Will e-auctions put realtors out of business?
by Julia King
(IDG) -- Forget balloons and Sunday afternoon open houses. Dee Mellor, a real estate agent in Littleton, Colo., listed a $1.3 million house for sale at www.Rbuy.com on a recent Monday morning and by the following Thursday had bidding inquiries from several prospective buyers.
On July 10, the house will go to the highest bidder, with Mellor orchestrating the online auction -- in $1,000 increments -- from her office PC. Once the house is sold, she will pocket the same commission she would have collected had she chauffeured the potential buyers in her 1998 BMW.
Her cost of doing business on Rbuy.com: 0.5% of the final sale price.
"The Internet has changed everything," said Mellor, a 27-year industry veteran. "Realtors who are not into the Internet will be out of business in the next year."
Launched earlier this month by Denver-based Rbuy Inc., Rbuy.com is the first online real estate auction site controlled by real estate agents. In that respect, it mimics the traditional, real-world home-buying process, but with a slight twist. Other sites list properties and charge buyers and sellers to list or sell, but Rbuy is exclusively for real estate agents.
Agents and sellers privately set the terms and conditions of the sale, while the market essentially sets the selling price during the auction period, which can last from three to 10 days. The Internet enables all interested buyers to see and bid on the property regardless of where they live.
"As a result, the seller gets the top dollar for the property," said Charles Huggins, president of Rbuy Inc. And real estate agents like Mellor significantly reduce the cost and amount of time associated with traditional real estate sales negotiations.
"People that are using the Internet aren't into bargaining," Mellor noted. "They're into getting their house sold as fast as possible. With this [Web site], they can set up a time and hold an auction whenever they want."
Another new Web site (www.realestate.com), run by Atlanta-based RealEstate.com Inc., is bringing the auction process to the mortgage business. Consumers like Victoria Cambrice enter the amount of money they want to borrow, how much money they owe to creditors and the loan terms they want. Those customer requests, which are stripped of name, address and other identifying data, are then put up for bidding by some 200 registered lenders.
Within 24 hours of going online, Cambrice, a financial analyst at Delta Air Lines Inc., received an e-mail from the Web site containing the contact information for the lender with the lowest bid. She paid nothing for the service and was under no obligation to call the lender. But she did call and got a loan.
"I paid 1% to close [the loan], and I saved three points. Plus my mortgage rate dropped from 12% to 8%, so basically I'm going to recapture the cost of refinancing in six months," she said.
But just as valuable, she said, is the time and hassles she saved. The paperwork also was minimal.
"If you've ever tried to get a mortgage, just to get qualified is a hassle," said Cambrice, who has bought and sold homes three times. "Mortgage people are so invasive. They ask you about your soul. It's intimidating, which is why people don't want to deal with it."
By comparison, "I did all of this from my computer. This is the best thing since sliced bread, but so many people are not savvy to doing it," she said.
Theodore Iacobuzio, an analyst at TowerGroup in Needham, Mass., agreed that only a very small fraction of buyers in the $1 trillion mortgage industry shop for and buy loans online. The real estate industry in general remains largely a face-to-face business in which consumers are still more comfortable doing business in the real world.
"As a friend of mine pointed out, you can't test a house for termites online. Somebody has got to go there and look," Iacobuzio said.
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