The four-bedroom San Clemente, Calif., home that real estate agent Richard Malland lists for $829,000 recently appeared as one of the featured homes on auction site eBay. But that doesnt mean Malland is auctioning the house. In fact, he doesnt even like the term “bid” when it comes to real estate.
“When you bid, it sounds like the lowest price is going to win, Malland says. “Theres a lot more to the quality of an offer for a home.” Nonetheless, his use of eBay to sell real estate demonstrates just how much the Internet is changing an industry closely protected by brokers and their agencies.
Mallands Spanish-style house listing with the ocean view ended up on eBay through the Multiple Listing Service, the proprietary database that gave the real estate industry a running start on the Internet revolution. State Realtor associations promote the use of the MLS on Web sites such as eBays to enlarge the pool of potential buyers.
For properties such as the San Clemente home, an online auction is unlikely to materialize. At the lower end, however, auctions on foreclosed properties, such as those financed through the Veterans Administration or the Department of Housing and Urban Development, show promise, real estate experts say.
“More real estate is going under the hammer every year,” says Saul Klein, a real estate agent from San Diego and a nationally recognized auction practitioner. “While the percentage of properties thats sold at auction is still relatively small compared with traditional sales methods, its increasing steadily, and includes residential, investment and commercial properties.”
Confirming that trend, eBay last month bought HomesDirect.com, a Web-based provider of foreclosure-related auction services. The deal, for an undisclosed price, included HomesDirect subsidiary Tower Communications, which is the companys government foreclosure arm. Joining eBay “gives us more credibility than ever, not only with our government partners, but also in our continued expansion into relationships with leading lending institutions,” says HomesDirect President Todd Coyle.
HomesDirect recently struck a deal with First American Default Management Solutions, a subsidiary of The First American Corp., one of the nations largest providers of mortgage-related products and services. Combining HomesDirects expertise in foreclosed properties with eBays online presence should give home buyers a wider list of properties to shop, says Joe Filoseta, First American Default Management Solutions division president.
For experts, the key driver in online auctions of real estate is the new technology, including improved marketing, better databases of neighborhoods and amenities, and the ability to communicate via e-mail through the Web sites. “Auction technology fills a gap in the electronic transaction — that of bidding,” Klein says. “The traditional real estate transaction resembles an auction if you consider each offer and counteroffer as a bid to purchase the property.”
But a major difference between most online auctions and a real estate deal lies in the fact that “due diligence in a real estate transaction takes place after the successful bid has been accepted and any contingencies removed,” Klein says. “With traditional auctions, the due diligence process takes place before the bidding, and all bids are usually final.”
Despite the trend at the lower end of the market, Malland considers most online real estate auctions a joke. “This business is still about personal contact,” he says.
To overcome that hostility, Accelerated Marketing Services AMSauctions.com — the only Internet site conducting totally online auctions of bank-owned properties and the most successful real estate auction site on the Web — developed its auction formula to include real estate agents in the process. Since June 2000, AMSauctions has hosted 25 online auctions in nine states. The events have resulted in the sale of more than 700 houses, ranging in value from $1,000 to $400,000.
“Investors and homebuyers are responding to the unique formula AMSauctions is using,” says Tony Isbell, president and co-founder of AMS. “People can register on the site to receive an e-mail notification of upcoming auctions. Once an auction begins, bidders have two weeks to look at properties, consult with a Realtor, see how the bidding is going, line up financing and make decisions.”
About 85 percent of AMS properties are listed with residential brokers. Mike Keracher, chief financial officer and co-founder of AMS, says agents are discovering several advantages to participating in online auctions. “In the age of the dot-com demise, the auction formula we have devised has made AMS a profitable Internet company,” Keracher says. “And we believe that designing the auction process to benefit Realtors has played an important role in our success.”
When the online real estate sites first developed, some real estate agents feared they would be squeezed, as travel agents have been, by online competition. But because real estate transactions are so expensive, eliminating an intermediary proved difficult. While individual real estate agencies have embraced the Web, many do not take advantage of the free resources available, Klein says.
“Most properties offered for sale in the country are being marketed on Realtor.com, the largest real estate Web site,” Klein says. “Realtor.com allows six pictures for each property, and yet, if you did some random searches on that site, you would find that very few real estate professionals take advantage of this fact.”