Once, old-school methods of selling commercial real estate were fine. “Brokers would go next door and ask, ‘Do you want to buy a property?’” recalls Jay Olshonsky, president & CEO of NAI Global, a top real estate brokerage. But now sellers want to reach the best group of potential buyers possible. “We do not know anymore that the most logical buyer is coming from next door.”
Before co-founding Biproxi, a modern CRE property marketplace and NAI Global partner, CEO Gordon Smith was the former GM of the largest online CRE auction platform. “At least half the properties sold on our platform were to out-of-state buyers,” he says. With sell-through rates under 50% these days, according to Smith, “that’s a pretty inefficient use of resources given that the broker and seller spent 3 months or more trying to market the property.”
Even sending email blasts and waiting for responses is often a waste. “It’s just not working as effectively as it was even five or six years ago,” says Biproxi co-founder and head of revenue Ember Hansen. Email marketing firm Mailchimp, now part of Intuit, says that real estate open rates are about 19.2% and click-through rates, 1.8%.
But the newest tech offers better ways, like a self-service auction. Traditional online auctions are expensive and very people-intensive, says Hansen, and the buyer premium on top of the broker fee can run an additional 3% to 5%.
“A self-service auction allows you to use the same psychology to maximize proceeds without the fee load,” Hansen says. Brokers pay a flat fee to a company like Biproxi to run as many auctions as they wish. A broker can set its own contingencies, decide if there’s earnest money, and invite people.
Next, there’s the electronic off-market deal. In the past, brokers would check with local buyers they knew to get a sense of a realistic price. But that’s a small sample to work with. “A private listing product enables a broker to expand the buyer’s pool without putting the seller’s information out there,” Hansen says.
“Maybe a seller has tenant leases ending soon and doesn’t want the building next door to come over and poach tenants,” Smith adds.
Third is digital offering memorandums (OMs). “There is a time and place for traditional PDF OMs,” Hansen explains. “The issue with a PDF is that there is no dynamic version control, no way to track performance and no way to control distribution or confidentiality. Digital OMs solve all of that.”
“We have made decisions to sell properties when it seemed close with some buyers by looking at how long it took them to look at the information,” Olshonsky says. “Someone who barely looked at the deal might become a re-trade” who will try to renegotiate terms and delay the process.