As a business owner or a property investor, when looking to sell your commercial property there are several options open to you.
While most people decide to go down the traditional route of using an estate agent that specialises in commercial property, auction presents an attractive alternative.
Selling your commercial property at auction is efficient and cost effective, and with the right combination of marketing and advertising, an auction can lead to maximum exposure for your property and in turn could lead to the best offers.
Auction vs traditional sale
Selling commercial property at auction is different to selling through an estate agent. As auction can sometimes attract different buyers with different interests, there are some types of commercial property that are more suited for this process. Generally speaking, most types of commercial property are suitable to be sold at auction, however there are some types of property that generate more interest such as retail shops, offices and industrial units.
As auctions tend to attract property investors and developers, properties that require a reasonable amount of regeneration tend to attract attention. For properties that may be hard to value by a conventional estate agent, auction may be the best method to sell this type of property as the bidders will set the price that they feel the property is worth.
Understanding the process
The process to selling your commercial property at auction is relatively straight forward. A common concern before deciding to sell at auction is whether your property will sell under value. To prevent this from happening, a reserve price is agreed with the auctioneer.
This is the minimum price you will accept when the property goes under the hammer. It is important that this is set at the right price as once this has been reached, there is no going back, and the property will be sold.
It will take approximately 6 weeks after registering your property with an auction house until your property will actually go to auction. During this 6 week period your property will be marketed, effective coverage of your property will include the local and the national press.
At this stage you will need to appoint a solicitor who will guide you through the legal requirements and the legal documents that must be signed to enter your property into the auction. Your solicitor will help you produce a detailed legal pack which will include details that potential buyers will need to know about your commercial property.
This is very beneficial as a full legal pack will give buyers more confidence to bid at the auction. A good auctioneer will communicate with your solicitor completely, guaranteeing everything is in place for the auction sale.
The auction day
On the actual day itself, the auction will take place in a large function room or hall. As a seller you are not obliged to attend the auction, however many sellers like to see how much interest their property has generated.
As soon as the reserve price has been reached or passed, then the fall of the auctioneers hammer means a sale has been made and a legally binding contract has been created.
Benefits
There are many benefits to deciding to sell your commercial property at auction, one obvious benefit from this method is the momentum generated by the auction process which encourages buyers to act. Auction provides the opportunity of quick sales, which for many business owners is an attractive prospect.
A non-returnable ten per cent deposit has to be paid by the purchases there and then. If the rest of the finances fail to materialise, then the deposit can be kept. Beyond this there is no further negotiation and the whole sales process can take as little as six to eight weeks.
Also, selling your commercial property at auction provides a higher chance of a successful sale in comparison to the lengthy private treaty process, as typically auction houses sell around 90% of the lots covered.
Learn more about the auction process by visiting Romans' excellent 'selling at auction' advice page.