Once you finally stumble upon the perfect commercial property, your conquest has only begun. As good properties usually attract a lot of interest from investors, learning how to win commercial property bidding wars is a skill worth having. You probably know that commercial property bidding wars can drag on to last weeks, even months. So, it makes sense to know all the myths and mistakes you can make when you invest in commercial real estate. Therefore, we are here to help you boost your chances of winning the bidding negotiations.
Bidding can be quite demanding even for the most consummate commercial real estate investors. Buyers have to manage their expectations as they stand up against the fierce competition. You have to be prepared to step up and entice the seller with your offer to catch his attention. And if it doesn’t work from the outset, you may have to adopt a different bidding strategy. However, a few guidelines can help you win your battles in the bidding wars for the best commercial properties. So, let’s have a look.
Careful preparation for the bidding will go a long way
The commercial real estate industry is one where comprehensive research pays off. Interestingly, investors tend to go into biddings unprepared. Yet, this kind of negligence can hinder your success because you have to be able to act fast based on the information you have about the property in question. Remember – you only have one chance to seize the property, and there is no room for reluctance or second thoughts.
Hence, it makes sense to bid confidently but incrementally to help the seller consider you as a serious bidder. That means you should take careful note of commercial property listings of interest and learn everything there is to know about them. That way, you will be able to assess how much to bid and whether it is worth it.
Furthermore, having a detailed insight into the property’s characteristics allows you to plan out your bidding and the relocation once you secure the commercial property. According to Pro-Move Logistics, letting professional commercial movers know about all the property features will simplify your company’s relocation.
Provide the necessary documentation to prove you are a serious bidder
Another important aspect of presenting yourself as a serious buyer involves preparing the necessary documentation. Of course, it is usually the case that listing agents and sellers set down their criteria, but there is a specific benchmark all of them expect you to fulfil. First and foremost, you should supply details of finance or financing. This will show the buyer that you have the ability and the means to close quickly. You have to make the seller feel confident that you can cover all expenses.
Cash payments are an advantage
Another way to set yourself apart from the competition is to offer to pay in cash. This does not automatically mean that you cannot win a bidding war without cash, but it will set you up for success. Some statistics show that all-cash bids take up around 40% of recent commercial property sales in European hotspot markets, a sizeable increase compared to previous selling cycles.
As previous tips, cash payments also serve to prove that you are a legitimate investor that the seller should take notice of. Offering cash signals that you can secure the property immediately, making your bids speak volumes to the seller. You are saying to the seller: Choose me; there will be no mortgage processes, underwriting approval, and complications.
Use contingency clauses to your advantage
Another way to ante up your bids is to know your way around contingency clauses. Contingency clauses can be either roadblocks or springboards in the bidding war. When you set down a purchase offer, these clauses render the sale contingent on an appraisal or the very ability of the owner of the commercial real estate property to sell the property. Investors who have enough resources to cover a low appraisal or the first couple of mortgage payment instalments should consider waiving the contingency clauses set by the seller.
Other than these contingencies that can place your bid on the sidelines, other clauses can help you advance your bid. For instance, your real estate agent might suggest you add an “escalation clause” to the purchase offer or purchase agreement. So, one way to win bidding wars for commercial properties is to offer to pay, say, $5,000 more than what the highest offer in the bidding was. Or, you can vouch that you will pay, for example, $10,000 in $2,000 instalments over a certain period. Hence, contingency clauses can help you advance your cause by making your offer sound more competitive.
