It’s difficult for most property owners to decide to sell an asset. More often than not, they do an in-depth evaluation of the asset and carefully consider their options before making the decision to dispose of it. Brought to you by Auction.com.
It’s difficult for most property owners to decide to sell an asset. More often than not, they do an in-depth evaluation of the asset and carefully consider their options before making the decision to dispose of it.
But once sellers make that decision, they have an even bigger decision to make – how to sell that property.
Here are five reasons why owners should consider an online auction.
1. Auctions ensure that your property will sell at true market pricing.
All sellers want to achieve the best possible price for their properties, and all buyers want to feel like they’re paying a fair price. But who decides what’s fair?
An auction is the best and most efficient way to ensure that a property will sell at true market pricing. Buyers who participate in the auction have done their due diligence, and they know what they’re willing to pay. They’re bidding in a competitive environment, and the buyers are the ones who determine the value of the property.
After each bid is placed, other bidders have at least 2 minutes to determine if they want to continue participating. Technically an auction can continue indefinitely if bidders keep bidding. Once the clock expires, the winning bid reflects the highest and best price that the market will bear. It’s the buyer’s true “best and final” offer.
As part of the auction process, sellers are able to set a reserve price, which is the minimum amount they’re willing to accept for their properties. Properties will sell at or above the reserve price.
Zeshan Tabani, dispositions director for Tabani Group Inc., has sold several properties via auction. The Dallas-based company owns 7 million square feet of retail and multifamily assets in 14 states.
“Our properties have always sold in the range that we wanted,” Tabani says.
2. In an auction, the likelihood of a transaction closing is nearly 100% due to the higher-quality buyers
How many times have you heard about a property falling out of contract? Or heard of sellers who haven’t been able to close a deal once they’ve put it under contract?
It happens a lot, and it’s frustrating for sellers because it wastes time and money. They go through months of marketing, offers, negotiation, and due diligence only for everything to fall apart at the last minute.
Putting a property under contract ties up the asset, yet a buyer can re-trade with nothing at stake. And that leaves the seller in the lurch, forced to either start the process over again or keep the property.
The key to Auction.com’s process is that we leave the control of the real estate in the hands of the owner until it is time to trade, versus allowing the property to be controlled by a third party at the Seller’s potential detriment. In addition, Auction.com pre-qualifies its bidders to make sure they can close the deal if they win the property. Bidders must provide a deposit and their funds are verified. If the winning bidder does not close the deal, his deposit is forfeited to the seller.
“We rely on Auction.com to vet the buyers,” Tabani says. “That way there are no surprises… no guessing. We know that if they’re bidding, they’re committed buyers. They want to transact, and they have the money.”
And on the rare occasion when a bidder is unable to close the deal, Auction.com has back-up buyers in place, Tabani notes. “That adds an extra layer of certainty of closing.”
3. Transparency encourages buyer participation.
When it comes to buying and selling commercial real estate, transparency is best. It’s difficult to make decisions, either as a seller or a buyer, without having a complete picture.
Because of the way they’re set up, auctions are inherently transparent. The qualified buyer with the highest bid wins the property. There’s no negotiation, no back and forth, and no favoritism.
This is dramatically different than the traditional marketing process. In many cases, buyers with highest offer lose out to “favored” buyers – buyers who are not any more qualified from a financial standpoint, but simply a known entity.
4. Auctions work best for both stabilized and opportunistic properties in desirable markets
Many people mistakenly believe that only distressed properties are sold at auctions. But properties across the spectrum, from trophy assets to bank-owned assets, trade at auctions.
Although auctions are still a popular way for banks and other lenders to dispose of distressed properties, owners with stabilized, performing properties also choose auctions to prune their portfolios. Tabani Group, for example, has sold mulitple properties via auction, and those properties were stabilized.
In fact, the properties that achieve the highest price over reserve are the properties that people want most.
5. Auctions are effective ways to close commercial real estate transactions
Every seller wants their property to be traded quickly, efficiently, and for a good price. A lot of things have to come together to make that happen, and auctions are one of the most effective ways to close commercial real estate transactions.
A successful sale requires a qualified pool of buyers, and auctions attract buyers far and wide. While traditional marketing processes tend to have a limited scope, auctions give sellers access to more buyers, particularly international buyers and wealthy individuals, Tabani notes.
Online auctions also streamline the due diligence process. Auction.com offers the same documentation and managed site visits as a traditional broker-driven transaction. The physical inspections and other due diligence documents are stored in the company’s fully-secure, online data vault, and all bidders have access to it.
Additionally, the technology platform behind online auctions streamlines the buying-and-selling process. It drastically reduces the amount of time required to market and close a deal, which in turn reduces market risk.