BLM to require $10,000 deposit at auctions

Jennifer Shubinski

Thursday, Jan. 29, 2004 | 9:53 a.m.

The Bureau of Land Management will require potential bidders at its future Las Vegas land auctions to each put down a deposit of $10,000. This is aimed at curbing a growing problem at the auctions -- defaults.

Bidders defaulted on 17.5 acres, or almost $4.7 million in high-bids, at the agency's last land auction, at which 2,700 acres were put up for sale.

While the total acreage defaulted on isn't large, the land defaulted on was for 2.5-acre and 5-acre parcels, land sizes that draw some of the most competitive bidding.

"We think it will better the process," Phillip Guerrero, BLM spokesman, said of the $10,000 deposit. "We think it will truly bring out interested buyers to the event and potentially forestall anyone defaulting on their proposed purchase."

If high-bidders can't pony-up the cash, they lose their deposit.

People who buy multiple parcels at auction, and default on even one, will also lose their money.

"We are anticipating some negative reactions," said Merv Boyd, BLM assistant field manager for land sales and acquisitions.

People will still be required to put a deposit of 20 percent down after winning the high-bid. The $10,000 deposit will go toward that 20 percent, Boyd said. If bidders don't win any parcels, they get their money back, he said.

This is not the first time the BLM has required deposits to bid, but it is the first time the governmental agency will require people to place a deposit just to receive a bidding placard.

The BLM required, at the request of developers, potential bidders to place a 20 percent deposit, in the form of a $50 million certified check, for the largest parcel being placed on the block at its November auction.

Potential bidders again interested in the 1,940-acre parcel will have to present a $50 million check to the federal government the morning of the auction.

"If you default you will lose your money," Guerrero said. "The time of toying with the federal government is over."

Tom DeVore, general counsel for Focus Property Group, which has bought small and large land tracts at BLM auctions, said the change is for the better.

"As far as we're concerned, that's a welcome change," he said. "It will discourage bids from people who have no intention of closing, but are just there to play the game."

BLM officials were concerned that the people who defaulted on the parcels potentially bid up the price for other serious bidders. There was also concern that parcels were being bid up on purpose, with the preconceived idea that the bidder was going to default so they could bid on the same parcel again via the Internet.

In past auctions, property that didn't sell at the live auction, or was defaulted on, was put up for auction via the Internet. Unlike live auctions, the Internet venue does not provide as competitive a bidding situation and buyers routinely obtain land at the appraised price or slightly more than appraised price.