The Top 5 Questions You Should Ask Before Choosing an Online Commercial Real Estate Auction Website

  • Apr 14, 2020
  • Research

How to choose the right online CRE auction website for you and your asset.

As market uncertainty continues to impact the real estate sector, more and more commercial property owners are turning to online CRE auctions for their disposition needs.

By placing importance on the certainty of closing, and finding qualified buyers, the success of online auction sites will continue to grow, and the number of available platforms will continue to expand. So… how do you choose which platform is best for you and your asset?

We asked Damian Smoter, Vice President at RealINSIGHT Marketplace, for his recommendations on the top questions you should ask before choosing an online auction platform. Asking these questions will help bring clarity on what is most important when selling through auction. It will also highlight the key differentiators that will provide you with the highest chance of a successful and profitable closing.

1. What processes are in place to provide certainty of closing?

Certainty of closing is one major benefit of choosing an online auction process. A typical auction requires buyers to pay a 10% hard money deposit immediately and will not allow buyers a due diligence period post-auction. Some auction platforms require up-front deposits, while others vet bidders and require proof of funds to demonstrate the bidder’s ability to perform under the terms of the transaction. Knowing how bidders are verified is critical to ensuring the certainty of closing in an online CRE auction.

2. What is the average sell-through rate for commercial properties in your online auctions?

A sell-through rate is the percentage of assets taken to auction that ultimately close. The industry average is under 50%, which is why asking about the sell-through rate by asset class is very important. This will help ensure that you select the platform that will give you the best chance to find a buyer on auction day. If the sell-through rate is low for your asset type, you may want to consider other options.

3. What is the average number of bidders on a deal?

An auction works best when bidders compete to drive pricing above a set reserve, or strike, price. Knowing how many fully verified bidders a platform averages by asset type is key. This will help ensure that you select the best online auction site to both meet, and exceed, your expectations, resulting in maximum value.

4. Does your platform offer complete transparency?

One of the major benefits of an online auction is full transparency for both buyers and sellers. This transparency entices more bidders to compete, ultimately achieving maximum transaction value. For the seller, an online auction provides real-time stats on how their asset is tracking and which buyers are showing interest. On the other hand, buyers want to compete in a transparent process where they have total control over winning a deal. An online auction allows that.

Some platforms change the end times of their auctions at will, which can cause frustration and confusion among the bidders, and has a negative impact on the sale. Choosing a platform that provides the integrity and transparency that buyers and sellers expect is critical for a successful transaction.

5. How will you market my property prior to auction?

Every property is different. It is important to fully understand to whom, and how, your property is being marketed. Is it a one-size-fits-all approach, or will they create a custom marketing plan? Will they be doing outreach to potential buyers, or hoping that the buyer is already on their platform? Are they targeting these potential buyers through emails, calls, direct mail, or other channels?  You should also ask if your asset is missing out on any marketing opportunities due to its reserve price.

Some CRE auction sites only concentrate on higher-priced properties, so it’s important to understand exactly what marketing is available and what you are getting. Asking these questions will give you confidence that your property will be marketed to the correct buyers. These buyers will ultimately become bidders, resulting in a closed transaction.

We hope these questions help you find the right online CRE auction platform for your disposition needs. If you are interested in learning more, visit our Sellers page and register for a free property valuation, or send us an email to info@rimarketplace.com.

If you would like to reach out to Damian directly, you can email him at dsmoter@realinsight.com.