The Auction Option
CCIM members may be skeptical about real estate auctions as a disposition strategy. Traditionally, auctions were used as a measure of last resort for only the most troubled of assets. But that’s changing quickly. Auctions now are accepted by both buyers and sellers as a viable means of completing transactions. Furthermore, conducting an auction online versus on site allows brokers to maximize efficiency, tap into a limitless buyer pool, and offer buyers full transparency.
For example, between August 2009 and February 2010, brokers from CB Richard Ellis, Cushman & Wakefield, and Voit Commercial Brokerage utilized the AuctionPoint platform to auction off a portfolio of 13 industrial properties in Orange County, Calif. These properties previously had been listed for an average of 18 months each. Using an online auction strategy, all 13 properties were put into escrow and closed within a six-month period. Four of the assets sold prior to bidding to buyers who made preemptive offers, and the remaining properties were sold via the bidding process. The brokers marketed the auctions for an average of just five weeks each. Overall, 68,300 square feet of commercial space was sold for an average of $149 per square foot.
The partnership between CCIM Technologies and AuctionPoint connects the market’s savviest brokers with one of the most effective online tools available today. The CCIMREDEX and AuctionPoint platforms now are fully integrated, and CCIM members can initiate online auctions directly from the CCIM-REDEX console. AuctionPoint allows CCIM members to sell their listings in eight weeks or less and keep their full commission.
When to Auction
Auctions represent a tremendous opportunity in today’s market. You can use them in listing presentations to gain new clients; in presentations to existing clients to extend listings; and, most importantly, to sell your current listings quickly, efficiently, and at market price. And by offering online auctions to clients and prospective clients, you position yourself as a broker who understands how to leverage the most innovative tools to close sales in any market conditions.
Auctions are most effective when:
• time is of the essence and the seller is motivated. For example, the seller is approaching loan maturity, needs liquidity, or faces high carrying costs;
• the lender owns the property and wants it off the books; and/or
• no comps are available. An auction is a price discovery tool that helps sellers understand and achieve fair-market value for their asset.
Making the Sale
Three fundamental factors can make or break an auction: pricing, marketing, and data capture/analysis.
The asset must be priced appropriately. An aggressively low, “eyeball-popping” starting bid is what drives the largest pool of interested buyers into the virtual auction room.
Auctions get buyers off the sidelines and motivate them to bid, but the buyers have to know about the auction first. Start with the fundamentals: Identify your target audience, create auction-specific signage and flyers, and use online marketing. Once you initiate outbound marketing, immediately reach out to individuals who register for the auction: Offer a tour, answer questions, and qualify their interest. You can even use the auction as leverage to get a pre-emptive offer before auction day.
You need to know what marketing tools are driving the most traffic to your auction site. AuctionPoint provides access to a “back room,” where all of the names, phone numbers, and e-mail addresses of auction registrants are stored. In addition, a dedicated auction advisory team sends you weekly auction Web site traffic reports and helps identify trends and ways to optimize your marketing efforts.
The formula for a successful auction is simple: Identify the right client and asset, set a low starting bid, market the asset aggressively, communicate frequently with potential buyers, and continually optimize your marketing efforts based on data analysis. CCIM members already are equipped with the skills to successfully close deals in all market conditions. Now they can add AuctionPoint to their asset-disposition toolbox.