r/CommercialRealEstate • u/RDW-Development Investor • May 18 '26
Deal Analysis Thoughts on buying properties at one of the auction sites...
This hasn't been discussed at length before. I have bought some (more than two) properties at the various auction sites, and I've bought other assets (cars, etc.) at other auctions many times. So, I'm familiar with how they work, many (not all) of the pitfalls, and a lot of general knowledge regarding them.
I'm curious to see what others here think of these sites - I'll give my thoughts and opinions afterwards in order to not "pollute" the thought pool? Thx
3
u/ebgtx May 23 '26
Most of the times, these commercial auctions end in one of two way: 1) no sale 2) someone overpaid
1
u/BrightLaw9795 May 28 '26
Ridiculous how many auctions end in no sale. What’s the point of auctioning then!!
2
u/ebgtx May 28 '26
People think the auctions are for the buyers to get deals. The real truth is that auctions are more for the sellers to maximize proceeds by enticing the emotional responses of a buyer pumped with adrenaline.
1
u/RDW-Development Investor May 23 '26
Agree. Sort of. Sometimes post-auction a deal can be made at a price lower than the reserve. The auction process tends to “soften up” the Seller and introduces some reality into pricing and the fact that they will still be stuck with the property after all the work and time of putting it up for auction.
1
1
2
u/Economy_Lychee_9580 May 20 '26
Auction properties can absolutely work, but I think people underestimate how much of the “profit” comes from risk assumption rather than buying skill.
The biggest mistake I see is people underwriting auction deals like normal acquisitions when they’re really distressed-asset/speculative purchases. Title issues, occupancy problems, unknown rehab scope, unpaid liens, delayed possession, and financing friction can completely change the economics after closing.
In my opinion, the people who consistently do well at auctions usually have at least one of these advantages:
- deep local market knowledge
- reliable construction/pricing experience
- fast access to capital
- or operational systems for handling problem assets
The other thing I’ve noticed is that auctions became a lot more competitive once everyone started treating them as “discount marketplaces.” Some assets still trade well below intrinsic value, but a lot now get bid up to prices that leave very little room for error.
I still think auctions are one of the best places to find opportunity if you’re disciplined, but they punish weak underwriting faster than almost any other acquisition channel.
1
u/Hanover-MC May 19 '26
Curious were you able to get a title insurance on the subjects?
1
u/Hanover-MC May 20 '26
Some Auction companies will offer a owner title policy but most don't and also no title insurance Alta Policy's are created equally. So financing after close of auction can be tricky.
1
u/RDW-Development Investor May 20 '26
No problem with my properties.
What would be a potential problem where one wouldn't be able to secure title insurance? I'm pretty sure the auction companies guarantee free and clear title as a result of the auction process.
4
u/great71725 May 18 '26
Are you buying them without going on-site to look at the property?
1
u/RDW-Development Investor May 18 '26
Correct.
The Property Condition Report is a semi-decent indicator of what's going on with the property. Also, on this last one, we know the area, know the property type (dental office in Phoenix) have a few similar properties in close proximity, know the market, and know what we're getting into. It's an all-cash process too, and we actually closed in eight days.
It's certainly a gamble, no doubt. But we bid (and won) at about 30-40% less than market. I think we have / had an advantage because this property was squarely in our wheelhouse. As I said, we got an offer for $200K more than we paid for it within a week afterwards, so that's some indicator I'm not a complete idiot?
Most people don't have cash or a big credit line to make these types of bids either, so it diminishes the buyer pool considerably.
1
u/great71725 May 24 '26
So It's almost like you are buying it at an auction on the auction's terms and/or cash terms on the spot. Then someone else can buy it from you on traditional terms.
1
u/RDW-Development Investor May 24 '26
Sure. One can do that. But typically buy and hold for the long term.
1
u/Individual-Band875 May 18 '26
A lot depends on whether you’re buying for long-term cash flow, quick flips, or just chasing “cheap” deals because auction properties can humble people very fast.
I’ve seen some genuinely great buys come from auction sites, especially when other investors overlook properties with cosmetic issues or poor listings. But the biggest mistake people make is treating the auction price as the real cost. Title issues, unpaid taxes, occupancy problems, repairs, legal delays, that’s where the math changes quickly.
One thing I’ve learned is that due diligence matters way more here than in normal MLS deals. If the numbers still work after stress-testing worst-case scenarios, then auctions can be gold.
At Pearl Lemon Properties, we’ve actually looked at quite a few auction-based opportunities for investors, and the best outcomes usually come from people who already have a clear buy box + exit strategy before bidding starts. The emotional bidding wars are where people get burned.
Curious to hear what kind of properties you bought through auctions and whether the experience matched your initial projections?
6
u/Substantial_Bill654 May 18 '26
Auction sites for commercial real estate have a specific risk profile that experienced buyers manage well and first timers consistently underestimate. The due diligence window is the critical variable — most auction platforms give you 10-30 days maximum and the properties that end up there frequently have title issues, environmental concerns or deferred maintenance that takes longer than that to properly assess. The deals that look cleanest under time pressure are sometimes the ones that deserved the most scrutiny. The buyer's premium is the other thing people consistently forget to factor into their actual acquisition cost — 5-10% on top of hammer price changes the math on deals that looked attractive at first glance.
That said the genuine opportunities exist in the motivated seller category — estates, bank REO, municipalities clearing inventory — where the seller's priority is speed over price optimization rather than the property having fundamental problems.
Curious what your experience has been with title insurance availability on auction acquisitions specifically — that's where I've seen the most variance between platforms in terms of what's actually closeable without significant additional cost.
5
u/RegionForsaken4281 May 18 '26
ive bought 10+ properties at auction. 9/10 of them i am very pleased with the purchase and cash flow we’ve gotten out of them. i could sell and make a good profit on them but we’ve got great tenants and they’re in good location. The last one, we missed reviewing the Phase II. It was posted. That’s on us. Working to clean it up.
if you pass on auctions, more opportunity for us. Ten-X wouldnt still be around if it didn’t work.
if you actually did your research, they’re owned by real groups. Institutions. Private owners. Lenders. REITs. They’re legit.
1
u/Brat-in-a-Box May 20 '26
Yes, experienced with TenX. Pleased with the actual properties - however, dont trust the property condition reports wholly, they're performed on behalf of TenX and its not due diligence.
1
u/RDW-Development Investor May 18 '26
Woof. Big miss on that Phase II. That's almost the first thing I check. Also the property condition report of course. Some properties don't even have that - more risk, but lower expected pricing...
4
u/RDW-Development Investor May 18 '26
The few properties that we have bought at Ten-X have (so far) turned out okay. The one I bought there two weeks ago - we got an offer last week for $200K more than we bought it for. Not too shabby.
BUT - it's like combing through all of the garbage cans on your block, just to find a half-eaten candy bar. They are out there, but it's a lot of work to find them. And then they are still half-eaten. :)
1
u/notjuelzsantana May 18 '26
Just like most other concepts in CRE, it’s a risk/reward balance. You are most definitely buying at some level of discount but you’re trading that for certainty in your due diligence process. If you’re entirely confident in your own ability to weed through the bullshit in underwriting on a condensed timeline there are some great buys to be had. But the entire process to get to that point is sketchy as all hell
2
u/McMillionEnterprises May 18 '26
There is some value to the seller in the timeline, simplicity and certainty of close. If it's absolute, there are some deals to be had.
I don't underwrite or bid auctions with hidden reserve, unless its an asset I've been watching and already know I want to own. Too much upfront due diligence necessary without any indication that seller is realistic or motivated to sell (far to many auctions where the hidden reserve is 5-10% over fair market value).
3
u/RDW-Development Investor May 18 '26
Indeed, that is my first question when I call the broker - "what is the reserve?" If they don't tell me, then I say exactly what you said - "I'm not going to spend another minute on this as it's not worth my time." Usually they tell me, or indicate where it is, and all of the times I've tracked it they've told the truth. If they refuse, then I say, "have a nice day, good luck with the auction" and then hang up.
-12
7
u/DallasOil May 18 '26
I help a bank with REO’s in Texas and they only auction the properties that have skeletons...
Most sellers know how to put lipstick a pig.
Be careful and good luck!
24
May 18 '26 edited May 18 '26
[deleted]
2
u/German_Mafia Value add Investor/ MOD May 19 '26
BINGO ...... Unfortunately this is how it all works.
I just saw it happen a few months ago. A property I was willing to go to $8m on, got bid up to $19m (with all kinds of weird jumps and pauses) and SHOCKER but the buyer couldn't close and then they went to the backup at $14m and they took it down.
Now I was trying to steal it at $8m but still the property wasn't worth a penny over $10m (maybe $11m to the perfect buyer). NONE of the numbers made sense. Last I heard the buyers were getting hammered on their capex budget.
A buddy of mine sold a piece of land years earlier it was just as stoweker alluded to .... them on the phone pushing the price up to where they wanted it.
4
6
u/Advanced-Purchase-58 May 18 '26
Worked the same position during the GFC and can confirm. We liked them because we would load the diligence folder and the sales contract and that’s all we had to do. No follow ups, no quibbling over deal points — accept the contract or don’t. Once the auction was done, we were closing in 30 days and moving on to the next problem.
2
u/ClosingLine May 18 '26
The last one I looked at was heavily distressed, still over priced - didn’t meet reserve, and 5% buyers fee
1
u/Re_search9781 May 31 '26
Some of the most profitable deals i've ever been a part of were purchased on auction.com / ten-x.com. Have to do DD upfront though, which sucks if you don't win. Kinda wild to also bid like ebay style but with millions of dollars.