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Questions To Ask When Evaluating Online Commercial Real Estate Auction Platforms From Loan Sales, Property Dispositions, and Special Servicer Perspectives.

  • Jul 22, 2020
  • Research

As market uncertainty continues to impact the real estate sector, more and more commercial property owners and special servicers are turning to online commercial real estate auctions for their disposition needs.

As market uncertainty continues to impact the real estate sector, more and more commercial property owners and special servicers are turning to online commercial real estate auctions for their disposition needs. Why? Because online auction platforms provide a wider and more qualified buyer pool, lower marketing expenses, and ultimately a higher close rate and sale price. But as the success of online auction sites continues to grow, and the number of available platforms will continue to expand. So how do you choose which platform is right for you?

We asked several seasoned professionals in the following interviews: CBRE brokers, Phil Kates and Adam Sklaver, who specialize in dispositions through an auction format; Newmark Knight Frank's Head of National Loan Sales, Brock Cannon; and Special Servicer Disposition Expert and Vice President at RealINSIGHT Marketplace, Damian Smoter.

The interviews will cover the top questions to ask when evaluating an online CRE auction platform from the:
  • Special Servicer Perspective
  • Loan Sale Perspective
  • Broker Property Sale Perspective


FROM THE BROKERS POINT OF VIEW:

If your client has expressed an interest in selling an asset in an online auction, how do you help them select the right platform that will work with you to provide the highest likelihood of transacting? As the investment sale broker, you need to be ready to help your client make this important decision. 

That's why we asked Phil Kates and Adam Sklaverwho specialize in dispositions through an auction format at CBRE, for their recommendations on the top questions you should ask when selecting an online auction platform as a broker.

1. What is the trade rate for similar properties on the platform?
Adam Sklaver notes that asking how many assets the platform has sold by property type, location, and price can help you decide which platform to choose. "If the platform has been successful selling similar assets then it is more likely that they will be able to attract more eyes on the deal, and therefore achieve higher pricing and a greater likelihood of successfully trading," says Sklaver.

Phil Kates says that they have seen a large number of assets that have failed to sell on one platform, being very successful on other platforms with three-four times the bidders than the previous auction. 

2. What will marketing encompass?
"Understanding who is responsible for the marketing, the reach, and targeting of the marketing efforts and the costs, are essential to the success of an online auction. Ensuring that marketing from the platform, and broker-based marketing, are complementary, and will attract more potential buyers," says Kates.

Sklaver added that it is also important to take time to understand the platform’s budget and ensuring that they are focused on the most likely buyers. As every asset is unique, and having a flexible and custom marketing plan that can change based on data is essential to ensure a successful auction.

3. Is the platform easy to use from a technology standpoint?
Kates found that one of the major benefits of an online auction is that it can help to make the broker’s job easier. "Without the right technology, some platforms can actually make our jobs more challenging. Does the platform allow me to easily upload a deal? And how much of my time is spent to get a deal live and out in the market? Uploading asset information and making changes should be quick and easy. The ability to make changes myself allows for the information to get out and into the market quickly."

Beyond the ease of use for Brokers, bidders need to have ease of use too.

Sklaver adds that an additional factor to keep in mind is the ease at which bidders can register to bid on an asset. "An auction works best when bidders compete to drive pricing above a set reserve price. Understanding how easy it is for a potential buyer to get registered could mean the difference between the asset trading or not trading on auction day. This process should be as painless and as easy as possible."

4. How many other properties will my asset be competing with?
Kates and Sklaver agree that a large auction can bring many potential buyers on auction day, but it is important to look at the auction event as a whole for these two main reasons:
  • Say you're selling an office. Is your office building competing with 10 other office buildings on auction day? While it may bring more buyers to the table, it can also create stiff competition if they are in the same location. 
  • If you have an asset that is fairly priced, and another similar property is heavily discounted and in the same location, your asset could suffer.

Being strategic about when and where you auction your assets has served us well and allowed us to surpass client expectations with prices exceeding their set reserves on a regular basis.

For the complete interview, please visit: How To Choose The Right Online CRE Auction Platform For Your Asset: An Interview With CBRE's Adam Sklaver and Phil Kates

FROM THE LOAN SALE POINT OF VIEW:

With an extensive background in loan sales, we interviewed Brock Cannon, Head of National Loan Sales at Newmark Knight Frank, to understand what he looks for when selecting an online auction website for his loan sales.

1. What Testing Has Been Performed On The Online CRE Auction Platform?
Cannon notes that a lot of online auction platforms are relatively new, so his first questions are centered around the platform testing. "Having been involved in the development of an auction platform, it is vital that the technology works seamlessly, that it is secure, and that it is not vulnerable." You want to be confident that the technology will not break down in the middle of an auction.

2. What Will The Marketing Plan Look Like?
Cannon notes that every platform markets its assets in different ways, so it is important to understand the marketing plan as a whole. What is the strategy to find potential buyers? What is the depth and engagement of their investor lists? Is the marketing custom and targeted to your asset by location and property type or is it more of a shotgun approach? He also includes the importance of timing and marketing flexibility. "The marketing timeline is normally around 45 days, so it’s important that marketing is going out on time and hitting the right people throughout the 45-day process. Another focus is the flexibility of marketing. If the asset needs extra help does the platform accommodate and is it able to pivot in the middle of the marketing period?"

3. Who Is My Main Point of Contact?
"Executing a successful auction depends on who you are working with and if you have a good relationship," says Cannon. "Working with professionals who have years of commercial real estate experience will make the online auction process much easier as they can bring knowledge and another set of skills to ensure a positive experience. Does your point of contact have CRE experience outside the CRE auction platform? Can their knowledge and experience help guide the process? Having experience in more than one faucet of CRE will add tremendous value when working towards maximizing profits for your clients."
 

For the complete interview, please visit Choosing The Right Online CRE Auction Platform For Your Asset: An Interview With Newmark Knight Frank's Brock Cannon

FROM THE SPECIAL SERVICER POINT OF VIEW:

We asked Damian Smoter, Special Servicer Disposition Expert and Vice President at RealINSIGHT Marketplace for his recommendations on the top questions you should ask before choosing an online auction platform. He says that these five questions will help bring clarity on what is most important when selling through an auction and help you identify the key differentiators.

1. What processes are in place to provide certainty of closing?
In Smoter's experience, he found that a typical auction requires buyers to pay a 10% hard money deposit immediately and will not allow buyers a due diligence period post-auction. "Some auction platforms require up-front deposits, while others vet bidders and require proof of funds to demonstrate the bidder’s ability to perform under the terms of the transaction," says Smoter. "Knowing how and when bidders are verified is critical to ensuring the certainty of closing in an online CRE auction."

2. What is the average sell-through rate for commercial properties in your online auctions?
The sell-through rate is the percentage of assets taken to auction that ultimately close. With the industry average under 50%, Smoter's found that asking about the sell-through rate by asset class is very important. "This will help ensure that you select the platform that will give you the best chance to find a buyer on auction day. If the sell-through rate is low for your asset type, you may want to consider other options," says Smoter.

3. What is the average number of bidders on a deal?
Smoter notes that an auction works best when bidders compete to drive pricing above a set reserve or strike price and that knowing how many fully verified bidders a platform averages by asset type is key. "This will help ensure that you select the best online auction site to both meet, and exceed, your expectations, resulting in maximum value."

4. Does your platform offer complete transparency?
"One of the major benefits of an online auction is full transparency for both buyers and sellers," notes Smoter. "Buyers want to compete in a transparent process where they have total control over winning a deal. This transparency entices more bidders to compete, ultimately achieving maximum transaction value. For the seller, an online auction provides real-time stats on how their asset is tracking and which buyers are showing interest."

5. How will you market my property prior to auction?
"Every property is different," says Smoter. "It is important to fully understand to whom, and how, your property is being marketed. Is it a one-size-fits-all approach or will they create a custom marketing plan? Will they be doing outreach to potential buyers, or hoping that the buyer is already on their platform? Are they targeting these potential buyers through emails, calls, direct mail, or other channels? Some CRE auction sites only concentrate on higher-priced properties, so it’s important to understand exactly what marketing is available and what you are getting.

For the complete interview, please visit: The Top 5 Questions You Should Ask Before Choosing an Online Commercial Real Estate Auction Website





We hope this Q&A helps you find the right online commercial real estate auction platform for you, your clients, and your properties and loan sales.  If you are interested in learning more, you can reach out to us directly at info@rimarketplace.com or visit our Broker and Seller pages for more catered information, testimonials, and the opportunity to request a free property valuation.