Auction of commercial property


#1

why are some “opening bids” discounted-sometimes as much as 68% from from original published bid? Example: Original published bid was $12m, but opening bid was only $3m (discounted 68%) Why such a large discount?


#2

HI Bill,
The opening bid is completely at the discretion of the foreclosing lender. There could be other factors that determine the opening bid like a mortgage insurance policy or re insurer. It is impossible to know why one bid will be for the total amount owed far and above the estimated value and why others are severely discounted. All of that happens behind the scenes and sometimes leaves us scratching our heads. The key is to be prepared to recognize an opportunity and then be ready to act!


#3

Michelle hit the proverbial nail on the head! Bids are “dropped” on commercial properties just as they are on residential. If you do a search here on FR on sales to 3rd party bidders, you will see numerous cases where the amount paid is less than 1/3 of the amount owed. Of course a search will also show instances where the bank’s bid was 1/3 or less of the amount owed and it will show the bank took it back - becuase it wasn’t worth anyone bidding for it.