If these home-auction companies spent $100 million per year on advertising, they could go mainstream – and pressure realtors to justify their existence. Thankfully, sellers resist anything that sounds like they might give it away:
According to comScore, online sales so far this holiday season (November 1 – present) have risen over 16% against last year’s figures from the same time. Housing prices are also accelerating month-over-month and are predicted to reach pre-recession prices by mid-2015 (cnbc.com). With the average online purchase sitting at $180.94 (as of this year’s second quarter), selling real estate online seems like an unlikely scenario.
However, heavyweights in the online real estate auction space such as auction.com and homesearch.com are thinking otherwise. Both companies use an online auction model to sell homes to investors and would-be investors online; however, during this holiday season, both seem to be testing ways to give online home buying more mass market appeal.
Are we witnessing the marriage of e-retailing to real estate?
One example suggests the answer to this is yes. Homesearch recently brought on a new CEO, Kal Raman whose background as an eBay/Groupon executive may foreshadow where the industry’s headed. Earlier this month, Homesearch joined the Cyber Monday craze by launching what seemed to be the industry’s first Cyber Monday sale packed with discounts and buyer incentives on homes. These properties were auctioned online through Homesearch’s typical online auction process.
Their most recent promotion though consists of a “buy it now” price, similar to that of eBay, so instead of actually bidding for a home through an online auction, consumers will call Homesearch to receive a price via telephone. If a consumer likes the price and the extra incentives offered, they can purchase the property before it goes to auction (Homesearch handles much of the downstream closing process already). As eBay’s strategy made clear, there are masses of people who are uncomfortable joining an online auction but who react very well to bargain-basement fixed prices.
Given that Homesearch continues to grow their network of real estate agents and broker partners, is it a stretch to imagine the day when an agent shows homes in the neighborhood and then takes their client online to purchase?
In a space where nothing like this has been tested before it’s hard to know for certain how successful Homesearch and others will be trying to scale mass-market retailing strategies to real estate. However, if they’re really able to go the retail merchandising route and apply discounts of 20%-50% off the list price of homes for sale, I can see how people might be inspired to buy their next home online.
Yea but it the seller is not getting his target price (or even a premium) why would they put it up for auction?
If he can wait until it sells on the MLS route and get 20% more?
All smoke and mirrors if you ask me.
If makes sense in most retail and they can add a discount because you don’t need sales staff and stores, but I don’t think it will work in the case where the difference if 50-100K or more.
Though I can see it in the case where there is a minimum sales price that is say maybe 10% less than the retail where the owner is looking for a quick sale. But I would think the same strategy would work on the MLS LOL.
I would think the owners expect a premium or they would not go this route IMO.
Agreed, and that’s why they need to invest $100 million in advertising to re-educate consumers.
You and I know that your best chance of selling for top dollar is early on, when urgency is high. Creating an auction-like event to stoke the urgency into a frenzy is best for the seller.
But do you hear anyone in the real estate industrial complex pushing that idea? Harcourts was supposed to bring it from Australia, but I haven’t seen any big publicity campaign about it.
If you saw and heard ads every day showing people jumping around like they won the lottery, and screaming it was all because of their auction event, it would change some minds. Sellers want to hit the lottery, and if they get convinced that an auction is the best tool, then they will gladly go that route.
It is the best way to sell a house for top dollar. But will realtors agree? Big-box corporate real estate companies? No way.
Without a mass marketing campaign to convince sellers to give it a try, it’s not going to happen.
I’ve been saying it hear for close to a decade but it bears repeating.
If there is a reserve price it is not an auction.
Irks me no end to see people try to keep all the advantages of different selling methods.
And don’t forget, when you bid you are providing valuable information to the auctioneers. Waiting for the day some stranger shows up at the closing to collect their agent fee claiming they have evidence the buyer had seen the property on their web site.
Online auctions with no reserves?
Add another $100 million in advertising to prove why that’s a good idea, and that might not be enough for sellers to walk out on that plank. But if they did, buyers would come running.
Just to be clear I have no problem with an opening bid price.
Anyway the real problem is going to be how many hundreds of millions will it take to convince buyers that there are no straw bidders. Personally I have trouble thinking of anything they could do to convince me.
Yes me too but the general public may be more trusting – especially if the advertising is compelling.
Tack on another $100 million in advertising, just in case. Hire celebrity spoke people and tie into the real estate entertainment on HGTV.
Yeah, I’m pretty sure you and I aren’t their target demographic.
I’m thinking of inverting the process. I’m going to start an online bidding service for sellers. They post the property and some of the particulars. Realtors® will then submit bids as to level of service and pricing. The seller can then pick the best match/lowest price. Actually i see it as a three armed creature. In addition to the regular eyeballs advertising revenue I expect to ultimately charge for vetting you guys and pulling in a nominal matching fee.
Feel free to delete this if you want to keep this idea among ourselves.
I’m already up to $300 million in advertising for the first year! I’ll leave that to the VC boys.
A little latitude here. This is going to sound crazy until you think about it.
Why not auction food, education, health care like shelter being proposed here?
What do we auction? Collector cars, Fabregé Eggs, and the like.
Highest bidder for necessities is not a good idea. Now, if we are ready to make the leap to housing not being a necessity like food….
I am surprised Tesla has not gone this route LOL.
How about this new 2015 mustang, do I hear 26 thousand going once twice SOLD !!
Next up, this new lennar home,
Now, if we are ready to make the leap to housing not being a necessity like food….
A house is unique – at least as unique as those fancy eggs – and sellers definitely want to sell for top dollar. Once people grasp that auctions are the best way for the seller to achieve top dollar, then they could become wide-spread.
If we could drop the ballroom settings full of tuxedo-wearing guys running around like monkeys to distract from the shill bidders, then there might be a chance.
The Buy-It-Now idea works on ebay but home sellers are going to want every buyer bidding up the price. I think the auction needs to be a festive live event at the property.
JtR: Interesting article over on Business Week with regard to the ongoing crackdown on Chinese money and families disappearing overseas. My particular favorite is paragraph 5, “…Operation Fox Hunt.” We will have to see if this has any affect on the California market.
Article here: http://www.businessweek.com/articles/2014-12-16/china-to-its-naked-officials-bring-back-your-families-from-abroad-or-face-demotion#r=most%20popular