By Gene J. Koprowski
With much fanfare, homes once owned by Madonna, Eminem and other celebrities have been auctioned on eBay.com in the past year.
But the number of these trophy-property listings pales in comparison to those posted by regular folks since eBay created its real-estate category in 2001. In just over 18 months, more than 20,000 listings for new and existing homes have been posted on eBay. On average, an eBay posting generates more than 1,000 viewings per property, but there's no way of knowing how many postings result in actual sales. EBay Inc. executives say the company doesn't keep track of concluded transactions.
In addition to new and existing homes, the postings include land, vacation homes and timeshares. There's also a section for foreclosed homes, which listed 120,000 properties last year.
Recent deals concluded by eBay sellers include a $4.5 million sale of a 237-acre property in the U.S. Virgin Islands. There were more than 50 competing bids for the property, says Kevin Pursglove, an eBay senior director. The posting was viewed 150,000 times by registered eBay users.
But you don't have to be wealthy to buy or sell at an online real-estate auction. A recent check of online listings turned up properties available for auction in Orchard Park, Fla., at $201,990, and Ocoee, Fla., for $188,990, from builders like Cambridge Homes, online marketing partners of eBay.
Melissa Butler, a speech therapist in Tempe, Ariz., purchased her two-bedroom, luxury loft townhouse online in December for about $160,000. She visited the property before closing, and the contract for purchase had contingencies that allowed the buyer to opt out of a deal under some conditions.
"I had been looking since August," she says. "I like the fact that it was so easy to do this from the comfort of my own home.''
No Obligation
Should you buy -- or sell -- a home on eBay? Or is it too risky? Before you decide to participate in an online auction familiarize yourself with the rules of the road.
The format for eBay real-estate auctions is different from those usually used on eBay. For starters, a bid to buy or sell real estate on eBay isn't legally binding. A bid on eBay for a property merely expresses your serious interest in the purchase and indicates that you want to proceed to final negotiations for the property. "Neither the seller, nor the buyer, has a legal obligation to actually complete the real-estate transaction," says Mr. Pursglove.
Better for Advertising?
Steve Good, chairman and chief executive officer of Sheldon Good & Co. Auctions LLC, a large Chicago real-estate auction house, says the Internet is an effective medium for advertising real estate, but has its flaws when it comes to the actual sales transaction. The lack of a binding agreement is an issue.
In most traditional auctions, bidders must bring a cashier's check for the deposit. "When that gavel comes down, the buyer is locked in, and the deal closes at a predesignated time," Mr. Good says.
And for buyers, there's the question of whether the other bidders can be trusted. Mr. Good says he's seen a credibility problem in auctions of higher-priced homes in his own firm's online bidding service. "Bidders are concerned that the bidding isn't real," he says. And he believes that eBay doesn't provide enough analysis of the properties or allow for sufficient due diligence on them.
Mr. Pursglove says that unlike other eBay auctions, real-estate sellers are encouraged to speak with buyers by e-mail to facilitate the closing of the transaction. These communications can be a critical part of the process.
Consider the recent experience of a Chicago-based writer who bid on a timeshare in Northern Virginia's horse country. Bidding started at $75, but in an e-mail exchange with the seller, he learned that in addition to the final purchase price, there were hidden costs. For example, the property came with a yearly assessment of close to $1,000, but the seller hadn't paid her 2003 assessment and wanted to offload it on the buyer. When he learned of the demand, the writer dropped out of the bidding.
The eBay process does provide an "escape clause" to protect buyers who later learn that the property they've bid on doesn't match the ads posted online. "That's important," says Victor Benoun, president of the Mortgage Source Inc., a mortgage lender in Studio City, Calif., and author of "Your Castle, No Hassle" (Silver Lake Publishing, 1999).
Timeshares
eBay has been a particularly effective marketplace for vacation timeshares, likely because their price tags are much lower than for family homes, lessening the financial risk for buyers. For example, a one-week timeshare near Carnegie Hall in New York City recently was going for $10,000. In the past, timeshares were marketed mostly through seasonal industry publications.
"Here, a person can literally list a timeshare year-round to an audience that approaches eight million on a given day," Mr. Pursglove says. "When you think about it, that is a perfect example of how eBay can bring the power of its marketplace to buyers and sellers who really don't have a better way to connect with one another."
-- Mr. Koprowski is a journalist who has covered business for 16 years.
