Is Online Auctioneering a Viable Way to Sell?
Auction.com, the Internet’s largest seller of distressed properties with over $37 billion in sales and over 200,000 properties sold, rebranded in early 2016 as Ten-X. Powered by a $50 million infusion from Google Capital made in March 2014, the rebranded site expands their existing bank-owned property business model to include both commercial and residential sales.
According to CEO Tim Morse, Ten-X is seeking to make the online transaction experience better than the traditional offline experience. Consumers want to be able to buy property whenever they want, wherever they happen to be, on whatever type of computing device that they are using.
Ten-X is striving to meet this need by providing a flexible platform, a simplified process, and an abundance of information and tools clients can use to confidently buy and sell real estate online. Even though online bidding is much more transparent than offline bidding, it is optional. Consumers decide where, when, and how they would like to purchase as well as the degree of involvement they want their agent to have.
The Auction.com Platform
The original Auction.com will continue to be Ten-X’s home for foreclosure and bank-owned properties. The company has strong longstanding relationships with numerous big banks that provide large portfolios of consumer-ready properties to upload all at once. These properties seed the marketplace as Ten-X continues its expansion into the consumer space, especially for those sellers who are inclined to go For-Sale-by-Owner.
Unlike some auction models that shut out brokerage participation, both listing agents and selling agents receive a full commission when their clients use a Ten-X auction to buy or sell a property. Ten-X is compensated through a buyer’s premium (an amount on top of what the buyer bids for the property and a commonplace feature in many auctions). Morse added that by working with Realtors® in more markets, Ten-X had been able to increase demand.
The Ten-X Platform
Auction.com commercial first launched in 2009 and has already implemented the end-to-end feature for their apartment, commercial, hospitality, industrial, and restaurant property clientele. The commercial platform has proven to be extremely appealing to both buyers and sellers and has already processed over $15 billion in sales.
The Ten-X sales force generates commercial leads by prospecting a set population of commercial real estate clientele. Morse describes its commercial model as a spinning flywheel—a nice reinforcing cycle where sellers become buyers and buyers become sellers.
Because of the online bidding and purchase processes inside the Ten-X platform, it is also especially well suited for both today’s mobile and global clients. According to Rick Sharga, the Executive Vice President of Ten-X, one Ten-X client purchased a $2.5 million hotel from his iPad while he was driving. Ten-X also set a record for the largest online transaction ever, a $96 million dollar office complex located in Manhattan Beach, California. A Canadian investment firm representing a group of Chinese investors was the purchaser. Sharga observed it was hard to believe that with each click bids would increase by as much as a million dollars.
Buying a Home Via Action
When a buyer purchases through a Ten-X auction, they normally have ample opportunity to see the home before the auction. As Morris observes, there’s a very human element involved in purchasing a home. Viewing the home and participating in an auction in no way detracts from conducting the entire transaction online. Moreover, Morse claims that the Ten-X platform provides the first end-to-end transaction platform in the industry whether or not a client decides to use the auction function.
For sellers marketing their homes with or without a Realtor®, the patent-pending transaction manager Ten-X platform takes the seller/agent through each step in the process. This includes how to upload their listing information and photos into the Ten-X platform, how to write an effective description, as well as how to manage the financial criteria. Ten-X has partnered with DocuSign for digital signatures. From the time a seller or agent lists a property all the way through closing, the system shows when each step in the process is due and who is responsible for doing it. It’s much more than a checklist because it allows the user to actually manage the process. There’s no need to play phone tag because everything is done in real time online. It’s an easy and safe way to both buy and sell.
In most auctions the highest bid wins. One of the key benefits of using the Ten-X platform is that it allows sellers to compare the amount of the down payment, whether an offer is financed or all cash, plus any contingencies side-by-side. This allows sellers to make a more accurate evaluation of which offer is best, rather than making the determination based exclusively upon the price.
The buyer dashboard allows buyers to track when their bidding period will end (days, hours, and minutes), the current bid, the buyer’s current bid, and whether the buyer is purchasing with financing or cash. The system also allows the buyers to request concessions including having the seller pay the closing or financing fees. The amount of the concession may be calculated as either a percentage of the purchase price or a dollar amount. Once submitted, the platform automatically calculates the net bid after deducting the concession amount.
While many companies are pursuing the goal of transforming today’s onerous offline transaction process, the Ten-X platform couples its off and online auction offerings with a simple point and click platform, thereby moving the industry one step closer to providing consumers with one-stop shopping for both residential and commercial properties.
The jury is still out on whether online auctions will become a dominant force in selling homes but the Swanepoel T3 Group will, as always, continue to track this and other key trends as they develop.