What You Should Know When Buying Commercial Real Estate Through Auction

What You Should Know When Buying Commercial Real Estate Through Auction

Whether you’re an experienced investor or just beginning at buying and selling commercial properties, it’s important to understand what’s actually true and what’s myth or rumour about the commercial real estate auction process.

Some believe that if a property is up for auction, there must be something wrong with it. During the housing crisis when homes were in foreclosure, in a state of disrepair, or abandoned, this myth gained a lot of traction. While it’s true some homes up for auction can be distressed, most commercial auction buildings are perfectly fine, especially if they’ve had tenants in them. In fact an auction is simply a wise business choice that the seller makes in order to get the best price in the fastest time frame, and not necessarily a last resort option.

The seller usually wants to attract as many potential buyers as possible so they’ll provide a lot of information about the property in order for the buyer to do their due diligence before bidding. Savvy buyers will work with commercial real estate auction houses to make sure they know exactly what they’re bidding on, and they’ll know going forward if there are any liens or back taxes involved with the property.

Another myth about auctions circles around the idea that there are dishonest sellers with ghost bidders to drive prices up. However the truth is that commercial real estate transactions are highly regulated and if you work with a reputable auction house, there’s no need to worry about any underhanded tactics. Auction houses can’t stay in business if they cheat their buyers and word would get around far too quickly for that to be a best practice in business.

If you’re interested in the process and want to know how it works, attend an auction in order to obtain a deeper understanding before participating. Do some research of your own beforehand and consult with a reputable auction house to gain a full comprehension and awareness of the process. You’ll find that auctions are no more or less risky than any other commercial property purchase, when you know the facts and what to expect going in.