How do Commercial Real Estate Auctions Work?

Commercial Real Estate Auction Gavel

There’s no denying the fact, real estate is the fastest-growing sector across the globe. According to various reports, the net worth of the US commercial real estate industry is valued at over $16 Trillion.

Today, due to the unprecedented uncertainties in the real estate market, the selling of commercial real estate assets can be a major challenge. After all, every seller will look for a way to maximize the sale price of their property. While buyers want to pay the lowest possible price.  Therefore, when a commercial real estate auction is concerned, it quickly draws the attention of everyone who has a stake in the property market.

What Are Real Estate Auctions?

As far as a real estate auction is concerned, it is managed by a licensed auctioneer and is a way of offering properties to the buyers as the auction is happening. Once the property is showcased to the prospective buyers, the person offering the highest price will eventually become the buyer. However, a commercial real estate auction works on a set of principles that everyone has to abide by. Here is how it works:

Opening Bids

The auctioneer will usually start by requesting the bidding price that will be introduced to all the bidders available.

Engagement Rules

The seller’s real estate agent must provide documents at least 30 minutes prior to the start of the auction. Be aware that auction laws differ for every state, so expecting a certain law to be the same in another city won’t necessarily be the case. Make sure and check out the rules and regulations before getting involved.

Down Payment

Once the highest bid has been placed and the property sold, the buyer will make a significant amount of down payment at that time. This is usually around 10% of the sales cost. The rest of the settlement can easily be made after mutual consultation of both parties.

Because finalizing a real estate property can be a daunting process, every seller and buyer must have a real estate agent on their side. From the buyer’s point of view, they are looking for an opportunity to minimize their expense by finding the best property for a competitive price. On the other hand, the seller would want to make the most out of their current property by finding the highest bid.

Auction Saves Time

An auction can easily save the time that it takes to sell or purchase properties. Because the real estate market is highly volatile, buyers and sellers are both looking to pick up an opportunity that can save time and provide value. On the contrary, sifting through the real estate market online and contacting various buyers/sellers is very frustrating. Therefore, when an auction is held, it brings together buyers and sellers who will not leave the room until a deal is cemented. Especially if one wants to sell commercial real estate, selecting an auction may be the best choice.

The Buyers Have Control over The Sale Price

The most intriguing thing to note about a commercial real estate auction is that the selling price is determined by the willingness of the buyers to pay the seller the most money. After all, when the property is brought to an auction, every prospective buyer will have a perspective on its price. So, when the auction begins, the person placing the highest bid eventually wins. In simplest terms, an auction opens up various opportunities that any other method would never present.

Accelerated Sales

No wonder the sales get accelerated as soon as the auction begins. Because every property gets a chance to be viewed by the buyers who offer the most lucrative prices, the sales get boosted immediately.  On the contrary, had the property been listed on a conventional property website, it could take months to find the right buyer.

The Legal Documents are Present

Contrary to the conventional process of buying a property first and getting the legal documents later, an auction event turns the tables. Because presenting the legal documents before the start of the auction is necessary, the buyers can rest assured about receiving verified documents. This saves time meeting the seller to negotiate the tiny details of the property being sold. Especially when a commercial real estate property is concerned, anyone can have reservations about its legal status.

These factors are some of the strong reasons why commercial real estate auctions are growing in popularity.

How Does the Commercial Real Estate Auction Stand Out?

As explained earlier, the commercial real estate auction stands out because it gives the right to the property owner to set a certain price and the buyers to decide how much the property is worth. Secondly, if the commercial property is located at a lucrative location that has access to various other amenities, the seller can demand a price that is much higher than the market. This means the seller will set the terms, and buyers will have to abide by them or improve on them. If a buyer begs to differ over a certain term, they will eventually lose the property to somebody else.

Now that commercial real estate auctions are happening everywhere in the world, real estate buyers and sellers are excited about what the future will unfold for them.

If you would like assistance of an experience local commercial real estate agent, we have some of the best available to assist you. Contact us today to find out more. No obligation to request information.