailout agency) advertised a "public liquidation" of desks, lateral files, vertical files, swivel chairs and armchairs, copiers, plus "3000 other items, from bulletproof glass to household furnishings." * In 1992, Alexander's, which had been a major department store chain for decades, went bankrupt. The U.S. Bankruptcy Court ordered a total liquidation, so a public auction of the store fixtures, furniture, phone systems, etc. was held in eight stores. * On a smaller scale, Mamie's Bakery in West Islip, New York, went into bankruptcy, too. The U.S. Bankruptcy Court ordered a bankruptcy auction, putting merchandise such as baking ovens, butcher block tables, and walk-in freezers up for sale. * Recently, the New York Times ran an ad announcing an auction designed to prevent foreclosure on A.W.B. & Partners, a major fine-art company. The auction, held at a Sheraton Hotel in Smithtown, Long Island, included emerald- and diamond-studded bracelets and works of art by Chagall and Dali. If you were willing to play in that league, the auctioneer was willing to accept credit cards, charging you a 10% buyer's premium. Some auction notices merely state that a secured creditor is selling items, obviously collateral pledged to back a loan that subsequently went into default. Especially in these troubled economic times, you can expect frequent ads for auctions of office equipment, machinery, furniture, fixtures, etc., which might be useful if you operate a business. If a retailer goes out of business, you'll likely see ads for secured creditors (manufacturers and wholesalers) who want to sell new furniture, such as, bedroom sets and dining room sets. Recently, a bank in New Haven offered 2,000 Oriental rugs it had repossessed. You can find out about such auctions in your local newspaper. As always, attend the preview to inspect the merchandise and read the terms of sale. If you're thinking about buying machinery, be certain that it works. Great Buys In Small Packages Yet another federal agency auctioning property from distressed borrowers is the Small Business Administration. The SBA guarantees bank loans to small companies; the companies (and often the companies' owners) pledge assets as collateral for the loans. If all goes well, the businesses will generate enough cash to repay the loans. But usually not all goes well, especially with start-up businesses. If the business doesn't perform well, the collateral will be seized and sold to facilitate repayment. Who sells the property? Sometimes the bank, sometimes the SBA. Call your local SBA office to ask about future auctions. Also ask which auctioneers the SBA uses and which banks are certified or preferred lending institutions. Then, contact those auctioneers and banks to ask about SBA auctions. You need to be careful, though. In one recent instance, the SBA offered a home in a mountain resort community "as is." Although the home needed a new well and a new septic system, this wasn't revealed. According to local gossip, the auctioneer used the threat of a lawsuit to silence a neighbor who knew about the defects. So check carefully before bidding.