New Auction Firm Puts Brokers in Charge

MARINA DEL REY, CA-Technology entrepreneur Joe Tang and real estate developer Keith Yang have launched a new company called AuctionPoint that provides an online auction platform designed to put brokers in charge of their own auctions. Yang tells GlobeSt.com that the new firm already has signed up brokers from CB Richard Ellis, Cushman & Wakefield, Voit Real Estate Services and Collins Commercial that will auction off five properties via the AuctionPoint.com system beginning on Sept. 15 and continuing through Sept. 18.

Yang says that AuctionPoint differs from conventional auctions and other online auctions in a number of respects. First and foremost, he says, it puts brokers in charge of running their own auctions as opposed to having auctioneers or online auctioning services controlling the auction. Another difference is that each auction is for the sale of just one property; the five properties to be sold beginning on Sept. 15, for example, are being sold via five separate auctions.

Yang explains that the idea for AuctionPoint originated when he and Tang sought to sell some properties that they developed before the recession and have been holding since the downturn put the brakes on commercial property sales. “Our brokers were very good, but they were having a difficult time selling our properties in a down market,” he says.

The AuctionPoint founders asked their brokers to explore auctions as a means of selling their properties and concluded that, although auctions are “a terrific tool for selling properties in a down market,” brokers didn’t have the tools to run an auction. Yang and Tang then decided to create such a tool themselves and designed it to correct what they considered to be flaws in the available auction platforms.

Although the auction process accelerates the sales process and motivates buyers with deadlines, aggressive starting prices and transparent bidding, Yang and Tang found that existing auction platforms–both oral outcry and online–excluded or limited broker participation. “We believe that the local broker is the best person to run an auction,” Yang says. The traditional auction model tries to replace the broker or somehow share in the commission, “but that didn’t work for us because we want our brokers 100% engaged in the process,” he says. One of the keys to the AuctionPoint system is that “The brokers continue to do what they are best at, which is marketing to the right pool of buyers,” Yang points out. The commission structure between the broker and the seller doesn’t change, he adds.

Some disadvantages of the traditional oral outcry auction, Yang says, are that it involves a lot of overhead costs, such as renting a location for the auction, and it typically aggregates a lot of real estate from all over the country or from various parts of the country to support those overhead costs. “As a seller, I don’t want my property mixed in with parcels from other parts of the country and other property types,” he says. Hence, the AuctionPoint platform of one property per auction.

AuctionPoint sets up the auctions for brokers and creates a web site for each individual auction, charging brokers $395 per auction for each auction. The $395 per auction doesn’t cover overhead, so the way AuctionPoint makes its money is by collecting a fee from the buyer. The fee is 1% of the final price at the close of escrow and is collected at the same time as the brokers receive their commissions.

The properties that will be auctioned starting Sept. 15 include two turn-key flex industrial condominiums of 3,774 square feet and 7,405 square feet in Tustin and Irvine, an 8,462-square foot office condominium in Irvine, a 9,723-square foot, single-tenant, leased investment in Irvine and a 20,751-square foot turn-key, flex-industrial condominium in Riverside. Each online auction site provides detailed property information and due diligence materials so that brokers can review the list of registered bidders and qualify bidders to participate during the registration period.

Yang tells GlobeSt.com that he and Tang believe that auctions are going to play a major role in commercial real estate going forward by helping to activate the market and create liquidity. “Without the auctions, you get lowball offers because nobody believes there is another buyer out there who is going to pay more,” he says. In one of his company’s online auctions, he explains, “Each bidder is aware of the current high bid, creating a completely transparent process.”

Four of the five properties to be auctioned beginning Sept. 15 are owned by Tang and Yang, but AuctionPoint is now focusing on expanding its business to other owners and other brokers. “We see this ramping up very quickly,” Yang says.