Online Auctions

Buying a home on the Internet sounds a lot crazier than it really is. It connotes the image of someone picking a home like they do books on Amazon.com. The truth is much more need-based from the point of view of both builders and buyers.

Earlier this fall, for example, the Northern California division of Ryland Homes contracted with an Internet service to conduct a "bid-sell event" as a way to close out the 14 remaining homes in a neighborhood in San Mateo, Calif. In the process of doing so, it not only set a record for dollar volume of homes sold online, but each interested buyer felt as if they had some control over the buying process.

"We had a waiting list of 2,000 people and we thought this was an opportunity to let everybody on the list have an equal shot at purchasing a home," says Billy Reed, Ryland's division president for northern California.

Located smack in the middle of the Silicon Valley, with its much-publicized high demand for housing, the neighborhood of three- and four-bedroom homes was a magnet for buyers, many of whom would have been simply turned away elsewhere. Instead, they were given an opportunity to tour the remaining home sites, pre-qualify for a Ryland Homes mortgage, and finally, to bid on the home of their choice from the comfort of their homes and offices.

"We jokingly say that we should apply to HUD for an Equal Housing Opportunity award for what we are doing," says Chris Albrick, president and CEO of Ibidco Inc, parent company of Ibidco.com, which hosted the online event held October 30 and November 3. "In a hot market, people are frustrated by the fact that they really don't control their own fate. They can get on a list and from there it is pure chance."

According to Reed, all of Ryland's needs were met. First, it was an orderly way to sell out a community that did not have a trailer or models. Second, it spared the expense and planning of staging an auction in a hotel ballroom. And finally, they also received about $30,000 more per home than the asking price, totaling $10,780,000 in sales.

Still, Reed says future online sales will be determined on a case-by-case basis. "Right now I can say that we've definitely proven that it can be done. Now we have to evaluate each opportunity as it comes up."

From Albrick's perspective, "online bid-sell events" are appropriate in at least three other circumstances. Online grand openings in a strong market are usually very successful, he says, as are sales of model homes. They are generally clean and quick.

"But the number one application of our service is when there is an inventory of homes left and demand is low," says Albrick. "It is much better option than absorbing the cost of having a model complex open for six months and finding an sales agent that wants to sit there. It also means that you are done. You get to move on to your next project."