Are online auctions only for distressed assets?

This is just one of many myths and misconceptions about online CRE auctions that Ten-X President Steven Jacobs is ready to debunk.

Jacobs joined Nate Smoyer for Episode 221 of Tech Nest: The Proptech Podcast, a weekly podcast dedicated to highlighting the founders and leaders who are working to transform the way we buy, sell, and invest in real estate. 

Jacobs and Smoyer began with a conversation about why online auctions have gained the reputation of being a transaction method for distressed assets: 

"The definition of distress really is a distressed loan. A loan on a piece of real estate that has gone into default. The real estate brick-and-mortar isn't in default, but somebody didn't pay their mortgage or defaulted on their payment. So it becomes a distressed asset. It doesn't mean the real estate itself is distressed. At the end of the day, an auction is just a tactic, a way of transacting real estate. It just so happens that we've designed a transaction approach where running the auction allows the seller to transact twice as fast and with more certainty. In 2011, 98% of our revenue was from the distressed marketplace because we realized there was a sense of urgency from owners, lenders, and servicers who needed to dispose assets very quickly, get them off their books, and get the highest price possible. Now 95% of our revenue comes from non-distressed assets. In the market shift we've seen over the last 20 months with interest rates, we're starting to see more of what I like to call 'stressed' owners who have a mortgage that might be maturing."

Jacobs continued to discuss how Ten-X's online auctions greatly increased the certainty of CRE transactions: 

"In the offline world, once you find your investor and sign a contract, there's a due diligence period, and as a seller and a broker you're crossing your fingers that they're going to go forward with the transaction, and in my experience you're in the high-90 percentile for re-trades unless you're selling a trophy asset. At Ten-X, due diligence is done before the auction. Buyers have the opportunity to pay what they want to pay based on their knowledge, and that's their price. If they buy it at the price they want and you sign a contract, you close in 30 days. There is no renegotiation of the price. We have a sub-2 percent fallout rate once a contract is signed. Brokers love that and sellers love that."

Jacobs concluded the podcast with an outlook on the future of online CRE transactions: 

"As it is today, if you're an investor you're using technology and various tools and different algorithms to create values. We believe that digitizing real estate is the future—the ability to actually do the transaction from your keyboard. Because you're already halfway there and using a suite of different tools, we believe that we can be the one place to go for your data, for your marketing, and your transaction."

Listen to the full conversation on Tech Nest.