{"id":85161,"date":"2017-01-13T05:00:41","date_gmt":"2017-01-13T12:00:41","guid":{"rendered":"https:\/\/www.biggerpockets.com\/renewsblog\/?p=85161"},"modified":"2021-03-16T12:18:16","modified_gmt":"2021-03-16T18:18:16","slug":"commercial-auction-myths","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/commercial-auction-myths","title":{"rendered":"5 Commercial Real Estate Auction Myths Investors Believe"},"content":{"rendered":"

Whether you\u2019re an old hand at buying and selling properties or you\u2019re just dipping your toes into the real estate investment market, you\u2019ve probably heard your fair share of complaints — or outright horror stories — about commercial real estate auctions. While it\u2019s true that they can feel risky, it\u2019s also true that no <\/em>commercial investment is completely risk-free.<\/p>\n

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.<\/p>\n

5 Commercial Real Estate Auction Myths Investors Believe<\/h2>\n

1. If a property’s up for auction, there’s something wrong with it.<\/h3>\n

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\u00a0— it\u2019s not necessarily a measure of last resort.<\/p>\n

\"wholesaling-sellers\"<\/p>\n

2. You can’t look around before bidding.<\/h3>\n

This is another myth that has grown larger than life since the Great Recession, and it\u2019s been popularized on shows like HGTV\u2019s Flip or Flop<\/em>,<\/a>\u00a0in which house flippers peer through the windows and surreptitiously drive by abandoned properties to try to guess what\u2019s going on inside.<\/p>\n

Luckily, a commercial auction is the owner\u2019s choice, and they usually want to attract as many buyers as possible, so they\u2019ll provide all the information you need to do your due diligence before bidding.<\/p>\n

3. You’ll get swindled with hidden costs.<\/h3>\n

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\u2019ll know going in if there are liens or back taxes, and buyers almost never need to pay a fee to participate in the auction.<\/p>\n

You may have to prove up front that you can back up your bid in cash, but you should never find yourself in a pay-to-play situation when you work with a reputable auction house.<\/p>\n

4. Buying at auction is preying on other people’s misfortunes.<\/h3>\n

This myth arises from the misguided idea that auctions only happen when the bank forecloses on a property. While that may sometimes be the case, it\u2019s equally as likely that commercial auctions are the method of choice of a savvy seller. Even if a commercial property is in foreclosure, it\u2019s incredibly unlikely that a mom-and-pop shop is being pushed out of business. Instead, the owner probably made a calculated move to get out of their investment. There\u2019s no moral wrongdoing in buying at auction.<\/p>\n

\"productive-2017\"<\/p>\n

5. All auctions are rigged.<\/h3>\n

If you\u2019re worried about dishonest sellers driving up the price by planting ghost bidders or other underhanded tactics, relax. Commercial real estate transactions are highly regulated, and reputable auction houses couldn\u2019t stay in business if they cheated buyers — word would get around too quickly for that to be a viable business practice.<\/p>\n

If you\u2019re concerned about how it works, attend an auction and gain a thorough understanding of the process before you decide to participate. As in most things, knowledge is power!<\/p>\n

If you\u2019re interested in commercial real estate auctions, do some research beforehand and talk to an auction house to better understand the process. While not everyone loves the thrill of the auction setting, it\u2019s no more or less risky than any other commercial real estate purchase when you know what to expect.<\/p>\n

What other myths would you add to this list? Have you found any of the above to actually be true?<\/em><\/p>\n

We want your insight! Be sure to comment below.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

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.<\/p>\n","protected":false},"author":120484,"featured_media":85196,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[5527],"tags":[273,1136,6105,6106],"class_list":["post-85161","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-commercial-real-estate-investing","tag-auction","tag-commercial-real-estate","tag-commercial-real-estate-auction","tag-myths"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/85161","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/120484"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=85161"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/85161\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/85196"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=85161"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=85161"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=85161"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}