5 Commercial Real Estate Auction Myths Debunked
When it comes to commercial real estate, you have probably heard your fair share of horror stories about commercial real estate auctions. While, it’s true that it can be risky, it’s also true that no commercial investment will ever be completely risk-free.
As it turns out, a lot of what real estate investors take for gold these days, when it comes to commercial real estate auctions, is either not true, or at the most partially true.
In fact, in this article we will highlight about 5 myths that have been debunked about commercial real estate auctions.
Myth #1: If It’s For Sale, There’s Something Wrong With It
This myth stems from back during the housing crisis, when a lot of homes were being put into foreclosure and left in a state of disrepair due to being abandoned. However, while you may come across a few properties like this, ever since the market has picked back up, you’re seeing less and less of these “dumps” at auction. In fact, a lot of business savvy investors are now finding their way to auction to buy and sell property.
Myth #2: You Can’t Look Around Before Bidding
There is actually no Real Link to truth in this myth, and has been popularized by shows such as HGTV’s Flip or Flop. In contrast, most owner’s want to generate the most amount of offers possible, so they’ll provide more than ample enough information to draw in potential buyers. All you have to do is your due diligence before building.
Myth #3: You’ll Get Swindled With Hidden Costs
Actually, there is no Real Link to this claim. In fact, most savvy investors work with professional commercial real estate auctioneers and a legal team to specifically make sure their ducks are in a row. Meaning, you’ll know going in if there are liens or back taxes on the property. And it’s actually a rare occurrence that a buyer needs to pay a fee to participate in an auction. At the most, an auction house will just simply require you to show proof that you’re good for your cash up front.
Myth #4: Buying at an Auction Is Praying on Other People's Misfortunes
This myth once again arises from the 2008 housing crisis. Back then when most banks foreclosed on a property it was because of some form of misfortune. But, since the market has taken off again this is becoming a rare occurrence. And auction houses are instead becoming the method of choice of a savvy seller. Even in the property is in foreclosure; this doesn't mean that a mom-and-pop-shop is getting ready to be forced out the door.
Myth #5: All Options Are Rigged
Because commercial real estate transactions are highly regulated and reputable auction houses couldn't stay in business if they cheated buyers, you can relax and be assured knowing that you are not going to be cheated. If you're still concerned on how it all works, attend an action and gain a thorough understanding of the process before you decide to participate. After all with everything else in life, knowledge is power.
Commercial real estate doesn't have to be scary or overwhelming. Instead, it can be a great way to find a good solid investment. You just have to be willing to do your due diligence and take a small risk in order to see the potential of a big reward.