A Beginner’s Guide to Commercial Real Estate Auctions

How much do you know about commercial real estate auctions?

Commercial Real Estate Auctions

For starters, the owner of a property has to decide to either go with a traditional sale or to auction off their asset. If and when they do decide on an auction, they’ll typically partner with an auction specialist, such as Wilson Auction & Realty Co. of Bryan, Ohio, in order to facilitate the process. This is especially true if they want to hurry along the sale of the property rather than waiting around, hoping someone shows interest and eventually buys it in the traditional way.

Commercial Property Auctions

So what kinds of commercial properties “do well” at auctions? Multifamily dwellings, hotels, offices and agricultural properties are all good bets. Sometimes distressed properties are included on that short list, but they’re not the biggest component of auctions.

Buyers and sellers appreciate the expediency of auctions. Instead of having to wait months and months to get a transaction completed (the traditional way), an auction can help sell a property quickly, to the point where a buyer gets the keys and title within 90 days or less.

Basically, commercial real estate auctions are streamlined in order to get past the closing process upfront. An auction specialist can and will do a lot of the work that needs to be done, such as checking the title, obtaining due diligence reports, and even preparing escrow arrangements for the buyer. Of course not all auction platforms do this work, but many do. There are other things involved as well, such as taking professional photographs or videos of a property, marketing those online and elsewhere, and reaching out to potential buyers who are interested in commercial real estate.

How Commercial Property Auctioneers Help

The nice thing about auctioneers is they’re well-connected– they often have interested buyers chomping at the bit to acquire new properties. They typically maintain quite a list of potential buyers who can be informed of “what’s on the docket for auction soon.” This helps build interest in properties for sale that otherwise might languish on the market for lack of networking and marketing opportunities.

With commercial real estate auctions, sellers generally set a reserve price, which amounts to the minimum they’re willing to sell their property for… and then the auction team gets to work looking for people interested in what they’re selling/auctioning off.

Property Auctions

Most property sellers could use a boost when it comes to who knows about the property or properties they want to sell– and that’s where an auction platform’s assistance can be invaluable. Auctioneers often know people “regular people”/sellers don’t know! They know who’s serious about buying property, too.

It’s a good thing when buyers can be pre-qualified. Auctioneers want to essentially make sure that bidders can afford their bids so that they’re not wasting people’s time.

With online auctions, buyers have the chance to see what’s at auction ahead of time and they can also set themselves up to make a proper bid. Typically, they have to register online and disclose information about themselves to help pre-qualify them for the actual auction.

Sellers like the certainty of execution when it comes to auctioning a property. They don’t have to haggle over the price. They don’t have to worry if the winning bidder will back out. When it’s done, it’s done.

With an auction, the person who offers the most money wins the property. Sometimes there’s a “bidding war” as two or more buyers can’t stop raising the price higher since they “really really want it!” That’s a great thing for a seller.

If you’re thinking of bidding on commercial real estate at auction, have a credit line available or a bank ready to loan on your credit when it closes. Or just have the cash in hand. Before an auction occurs, take property tours virtually or in-person if you can. Ask about the format of the auction so you know what to expect and can plan accordingly. If you need expert help, hire someone to represent you who knows what they’re doing. And, finally, as hard as this sounds, avoid emotions. Yes, auctions can get exciting, but it’s important to recognize when you’ve reached your limit so you’re not buying something for an exorbitant price you cannot really afford.

Are you interested in learning more about commercial real estate auctions? Call Wilson Auction & Realty Co. at 866-870-5500.