Beyond Distressed: How Ten-X Mainstreamed Real Estate Auctions for the Digital Age

When Sotheby’s sells paintings at auction, no one thinks of them as being distressed. So why does real estate sold at auction get a bad rap? 

Ten-X, the world’s largest online commercial real estate exchange, makes a positive case for auctions as the fastest and most accurate way of finding a property’s true value. By combining 21st Century online sales tech with industry-leading data from CoStar, Ten-X cuts through the inefficiencies of the traditional sales process, finding sellers the right buyer in an average of 100 days from marketing to close. TRD sat down with Ten-X President Steven Jacobs and Vice President Victor Gutierrez to learn how their platform is perfect for sellers feeling stress in the current market, who need to get assets off their books before they become distressed.

Fixing The Backwards Sales Process

Ten-X’s sales platform is built to establish a property’s value from the start and then find the right buyer in a timely fashion with as little back and forth as possible. But what may seem like an obvious way of doing business is actually the reverse of how most real estate deals are done.

“The way traditional sales are done is fundamentally backwards,” says Gutierrez, who describes the inefficiencies of the normal process: “I give you a bit of information, and then you give me the price you’re willing to pay, and then I give you the rest of the information, and then you adjust your price, and now we’ve been going back and forth for months.”

“When you’re selling a property, by the time you get through the first and second round of offers, then the best and final round and pick an investor, it’s taken five or six months,” adds Jacobs. Only then does the due diligence begin, after which, “a majority of the time you get a retrade.” In the end, months after going to market, the result is a deal for a lower price than the initial offer. “It becomes a negative experience,” says Jacobs. 

With Ten-X, this order of operations is turned on its head. “The buyer does the due diligence before making an offer,” explains Jacobs. “As a buyer, by the time you come to the auction, you’ve read the rent roll, you’ve toured the asset, you’ve looked at the financials, you’ve seen the property condition report. You’ve had access to best-in-class CoStar data and documents. All the stuff that you typically have to do post-contract, you’ve already done beforehand.”

This transparency benefits both sellers and buyers. For sellers, they can complete a sale in a fraction of the time as a traditional deal while retaining a similar degree of control over the price thanks to their ability to set a reserve price under which they can choose not to accept an offer. For buyers, not only do they have all the information before making a bid, but the process is transparent and fair, what Jacobs describes as “an even playing field.” 

Buyers, like sellers, access the Ten-X platform through a robust digital platform that puts all the information they need to make an informed bid at their fingertips. Ten-X has also brought Stripe technology to the platform, which has streamlined the buying process further by giving bidders the ability to securely link their bank accounts for instantaneous approvals and real-time proof of funds updates.

Using Data to Find A Property’s True Value

One of Ten-X’s major strengths comes from leveraging its owner CoStar’s wealth of data to find a property’s value before the day of the auction. This enables Ten-X to set realistic expectations for sellers while ensuring that properties they do put up for sale find buyers.

“Prior to bringing a property to auction, Ten-X has a valuation checkpoint,” explains Jacobs. “Let’s say a seller comes to us wanting $10 million for a property. Our valuation team will look at the CoStar data and other comps and say, this is a $7.5 million property. If Ten-X and the broker cannot establish a realistic reserve with the seller that is within 20% of our valuation, it may not be a good fit for auction.” 

Gutierrez followed up on all of the properties Ten-X did not auction in 2023 and found that the vast majority of those properties had either not made it to market or were sitting unsold. “Our valuation team is usually within 10% of the final trade value,” says Gutierrez.

Stressed Not Distressed

While auctions are a time-tested and common method of sale, many still associate the process primarily with distressed or otherwise undesirable properties. Ten-X is working to change this perception. 

“Auctions are just another transaction method.” explains Jacobs. “They accelerate the transaction and provide certainty, whether a property is stabilized, value-add, or distressed.” Because of the platform’s due diligence, international buyer profile and transparent bidding, a Ten-X auction results in a sale where a property is purchased for its true value.

That being said, in a market where many sellers are becoming stressed due to factors relating to their capital stacks, being able to find a buyer in a timely fashion for the right price can keep an asset from becoming distressed. “A lot of problems are tied to the capital stack, not the property per se,” explains Jacobs. “A lot of investors bought in 2020 and 2021 at a floating low rate and now the terms are up and they’re going to default.” For these sellers, three extra months of holding onto a property can be the difference between defaulting and not.

A more drastic dynamic is taking root in the office market, where dropping occupancy rates can turn a building from being profitable to costing an owner money overnight. “We had an owner who bought an office building for $13 million, but their occupancy is about to drop to 25% and they’ll start losing $30,000 every month,” says Gutierrez. “So right now this seller is what I would call stressed, but not distressed. Our value prop to them is that we can get the property to market and under contract in 45 days, and ultimately save them a couple hundred thousand dollars in operating costs by condensing the timeframe it takes for the deal to get done.”

As the market continues to fluctuate, Ten-X is often the fastest and best way to realize a property’s true value. By leveraging CoStar’s data, cutting-edge tech, and decades of experience, Ten-X is changing the way real estate auctions are perceived by the industry at large.

If you’re an owner or broker looking to sell property for its true value in the shortest time possible, reach out to Ten-X today.