Certified Checks or Floor Plan only. SOLUTION TO AUCTION PITFALL #2 (Bad Checks)
At first, it is critical to establish your auction rules. We recommend when you write those rules to let wholesalers know that you only accept certified checks unless you have an established relationship with the wholesaler. At minimum hold the title paperwork until their check clears.
This may sound harsh, but even the well funded wholesalers run into financial woe’s from time to time. In one case during the recession of 2008-9 a large dealer in NY lost over a million in bad checks just from wholesale transactions.
You might think that buyers would be upset with this but in my experience they are usually so glad to be back in the dealership and avoiding huge auction fees that they understand the reasoning and will work with you at first.
As your auction takes off, you will be able to invite in floor plan companies as well. This way the money is EFT directly into your wholesale account with reduced risk. CFO’s love EFT from floor plan companies.