Online Commercial Real Estate Auctions 101

Every week, millions of dollars in commercial property change hands through commercial real estate auctions. This unique marketplace is transforming how properties are bought and sold, offering a fast and transparent alternative to traditional sales.

Contrary to common misconceptions, auctions are not limited to buying distressed properties; they also feature high-quality, tenant-occupied properties. While traditional sales can take months to close, properties transacted in online auctions powered by Ten-X typically move from listing to closing in an average of under 100 days.

Why Should You Consider Buying Property Through an Auction?

• Real-time price transparency: Buyers know exactly where their bids stand, eliminating the guesswork often associated with private negotiations.
• Equal access to information: Auction platforms provide standardized access to property details, ensuring all participants operate on a level playing field.
• Broader market reach: Online auctions attract a wide audience, increasing competition and the likelihood of securing a property at fair market value.
• Transaction speed: There are various benefits of buying a property through auctions. When it comes to real estate auction vs traditional sales, auctions enable faster property closings, reducing delays, fostering investor diversity, and providing an abundance of opportunities.
• Certainty of execution: With pre-qualified bidders and firm timelines, auctions offer sellers a higher likelihood of closing the deal.

Here's How an Online Commercial Real Estate Auction Works

Whether you're a broker, a potential investor, or an owner, online commercial real estate auctions can be an effective way to achieve your CRE goals and maximize the value of the transaction.

Here's a quick look at what the process looks like for a typical online CRE auction on LoopNet powered by Ten-X.

Before the Auction: How LoopNet and Ten-X Prepare Each Property for Success

• Days 1-10: Asset Evaluation & Onboarding: Before each property can be listed for online auction, it receives a thorough evaluation utilizing current market conditions and CoStar's extensive breadth of data. Using this information, LoopNet collaborates with the broker and the seller to set a reserve price that is in line with the market and will be likely to drive a successful transaction. Once the reserve is established, the property can then be listed on the platform.
• Days 11-55: Marketing: Each property receives a customized listing details page (LDP) with information about the property, high-quality photography, and all relevant due diligence documents. During this time, properties also receive 45-day marketing plan that utilizes social media marketing, email, search engine optimization, and personalization to target interested buyers.

Throughout the marketing period, brokers and sellers will have access to personalized dashboards where they can monitor their property's progress as auction day approaches.

This is also the time for potential investors to explore upcoming auction opportunities. If you're interested in bidding in an online auction, it's important that you understand the registration process and how to prepare for auction day.

Getting Qualified to Bid & What You Need to Prepare

You must register to bid and receive approval for each property you'd like to bid on in auction-before the auction begins.

Here is a quick look at the bidder qualification process:

• Create your online profile: Register on the auction platform and provide basic information to set up your account.
• Submit digital proof of funds: Most auctions require proof of financial capability to bid. Accepted formats often include bank statements or pre-approval letters.
• Set up your bidding account: Ensure your account is linked to verified payment methods. For detailed steps, check out how to register as a buyer.

Preparation is critical for auction success, and bidder registration is just one part of the process. Here's what to focus on in the days leading up to the auction:

• Access the digital due diligence room: Review all available documentation, including property details, financial records, and disclosures.
• Take virtual property tours: Inspect properties remotely from all angles.
• Review online documentation: Key information like zoning details, leases, and market analyses should be carefully evaluated. Use a commercial property valuation tool to assess the property's worth. When analyzing the details, consider the importance of commercial property appraisals to confirm market value and avoid surprises.
• Understand auction rules: Keep in mind that each auction platform has specific terms and conditions. You'll see Ten-X's auction terms when you register to bid. Take this time to familiarize yourself with bid increments, payment timelines, and cancellation policies.

During the Auction: 2 Days of Bidding

Each property listed for auction on LoopNet has a specific auction date. Once the auction has begun, bidders have a two-day window to place bids through the platform in real time, competing directly with other participants. Bid increments are standardized based on the current bid amount, but there is the option to make a custom bid.

While bidding is open, sellers and brokers can use the Auction Dashboard for real-time updates on the bidding activity.

After the Auction: What Happens Next

Once the auction has ended, there are two stages left before the process is officially over-contracting and closing.

Because LoopNet's online auction process incorporates due diligence up-front, the average period for contracting and closing is just 30 days.

Once the auction has ended, here are the steps for the winning bidder and the seller.

Contracting & Closing Process for Online Auctions

1. The winning bidder automatically receives the Purchase & Sale Agreement (PSA), populated with the information they provided during registration. They must electronically sign this within 2 hours.
2. The PSA will then go to the seller, who will electronically execute the PSA.
3. Once both parties have signed, the buyer has 24 hours to wire a 10% earnest money deposit (EMD).
4. If the PSA is ratified by both parties and the EMD has been received, the transaction will then move into escrow.

Frequently Asked Questions About Auctions

What's the difference between an estate sale and an auction?

An estate sale is typically organized to liquidate personal property, often after a significant life event like a death or relocation, and may include both real estate and personal items. In contrast, a commercial real estate auction focuses exclusively on selling properties, often through competitive bidding processes, with clear terms and timelines for buyers and sellers.

How much money do I need to participate in a commercial real estate auction?

The financial requirements for participating in an auction depend on the property and auction terms. Most auctions require proof of funds, such as bank statements or pre-approval letters, that demonstrate your ability to meet your anticipated maximum bid. Additionally, you will need an earnest money deposit, typically 5-10% of the purchase price, to secure the transaction if you win.

How do auction prices work?

Auction prices are determined through competitive bidding. In reserve auctions, bidding must meet or exceed the seller's minimum reserve price for the property to be sold. In absolute auctions, the highest bid wins, regardless of the amount. Bid increments are pre-set, and prices can rise quickly during the final moments of the auction as competition intensifies.

What happens after you win a commercial real estate auction?

After winning a commercial real estate auction, the process moves quickly. Buyers typically have a 30-day timeline to complete the transaction, during which they must handle digital documentation, finalize payments, and prepare for closing. Documents, including the purchase agreement and title paperwork, are managed electronically to streamline the process. Once all requirements are met and closing is finalized, buyers can take possession of the property. Ensuring prompt submission of necessary materials and adherence to deadlines is essential to avoid delays or complications.

Explore Commercial Real Estate Auctions on LoopNet

Interested in finding your next commercial property? Browse the properties listed for auction on LoopNet.