Top Five Myths about Commercial Real Estate Auctions

Are you thinking of buying a commercial real estate property at an auction? Well, you may be wondering whether it is safe or not. Whether you’re a newbie or seasoned in the real estate investment market, you’ve probably heard some preconceptions about commercial real estate auctions. With such horrifying stories in mind, it may seem too risky to invest in commercial properties. However, the fact is that there’s no commercial investment that is totally risk-free. Most of the preconceptions real estate investors talk about commercial real estate auctions are actually false or maybe partially true.

Myths about auctions that hinder investors from buying and selling using auctions.

Only Distressed Real Estate Properties Are Sold Via Auction
People mistakenly believe that there’s always something wrong with a property that is being auctioned. While most of the commercial property auctioned during the real estate crisis was in disrepair, current commercial property auctions have evolved. Property buyers can now get assets of all types and quality at a good price. For better price or quick sale of commercial real estate property, auctions are the ideal way and not a measure of last resort.

You Can’t Look Around Before Offering a Bidding

This myth has picked up a considerable amount of attention since the Great Recession. It has also been made popular on shows like the HGTV’s Flip or Flop. Some investors avoid participating in auctions because they mistakenly believe they can look at the commercial property when they’re part of the auction. Buying a property on auction does not forego the need for due diligence during the sales process. Since the owner of the property will need to attract many potential buyers for the commercial auction, they will always provide all the necessary information for you to perform due diligence before bidding for the commercial real estate property.

Expect To Get Hit With Hidden Costs

Working with experienced commercial real estate professionals and the savvy legal team is one of the due diligence steps to take as an investor. This team of professionals will help check for proof of property ownership, liens on the property, zoning problems, and any other potential roadblocks.
Auctions are always free when working with a reputable auction house. Don’t pay anything to participate in an auction. While you will to prove you can pay for the property in cash at the auction, there should be no unexpected costs.

Buying at a Real Estate Auction Is Preying on Other People’s Misfortunes

This myth emerges from the misguided thought that auctions only happens when a commercial real estate property is on foreclosure. Although it may be true in some cases, it is also likely that commercial real estate auction is the marketing choice for an insightful property seller. Even if the property is in foreclosure, it is extremely farfetched that a mom-and-pop shop is on the verge of being eliminated from the business. It is probably the owner’s decision to get out of the investment. There’s no moral wrongdoing in buying a commercial real estate property at auction.

All Commercial Real Estate Auctions Are Rigged

There are people who avoid auctions becomes they believe they’re rigged by the auction company. The truth is that commercial real estate deals are highly regulated. The role of the auction house in the bidding is to ensure they meet or exceed the seller’s desired price. If reputable auction houses could be cheating the buyers, the word would go around rapidly and the auction house wouldn’t stay in business.