Buying a Commercial Property at an Auction
By : Mari Milian

Buying a commercial property as an investment is not something for the novice or unwary. The market is primarily made of up of professional investors who have money to spare. In many cases commercial properties go for more than residential property. You could end up with a greater profit, but it can also be more risky.

The wide majority of these properties that come up for an auction in U.K. are handled by six auction houses. If this is the market you want to enter, you need to be very rigorous in doing your homework initially in order to compete against the pros. Even before you have a look at properties, be present at several auctions to understand how it works and acquire a feel for them. You will be going up against skilled people when you lastly bid, so be prepared.

Chances are that first you will hear of an existing property is when the auction is announced. Visit the site – never ever bid on anything that you haven’t inspected. You’ll require having a surveyor with you – and you should pay him from your own pocket. Although a physical inspection is just only a part of your preparation. You also require a solicitor to look at the legalities of the property. How to use it? What are the overall plans for this area? These are the most important factors that can decide whether you still want to consider bidding. Again, you need to pay the solicitor’s fees yourself.

Location must be the next major item on your list. How can you access to the site? Are the roads in good condition? Again, what are plans for the area? Whether it is retail or commercial? At times these can affect a property’s price. Next what is the market value? What could you expect in the way of rents and tenants? Think much about all this first. Before starting for an auction, you’ll need to have your finance in order. With commercial properties, this would generally be a line of credit from a bank or any other financial institution, than a mortgage as you find it with residential property. Do not overstretch yourself. It’s better to be realistic, definitely at first, than over ambitious.

You need to register to bid, and confirm that you have financing in place prior to you bid on a property. The chances are that you may not win the first couple of times when you bid on a property, which leaves you out of pocket for the solicitor and the surveyor. But it is just part of the game. Don’t be the foremost to offer a bid; if no one else bids, the auctioneer would lower the starting price. Above all, avoid bidding more than you can afford. Set a limit and fix to it. To go over again can be a recipe for disaster. If you succeed the auction; you’ll be expected to display your proof of financing and exchange contracts. Always you will be expected to pay in full within 28 days. Failure to do so could bring a breach of contract suit. In addition, you’ll be liable for any difference between the price that you offered and what the property brings when it’s re-sold.