Whether you’re an old hand at buying and selling properties or you’re just dipping your toes into the real estate investment market, you’ve probably heard your fair share of complaints — or outright horror stories — about commercial real estate auctions. While it’s true that they can feel risky, it’s also true that no commercial investment is completely risk-free.
It turns out that much of what real estate investors take for gospel when it comes to commercial real estate auctions is actually not true at all, or perhaps only partially true. There are lots of myths about the process that should be dispelled once and for all.
1. If a property’s up for auction, there’s something wrong with it.
This myth has gained a lot of traction since the housing crisis, when many homes in foreclosure hit the auction block in a state of disrepair as they were abandoned by homeowners and banks alike. While it is true that some properties may be distressed, most commercial auctions feature buildings that are fine, particularly if they have had tenants in them for the duration. In the world of commercial real estate, an auction is merely a business choice the seller makes to get the best price or the quickest sale — it’s not necessarily a measure of last resort.
2. You can’t look around before bidding.
This is another myth that has grown larger than life since the Great Recession, and it’s been popularized on shows like HGTV’s Flip or Flop, in which house flippers peer through the windows and surreptitiously drive by abandoned properties to try to guess what’s going on inside.
Luckily, a commercial auction is the owner’s choice, and they usually want to attract as many buyers as possible, so they’ll provide all the information you need to do your due diligence before bidding.
3. You’ll get swindled with hidden costs.
Speaking of due diligence, savvy investors work with professional commercial real estate auctioneers and a smart legal team to make sure their “i”s are dotted and their “t”s are crossed. You’ll know going in if there are liens or back taxes, and buyers almost never need to pay a fee to participate in the auction…