When a borrower defaults on a secured loan, attorneys are often the ones guiding the lender through the UCC Article 9 foreclosure process. Article 9 does offer a faster, non judicial route to recover value from personal property collateral, but it also imposes a strict standard: every meaningful part of the sale must be commercially reasonable.
For legal counsel, the central question is how to make sure the lender’s sale of collateral can withstand challenges from debtors, guarantors, and the courts. In practice, the answer usually depends on a single strategic decision:
Bring in a qualified, experienced auction company.
AuctionAdvisors conducts UCC Article 9 sales across the United States. In that work, they see how professional auctioneers help protect lenders from claims, improve recovery, and create the kind of arm’s length process courts expect. The brochure explains why partnering with an auction firm is not just helpful but often essential.
The Attorney’s Risk: Commercial Reasonableness Under Article 9
UCC Article 9 gives lenders the right to liquidate personal property collateral through either public or private sale. Section 9-610 makes clear that the method, manner, timing, location, marketing, and terms of the sale all must be commercially reasonable.
When this standard is challenged, courts do not focus only on the fact that a sale occurred. They look at the entire process, including:
How the collateral was exposed to the market
Whether the sale terms were normal for that particular asset class
Whether the lender actually tried to find genuine buyers
Whether the sale produced the best reasonably obtainable price
Whether the process was consistent with industry practice
An attorney can produce excellent notices and documentation, but if the sale itself was poorly marketed or not competitively run, the lender’s deficiency claim may be at risk and the likelihood of litigation increases.
Where Auction Professionals Add Critical Protection
1. Demonstrable Market Exposure
Courts expect lenders to do more than simply list collateral in a single place. They expect a real effort to connect with appropriate buyers. A capable auction firm contributes:
Established databases of motivated bidders
Marketing channels tailored to specific industries
Advertising strategies that use multiple platforms
Targeted outreach to niche buyer groups when the collateral is specialized
Together, these activities create a trackable marketing record that shows the lender acted in good faith and made a serious attempt to obtain fair value for the collateral.
2. Competitive, Arm’s Length Bidding
A public auction run by an independent firm creates an environment that aligns well with the commercial reasonableness standard. Typical features include:
Open competition among bidders
Clear, transparent bidding procedures
An arm’s length sale without insider influence
A neutral third party determining the sale’s timing, method, and terms
Because the outcome is driven by genuine market participation rather than internal decisions, it is easier to defend if challenged.
3. Realistic Valuation and Market Aligned Strategy
A commercially reasonable sale requires thoughtful advance planning. Experienced auction professionals help attorneys and lenders design an approach that fits both the assets and the market, including:
Deciding whether the collateral should be sold item by item, in lots, or as a going concern
Selecting sale dates that reflect typical demand cycles in that industry
Determining whether special marketing efforts are needed for unique or complex assets
Offering valuation guidance based on actual buyer behavior and comparable prior sales
This creates a process that is not only reasonable on paper but also consistent with how similar assets are normally sold.
4. Maximizing Proceeds and Reducing Challenges
Courts often pay close attention to low sale prices. A well designed professional auction can:
Narrow the gap between estimated market value and the final sale price
Show that the lender acted prudently and tried to avoid unnecessary loss
Strengthen the lender’s ability to pursue a deficiency claim when appropriate
When the lender can demonstrate robust marketing, competitive bidding, and a price that makes sense in the market, attacks based on commercial unreasonableness become much harder to sustain.
When Lenders Do Not Use a Qualified Auctioneer
Courts have held UCC sales to be commercially unreasonable when lenders failed to take basic steps to expose collateral properly. Risky patterns include:
Not advertising to buyers who specialize in the asset type
Selling niche or technical collateral without adequate market exposure
Accepting bids that are clearly far below likely market value
Holding rushed sales with very short notice and poor attendance
Using sale methods that do not align with normal trade practice
These weaknesses invite objections, encourage lawsuits, and can threaten the enforceability of the lender’s deficiency claim.
The Auction Firm’s Role in Your UCC Article 9 Strategy
When attorneys involve an auction firm early, it becomes easier to create a sale process that both maximizes value and stands up in court. An experienced auction firm helps ensure that:
Marketing and sale procedures are thoroughly documented
Collateral is presented in a way that attracts serious, qualified buyers
The timing and method of sale are consistent with accepted industry standards
The overall process can withstand judicial review
The lender has the best chance of achieving the highest attainable value
A professionally managed auction turns the sale from a potential weak point into a documented example of careful and reasonable creditor conduct.
Conclusion
The UCC standard is straightforward, but satisfying it requires more than formal compliance. Lenders and their attorneys must be able to show that the sale process was market driven, transparent, and defensible from start to finish.
Working with a qualified auction company gives counsel a strong partner in that effort. The auction firm’s expertise in marketing, valuation, strategy, and documentation can be the most effective defense against claims of improper foreclosure and one of the best tools available to protect the lender’s recovery.
Project Leaders
Oren Klein
Oren Klein is a restructuring and insolvency professional who works on matters involving bankruptcy trustees, federal and state receiverships, special fiscal agents, special masters, and assignments for the benefit of creditors. He has been a Partner at AuctionAdvisors for more than twelve years and previously served as a Partner at Integrated Property Group, LLC for over four years.
He currently serves as Chair of the Turnaround Management Association’s New Jersey Chapter, which includes more than two hundred members in the insolvency and restructuring field. He has also been involved with the Chapter Resource and Response Committee of the global Turnaround Management Association, which supports dozens of chapters with thousands of members worldwide.
Oren holds a bachelor’s degree from Rutgers University and is a graduate of The World Champion College of Auctioneering. He is a licensed real estate broker in multiple states and a licensed auctioneer, and has served as Special Master and court appointed Receiver in various state court cases.
Joshua Olshin
Joshua Olshin is a partner at AuctionAdvisors and brings extensive experience advising corporations, financial institutions, municipalities, and individuals on asset dispositions throughout the United States. Before joining the auction industry, he practiced for more than eight years as a corporate and transactional attorney, beginning at Skadden Arps Slate Meagher and Flom and later at Friedman Kaplan Seiler and Adelman.
During his time in private practice, Joshua advised leading Fortune 500 companies on acquisitions and dispositions of corporate assets. He earned a B.A. from Johns Hopkins University, a J.D. from Northwestern University School of Law, and an M.B.A. from INSEAD in Fontainebleau, France.
Joshua is active in a range of trade organizations, including groups focused on turnaround, bankruptcy, real estate, mortgage banking, and the auction industry. He is admitted to the New York Bar.
Contact – UCC Article 9 Project Leads
Oren Klein
Phone: 973-753-1313 ext. 703
Email: oklein@auctionadvisors.comJoshua Olshin
Phone: (212) 375-1222 ext. 705
Email: jolshin@auctionadvisors.com
