With the rise of tech in the commercial real estate space, especially post-COVID, more CRE professionals are leveraging new tools for the first time in their careers. One of these tools is Crexi’s all-digital Auction platform.
While selling real estate in an auction format has been around for a long time, online CRE auctions have quickly become a favorite tool for brokers embracing tech and the changing landscape. As a former Marcus & Millichap agent, I never worked on an auction sale in my brokerage career, so, suffice it to say I didn’t know what kind of property was a good fit for the auction format. Since joining Crexi’s auction team and putting over $100M of property under contract with the platform, I’ve compiled a list for the uninitiated.
This list is just a starting point to help you recognize if Crexi Auctions might help your client. Ultimately, the best-selling auctions are the assets people want to buy most: value-add properties in good locations and, ideally, essential business-leased properties.
Here are the top five indicators that your property may be ready for an online auction.
1. The deal fell out of contract.
While a canceled escrow is the bane of every agent’s existence, some execution methods can provide your seller with a date-certain execution. If you and your seller have experienced the frustration of sending escrow a cancellation letter (multiple times, in some cases), consider an auction. In circumstances where closing by a specific date is essential, an auction produces non-contingent, all-cash, 30-day close offers. When a property successfully enters escrow from auction, the chances of closing jump up to over 99%. In the rare event the buyer fails to close, they forfeit a 10% non-refundable earnest money deposit.
2. The listing has been on the market for a long time.
Let’s face it: a listing that lives on the market for a while can tell the market a few things you and your seller probably didn’t intend. It’s overpriced, there’s a problem with it, or the seller is unmotivated and therefore not interested in negotiating. Even with a slow retreat of price reduction after price reduction, overcoming those optics can be challenging, especially as CRE investors get more sophisticated at tracking market behaviors.
An auction event signals the market that the seller has committed to selling while abiding by auction terms. If a qualified bidder makes an acceptable bid during the auction, the seller is bound to sell. This commitment to the auction process signals to buyers that the seller is ready to meet the market’s determined value and trade the asset with clear, straightforward terms, giving all interested parties a reason to participate.
3.The seller has deal fatigue.
While this point might be considered somewhat redundant, sellers can get tired of a deal long before going to market. Often, when long-term holders find themselves as sellers for the first time in a while, they find themselves less interested in the process and more interested in the result. When a successful execution is all that matters and nothing else, an absolute auction practically guarantees it. In an absolute auction, the auction begins at $1 and goes until the countdown says stop, with the seller accepting the high offer whatever it may be. When selling the property is all that matters, an absolute auction is unmatched. Of course, you want to partner that absolute auction with world-class marketing, exposing the asset to every possible bidder to explore the heights of market value.
4. The listing has challenges that are difficult to navigate traditionally.
Some deals are messy. There are many approaches to deals with inherent complexities, but everyone can agree that minimizing the back-and-forth that can occur on those deals can save hours of your time. When marketing an auction property, all due diligence documentation is posted with a protecting Confidentiality Agreement. This allows bidders to conduct their due diligence work before the bidding starts, letting buyers bid confidently in the property, getting their highest non-contingent offer for your seller, and skipping the mess.
5. It’s a Special Servicer Deal, REO, or Foreclosure.
As the CRE industry watches the market closely for signs of turbulent waters, special servicers are already using online auction platforms as a tool to transact deals they need to get off of their books. As the natural life cycle of debt starts to create more inventory, special servicers will need an efficient tool to transact large portfolios with minimal mess. The non-contingent execution of auction will offer scalable disposition solutions for those groups.
As the market evolves, agents and brokers must stay ahead of the curve by expanding their toolkits and adapting. Crexi’s auction platform gives CRE stakeholders the ability to offer more services to their clients and — ultimately — capitalize on more earning opportunities.