Todd Gladis
As interest rates rise for the first time in nearly 10 years, a sure sign of a healthy economy, the main business that Auction.com started on in 2007 — selling distressed commercial and residential assets for institutions — is now selling more traditional properties by auction.
“We always knew that we would migrate from distressed to traditional properties,” said Auction.com vice president, Rick Sharga.
“We have started moving there on commercial — at this point, about 60 percent are non-traditional high quality properties.”
Sharga expects the same to happen on the traditional residential side. At the moment, the residential properties in Auction.com Select tend to be properties still owned by lenders, homes that have been properly fixed up and ready to sell. These homes have been selling — 88 percent — in the first three weeks of listing, and for within 96 percent of the listing price.
“We are seeing more of an uptick in users coming to the site — purchasing their first home to live in,” said Todd Gladis, senior vice president of commercial operations at Auction.com, which saw a 36 percent increase in visitors in the third quarter of 2015 — 5.1 million total. “We are really starting to notice a disruption in the marketplace.”
“First-time buyers, or millennials, are of an age where they are more comfortable with buying things online. They are used to using the technology,” said Michelle Schneider, senior director of public relations.
Gladis added that the percentage of homes being bought by auction in the U.S. is growing.
“It’s been very gratifying — about two-thirds of the buyers are traditional owner-occupiers,” said Sharga. “And everybody is buying with a real estate agent.”
Auction.com, the eBay of real estate
The plan was always for Auction.com to be the “eBay of real estate,” Sharga said.
“Google Capital invested in us because they look for late-stage emerging companies who are in large markets and have a chance to leverage tech and be disruptive,” he explained. “You couldn’t find a much bigger market than the $1.7 to $1.8 trillion commercial and residential property markets.”
Sharga said the pilot program it has been using to test traditional residential auctions, Auction.com Select, had been “spectacularly” successful. Currently being trialed in Miami, Dallas, Denver and Phoenix, Auction.com Select it is likely this will be rolled out in other markets in 2016 — though Sharga would not give details, only saying an announcement was imminent.
The company has talked before about consumer-friendly features, such as a “Buy It Now” button for impatient buyers. Many of these are still under development.
Sharga said the company was looking to pilot ideas with real estate agents and would be talking more with the National Association of Realtors about its place in the market.
To agents who might be fearful of what this might mean to their business, Sharga stressed: “This is not a zero-sum game. We are already looking for agents to work with us in Auction.com Select.”
A lot of people believe that properties for sale online can’t be inspected. This is not true for properties sold on Auction.com. Inspections are encouraged before the auction date, Sharga said.
“Another big difference with the Select site compared with the Auction.com site is a lot of properties that we have been selling don’t qualify for finance and are very difficult to finance,” he said. “Those on Select are fine to be financed.”
50,000 residential properties sold
In the last year, Auction.com sold around 50,000 residential properties and 2,000 to 3,000 commercial — the commercial lot sizes ranging from $1 million to $96 million. Seventy percent of residential winning bidders were first-timers to the platform, said the company, with buyers coming from more than 100 countries worldwide.
“We are starting to see a lot of foreign investment — Chinese investors coming into the U.S. for both residential and commercial properties,” added Gladis.
Auction.com’s busiest buyer residential markets are Miami, Tampa, Orlando, Houston and Chicago, while most properties sold are in Miami, Chicago, Orlando, Jacksonville and Tampa.
“It is a mix of single family, condos and multifamily — there’s a bit of something for everybody, first or second home, investment, condos, it’s all there,” said Gladis.
Buyers typically have between 30 and 45 days to view the property before it sells.
“We often see Mom and Pop investors who are buying foreclosures putting a bit of equity in, fixing them up, then renting or re-selling,” Gladis said.
In partnership with the establishment
Buying a home is always going to be an important purchase. It will continue to be the backbone of our economy, said Gladis.
“We need to be part of the solution — how do you make it easier for them, more available for people. We know it’s coming,” he said.
Auction.com took pains to say it was not trying to do a real estate agent’s job.
“Brokers are very important in our process because they obviously assist buyers on the residential and commercial side,” said Gladis. “We are very much in partnership with the broker to expand.”
“Agents should look at us as a tool or a resource for them as well as to buyers and sellers. We can take care of a lot of the paperwork on the back end, enabling them to go out and make deals and give their clients one-on-one attention,” said Michelle Schneider, senior director of public relations.
Company context: distressed homes and down under
Auction.com has sold a total of $34 billion in residential and commercial property since 2007 — each year handling more than 6,000 live online auctions and 52 week-long selling events.
Auction.com started with distressed homes — launching its online platform in 2008, facilitating its first live trustee/foreclosure auction in 2011, then its first shot sale auction in 2012.
Using the auction process is the most common way to sell a home in Australia, and after a trip there, the Auction.com founders were inspired to set the business up.
The Irvine-based company positions itself as the nation’s leading online real estate marketplace. Its mission is to make transactions easier and more transparent.
A growing role in real estate
Gladis made no secret this week that the company is out to play its own role in the current real estate market.
“In the U.S. residential and commercial markets, the way in which offers are facilitated, compared and rejected is not transparent at all,” said Gladis. “You don’t know what the other offers are — you don’t know who else is interested,” he said. And there is little opportunity for the interested buyer to increase their bid.
“With the auction format and the way we run our sales, every single bidder has the opportunity always to place their highest and best offer — they are never shut out,” he added. “Information is becoming much more available online — the transparency factor and trust factor are going to drive reshaping the way the entire industry conducts commercial and residential real estate,” he said.
Partnership with DocuSign
Auction.com
Auction.com spoke for the first time about its partnership with DocuSign, which it has been working with for a number of years.
“When we heard about the DocuSign Digital Transaction Management solution, it was a no-brainer for us,” said Gladis.
“When Auction.com started, our goal was to provide users with a new kind of real estate experience, and to do that we knew we had to be 100 percent digital. That meant that everything from viewing homes and housing auctions to placing bids and finalizing paperwork had to be online and mobile.
“We have to have very streamlined back-end processing as well as front-end, so that for our buyers and sellers, the end-to-end is 100-percent seamless,” he said. DocuSign’s automation enables Auction.com to scale and drive revenue increases, he said.
“At Auction.com, we are committed to leveraging trusted technology that streamlines inefficient real estate processes and positions us as the industry leader to reinforce where real estate is moving,’” said Auction.com vice-chairman and co-founder Rob Friedman.
