Real Estate HUB Q&A
Damon Scott – Reporter
Title: Managing director
Company: Sperry Van Ness/Walt Arnold Commercial Brokerage
Member, Society of Industrial and Office Realtors; Certified Commercial Investment Member; past president of the Commercial Association of Realtors of New Mexico; previous CARNM Realtor of the Year recipient.
Online auctions are being used by commercial real estate firms more often today than at any time in the industry’s history.
The platform at one time was seen primarily as a way to shed distressed or foreclosed properties. That’s sometimes the case, but auctions are being used for other types of properties as well.
Walt Arnold recently inked a partnership agreement with California-based online commercial property platform AuctionPoint. He is scheduled to host the firm’s sixth online auction in May for a 9,200-square-foot office building at 3809 Eubank Blvd. NE. The property was constructed in the 1980s and has been vacant for a couple years. The auction will feature properties from other U.S. firms as well.
What are some benefits for sellers?
An auction will tell [a seller] what the value [of a property] is that day — what someone is willing to pay for it on the day of the auction. You might get some bids, but if it’s not a successful auction those people are still potential buyers. Listing a property in an online auction creates additional activity and interest over just traditional methods. A big advantage is the cost savings in handing over the website and marketing functions to the auction company.
Is there a cost for sellers to participate?
Fees can reach about $1,500 for sellers, but it is refundable once the asset is sold. In the case of our May auction, the fees are being waived due to the presence of a large portfolio of properties across the country being featured in the same auction.
What can buyers expect?
The openness of the process is an advantage. Buyers sign up to be qualified bidders, which means running a credit card and putting down a “buyer premium” fee, which is from 2.5 to 4 percent based on the auction company. [AuctionPoint’s is 2.5 percent.] Once in the system, the buyer can review the purchase agreement, due diligence information, reports, surveys, plats and any other pertinent documents.
What happens on auction day?
For the buyer, auction day begins by logging on to the site and submitting a bid. There is typically about a four-hour window when the actual bidding takes place. Before the bidding begins, we can see what level of interest the property is generating and that’s a direct effect of making sure the brokerage community is aware in case they want to bring a buyer and get a fee.
Can anyone bid on a property?
The online auction process is self-qualifying. If you have a bidder’s deposit, you’re in the game. A lot of times with a lender, they want to qualify a prospective buyer before giving them a seat at the table.
What are the cost savings?
For the buyer, having paperwork available up front reduces the time spent on reviewing it and incurring legal costs associated with an attorney reviewing documents. People think it’s rigged in terms of the seller, but if they drill down there are advantages for the buyer. Everything is online today, whether Amazon or eBay, and online activity is in everything in your life, including a large part of conventional sales of property.
What are the main types of online auctions?
Absolute: highest bid wins, whether $1 or $1 million; Opening bid: if an owner wants to sell for $500,000 they would agree to take $500,000.01; Reserve/hidden reserve: the minimum price the seller is willing to accept, the buyer doesn’t see the reserve price, only whether it has been met.