LFC Offers an Alternative Selling Strategy

We are in the midst of an extraordinary economic slowdown which is forcing many real estate developers and investors to sell into depressed markets. With a gloomy outlook that could last several years, sellers really need to be resourceful and think outside the box of traditional brokerage. Sales transactions at most of the nation’s largest brokerage houses have screeched to a halt. Veteran CBRE economist Ray Torto recently spoke at an industry professionals meeting in Orlando, and he expressed his concerns that “the current slowdown is more similar to the Great Depression” and warned “that the nation’s commercial real estate downturn is already worse than the 1991 collapse and shows no sign of abating.”

LFC offers an alternative selling strategy – online auction. The pain sellers feel by constantly reducing their asking price time and again, just to realize they waited too long and the market has outpaced them, is overcome by the nature of an auction. An auction sets the price low – low enough to gain interest from potential buyers - and then allows the bidding process to push the price to the highest amount the market can bear.

Following the market down is a mistake, it is important to get out ahead of the wave of commercial properties expected to saturate the market in the next several years. Dr. Sam Chandan, President and chief economist at REEcon, a real estate advisory firm located in Washington DC, predicts that “default rates for commercial real estate loans will continue rising over the next few years, reaching 4.7% in 2010 and finally arriving at a peak of 4.85 in 2011.” Tony Villasenor, senior vice president at Voit Commercial, a commercial real estate firm believes, "These are going to be the toughest times we've seen since longer than I've been in the business, which is 27 years,"

LFC cannot create demand, but it can focus all the existing demand in a market on the property being auctioned; the highest bid at the end of the day is a pure appraisal for the property.

Online Auctions and Commercial Real Estate

More and more these days real estate investors are looking to the Internet as a one stop shop for everything real estate. Industry news, property listings, market trends and reports are just the tip of the iceberg when it comes to what is available to the Internet savvy investor. There is a myriad of commercial property listing sites such as Loopnet, Catylist, Property Line, Commercial Source and CoStar just to name a few, as well as major brokerage firms offering online access to their own company listings. The Internet has made it possible not only to search for properties located around the world but to do it from the ease and comfort of your home or office. LFC’s auction platform is the natural extension of this migration for real estate buyers and sellers to connect in a transparent and convenient marketplace.

As commercial real estate investors/developers continue to feel the pinch of tightening credit standards by lenders, declining commercial real estate values, challenging leasing environments and the deterioration of property incomes, many find themselves in cash generation mode. Sellers are searching for the most efficient strategies to market and sell their products. Proactive and realistic sellers have turned to auctions, which have proved to be an effective avenue for sellers anxious to clear their balance sheets. This is good news for buyers who recognize that auctions are a tremendous resource right now; it is a great time to secure low-priced assets in markets with strong long term fundamentals.

As the story goes, the commercial real estate market generally follows the path set by its residential counterpart; auctions will be more prevalent in the commercial market during the upcoming years of recovery. Rick Sharga, senior vice president for Irvine, CA. based search engine RealtyTrac says “Real estate is now at a tipping point. As more investors are buying properties through online auctions, that will become more of the general real estate process.” Recently an article titled "No place like home page", posted on Mediapost.com, highlighted the importance of auctions right now for the real estate industry, “Real estate attempts to avoid foreclosure by turning to online auctions…The internet might just be the thing for an industry desperate to avoid its own foreclosure”

Word to Buyers: take advantage of this perfect storm in the real estate industry, recession is not the time to be sitting on your hands!