Commercial Real Estate Auctions
When I was first starting out as a commercial broker I earned a few fees in a down market because I had a good client that paid me to make him aware of foreclosure auctions in my area.
Generally there are no real estate commissions paid at a foreclosure auction, so if you’re a broker, you’ll have to find a generous client like this one.
The auctions are advertised in the newspapers, and generally not the largest papers in the market. You’d think these foreclosing lenders would want more investors to show up at their auctions, but instead they look for the cheapest advertisements in the most obscure newspapers
Buying commercial real estate at foreclosure auction is a gutsy move: you have to be prepared to put up a significant non-refundable deposit - often 10 percent of the loan amount - if you make the winning bid. There may be some opportunity to walk the property, kick the tires, and review what little information the lender has on the property and its rent roll before bidding starts. That said, if you learn anything about the property between the auction and settlement you’re out of luck - settle or lose that deposit. There’s certainly no financing contingency either so ideally you should be able to take the property down on a line of credit or with cash on a short term basis if necessary, especially in today’s lending environment.
In many of these auctions, particularly these days, the asset won’t trade at auction. The lender won’t see a bid they like and will make that winning bid and take the property themselves. At the auction you may have an opportunity to meet the lender or at least their attorney, but not inall cases. Regardless, once the lender takes the property and own it, you can negotiate terms with them that include a study period - only you may not be able to get as great a deal as you might have with a non-contingent bid at auction.
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