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What are signs your listing might be ripe for auction?

Updated: May 17

With the growth of technology in the commercial real estate industry, particularly after COVID-19, more and more professionals are taking advantage of new tools for the first time in their careers.

Although auction properties have been around for a long time, auctions have quickly become a preferred tool for brokers adopting technology and the changing landscape.

This list is just a starting point to help you recognize whether Auctions could help your client. Ultimately, the best-selling auctions are the assets that people want to buy the most: value-added properties in good places and, ideally, properties rented by the company.

Below are the top indicators that your home can be ready for an online auction.

1. The contract has been breached.

While a canceled escrow is the scourge of each agent's existence, some enforcement methods may provide your seller with a certain execution date. Consider a bid if you and your seller have been frustrated with sending a commitment cancellation letter (several times, in some cases). In cases where closing before a specific date is critical, an auction results in non-binding, all-cash, 30-day closing bids. When a property successfully enters sequestering the auction, the chances of a closing jump as high as 99%. In the rare cases where the purchaser does not manage to close, it gives up a non-refundable deposit of 10% in cash.

2. The listing has been in the marketplace for an extended period.

Let's face it: a list that lives on the market for a while can say the market a few things that you and your seller probably had no intention of. The price is too high, there is an issue, or the seller is not motivated and therefore does not want to negotiate. Even with a slow decline in price reductions after price reductions, overcoming these optics can be difficult, particularly as investors become more sophisticated in tracking market behavior. An auction event indicates to the market that the seller has undertaken to sell while complying with the auction conditions. If a qualified bidder makes an acceptable bid during the auction, the vendor is required to sell. This commitment to the bidding process is a wake-up call for buyers. The seller is prepared to respect the specified market value and exchange the asset under clear and direct conditions, giving all interested parties a reason to participate.

3. Salesperson gets tired of transactions.

While this point may be considered somewhat redundant, sellers may tire of an agreement well in advance of going to the market. Often, when long-term holders end up as sellers for the first time in some time, they become less interested in the process and more interested in the outcome. When a successful completion is all that counts and nothing else, an absolute auction practically guarantees it. In an absolute bid, the bid starts at $1 and goes until the countdown says stop, with the vendor accepting the high offer whatever it may be. When the sale of the property is everything that matters, an absolute auction is unparalleled. Of course, you want to associate this absolute auction with world-class marketing, exposing the asset to every possible offer to explore the summits of market value.

4. The list presents challenging challenges that have traditionally been faced.

Some cases are messy. There are many approaches to addressing the inherent complexities, but anyone can agree that minimizing the back and forth that can happen on these offers can save you hours. All due diligence documents are posted with a non-disclosure agreement when promoting an auction. This allows bidders to complete their due diligence work before the solicitation begins, allowing buyers to bid with confidence in the property to get their highest non-compliant bid for your salesperson and skip the clutter.

5. It’s a Special Servicer Deal, REO, or Foreclosure.

While the industry is watching the market closely for signs of turbulence, special services are already using online auction platforms. As a tool to process the transactions, they require to exit their accounts. As the natural life cycle of debt begins to create more inventory, special service providers will need an effective tool to treat large portfolios with minimal mess. Executing the bidding without consideration will provide scalable disposal solutions for these groups.

As the marketplace evolves, agents and brokers need to remain at the forefront by broadening their tools and adapting. The auction platform allows Corporate Real Estate stakeholders to offer more services to their customers and ultimately take advantage of more money-making opportunities.

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