Resolution Trust Corporation:

Effectiveness of Auction Sales Should Be Demonstrated

GGD-92-7: Published: Oct 31, 1991. Publicly Released: Oct 31, 1991.

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Gaston L. Gianni
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Pursuant to a congressional request, GAO provided information on the Resolution Trust Corporation's (RTC) national satellite auction, focusing on whether: (1) the auction program design was conceptually sound; and (2) auctions were a viable and effective method for selling real estate assets.

GAO found that: (1) the RTC auction approach includes elements that should provide an adequate foundation for ensuring that auctions are a productive way to sell assets; (2) the RTC auction program hired experienced people to run the auction industry program, established communication lines within RTC and to the public, and established a private-sector outreach effort for the auction program; (3) although RTC believes auctions can be an effective way to sell many types of real estate assets quickly and at a good price, there is uncertainty about the viability of auctions since there has not been enough analysis to determine whether auctions are more effective in maximizing returns than the more commonly used brokered sales approach; and (4) RTC eventually plans to compare the results of different sales methods with the auction approach, which could help RTC respond to criticism that brokered or other approaches work better than auctions because they produce higher returns.

Recommendation for Executive Action

  1. Status: Closed - Not Implemented

    Comments: On June 3, 1994, RTC advised GAO that it had not undertaken the study it had agreed to do to compare the results of auction sales with the results of other sales methods used by RTC to dispose of assets. The Vice President of Asset Management and Sales told GAO that since the study had not been done, it was RTC's position that a thorough study at this time was neither cost-effective nor useful. Since RTC has already sold about 93 percent of its assets, little benefit would be realized in doing the study at this late date in RTC's existence (RTC will cease operations in December 1995). GAO concurs that making the recommended study, at this time, would not provide the benefits originally envisioned by the recommendation.

    Recommendation: The Resolution Trust Corporation (RTC) should determine the effectiveness of auctions used to sell its real estate by comparing a sample of the results of auction sales with results realized on various other sales methods, particularly sales by brokers.

    Agency Affected: Resolution Trust Corporation


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