Guide to Auction Terminology: Decoding the Language of Commercial Real Estate Auctions

CRER Broker

Written by: Ashley Dillard, CCIM | CRER Senior Director | Auction Specialist

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Guide to Auction Terminology: Decoding the Language of Commercial Real Estate Auctions

Commercial real estate auctions have gained immense popularity in recent years as an efficient and transparent method for buying and selling properties.

 

Auctions provide a unique opportunity for buyers and sellers to engage in competitive bidding, ensuring fair market value is achieved. Navigating the world of commercial real estate auctions can be daunting, especially for those unfamiliar with the terminology commonly used in this specialized field.

In this guide, we aim to demystify auction jargon and equip you with the knowledge needed to confidently participate in commercial real estate auctions.

 

Reserve Price: The reserve price refers to the minimum price set by the seller, below which the property will not be sold. It acts as a safety net for the seller, ensuring they do not have to accept a bid that falls below their desired price. The reserve price is typically not disclosed to bidders and is only known to the auctioneer.

Opening Bid: The opening bid is the initial bid placed by a participant at the beginning of the auction. This bid sets the starting point for the bidding process and can often influence the momentum of the auction. The auctioneer may start the bidding at the reserve price or at a lower amount, depending on the specific auction rules.

Bid Increments: Bid increments are predetermined, incremental amounts by which bidders must increase their bids during the auction. These increments are set by the auctioneer and help maintain an orderly and efficient bidding process. The size of bid increments can vary depending on the value of the property and the intensity of the bidding activity.

Buyer’s Premium: A buyer’s premium is an additional fee charged to the winning bidder on top of the final bid price. This fee is typically a percentage of the winning bid and is used to cover auction-related expenses. It is essential for bidders to understand the buyer’s premium before participating in an auction to accurately calculate their total cost.

Due Diligence: Due diligence is the process of thoroughly investigating a property’s legal, financial, and physical aspects before participating in an auction. Buyers are responsible for conducting their due diligence to assess the property’s condition, potential risks, and market value. It is crucial to review relevant documents, perform inspections, and consult with professionals such as lawyers and surveyors during this phase.

“As Is, Where Is”: The term “as is, where is” is commonly used in commercial real estate auctions to indicate that the property is sold in its current condition without any warranties or guarantees from the seller. Buyers are expected to accept the property’s condition and assume responsibility for any necessary repairs, maintenance, or renovations.

Withdrawal: A withdrawal occurs when the seller decides to remove the property from the auction before a sale is made. This can happen if the reserve price is not met or if the seller has accepted an offer outside of the auction. A withdrawal typically ends the bidding process for that particular property.

Auctioneer’s Hammer: The auctioneer’s hammer is a symbolic tool used to mark the acceptance of a bid and the sale of a property. When the auctioneer strikes the hammer, it signifies the end of the bidding process and the successful purchase of the property by the highest bidder.

 

At CRER, our brokerage specializes in commercial real estate auctions, and we have a deep understanding of the intricacies involved in navigating this dynamic market. We are here to provide you with expert guidance and representation throughout the auction process.

By leveraging our extensive experience and market knowledge, we ensure that our clients make well-informed decisions and achieve the best possible outcomes.

If you’re considering participating in a commercial real estate auction, don’t hesitate to reach out to our dedicated team at CRER. Let us put our expertise to work for you, ensuring a successful auction experience and maximizing the value of your investment.

Contact us today and benefit from the advantage of working with a brokerage that specializes in representing clients at commercial real estate auctions.

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Chicago, IL 60614
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CRER (Chicago Real Estate Resources Inc.) is a full-service, commercial real estate firm devoted to providing exceptional service for your every real estate need. Whether it is commercial and investment property sales, leasing, tenant representation, property management or receivership services; we are here to assist you around the clock.
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