Simulation: a fictional property for practice.

A bank-owned building at auction, with a buyer’s premium

Starting bid $500,000, plus a 5% buyer’s premium, a non-refundable deposit and 30 days to close. What is your real last bid?

A fictional bank-owned building sold at auction. Terms differ by auction; read the purchase contract before you bid.

• Starting bid: $500,000
• Buyer’s premium: 5% of the winning bid, added to the price
• Terms: 10% non-refundable deposit when you sign; close in 30 days; no financing or inspection contingency
• Property: 8,000 sq ft flex industrial building, empty

Mission 1: What a $700,000 bid really costs

• Winning bid: $700,000
• Buyer’s premium, 5%: +$35,000
• Purchase price: $735,000
• Non-refundable deposit, 10%: $73,500 when you sign
• Closing costs (title, escrow, any transfer tax), about 1–2%: $7,350 to $14,700

The premium is part of your price. Your all-in maximum has to include it.

Mission 2: Before you bid

Pick all you’d do before the auction.

• Get written loan approval that can close in 30 days, or have the cash
• Inspect at the preview and order a Phase I before the auction
• Read the purchase contract you’ll have to sign
• Win first, then arrange the loan

Auction terms move all the risk to the buyer. Do your homework before you raise your hand.

Mission 3: Your last bid

Your maximum, including the buyer’s premium, is $735,000 (closing costs are already set aside separately). What is your last bid?

• $700,000: with the 5% premium, that’s $735,000
• $735,000: the premium is small

Write your last bid down before the auction, premium included.

Another bidder goes to $720,000, which is $756,000 with the premium. Buy means bid again, Investigate means stop to research, Pass means stop at your last bid. What do you do?

Buy, investigate or pass? Work through the drill to see what an experienced investor would weigh.