This myth has acquired plenty of traction since the home crisis, when many houses in foreclosure reach on the auction block in a state of disrepair as they were abandoned by homeowners and banks. While it’s true that some properties might be distressed, most commercial auctions feature buildings which are fine, especially if they have had renters for the duration in them. In the universe of commercial real estate, an auction is just a small business choice the seller makes to get the very best cost or the quickest sale — it’s not necessarily a measure of last resort.
2. You can’t look around before offering.
Luckily, a commercial auction is the owner’s pick, and they generally wish to attract as many buyers as possible, so they’ll provide all the information that you have to do your due diligence before offering.
3. You’ll get swindled with hidden costs.
Speaking of due diligence, informed investors work with a bright legal team as well as professional commercial real estate auctioneers to make sure their “i”s are scattered and their “t”s are crossed. You’ll know if there are back taxes or liens going in, and buyers nearly never need to pay a fee to participate in the auction.
You might have to establish up front you could back up your bid in cash, but you ought to never find yourself in a pay-to-play situation when you work with a reputable auction house.
This myth arises from the misguided idea that sells only occur when the bank forecloses on a property. Even if a commercial property is in foreclosure, it’s very improbable that a mother-and-pop shop is being pushed out of business. There’s no moral wrongdoing in purchasing at auction.
5. All auctions are rigged.
Relax if you’re worried about dishonest sellers driving the cost up by planting phantom bidders or alternative underhanded strategies. Commercial real estate transactions are highly controlled, and reputable auction houses couldn’t remain in business if they cheated buyers — word would get around too quickly for that to be a viable business practice.
If you’re concerned about the way that it works, attend an auction and obtain a thorough comprehension of the actual process just before you choose to participate. As in most things, knowledge is power!
Do some research ahead, if you’re interested in commercial real estate auctions and talk to an auction house to better understand the procedure. It more or less speculative than just about any other commercial real estate purchase when you know what to anticipate, while not everybody loves the thrill of the auction setting.
Have you found any of the aforementioned actually to be true?