Friday, December 29, 2006

Real Estate Internet Auctions... The Next Big Thing?

By Tom Wood

Before the Internet became popular, real estate agents controlled most of the real estate listing information. During that period, the only way a buyer could find homes for sale was by depending on an agent, looking through the local newspapers or by driving around looking for For-sale signs. All of these methods took time and involved considerable effort.

As the Internet became more popular and MLS (Multiple Listing Services) made their listings available to the public on-line, the information shifted from the agents to the buyers. Now most buyers find their homes on the Internet and then contact their agent to show them the homes they are interested in. On one hand it saves the agent time, but on the other it gives buyers more choices which may result in indecision and more requests for showings.

Everyday the Internet is becoming more common place for finding real estate. Now the technology is taking more of the real estate purchase transaction on-line. One example is the real estate auction.

For years, real estate auctions have been done successfully on the courthouse steps or in the front yard. Then, EBay was introduced and people started to become comfortable buying and selling consumer goods through on-line auctions. A natural progression of that has led to on-line real estate auctions and they are steadily gaining momentum. Its a method where buyers can get details about properties without leaving their home. They can visit properties that interest them and make their offer on-line. And, during the auction, they are able to see the highest bid placed by other buyers. This method puts the buyer in control on how high they go and whether or not they get the property.

For a seller, its a valuable option to quickly sell their home. Bidders at auction are expecting a deal, so, in general, the sellers need to expect to let it go for a discount. Many sellers are willing to do this, in return for a faster sale. Auctions draw attention by implying Im giving a discount. It also puts buyer against buyer so it can minimize the discount the seller ends up giving. In addition, through the use of a reserve, the seller can protect themselves from agreeing to a price that is too low.

Its understandable why Internet real estate auctions are gaining popularity everyday. And, the technology is making it so much easier. But, will they take over the traditional way real estate is bought and sold in the U.S.? In the real estate investor arena, I think they will.