Everybody wants to sell homes online because so much of the process can be automated and many genuinely interested buyers will see them. That makes the process look deceptively easy. Hook buyers with front-view pictures, property information, school reports and maps, and show them comparables so they can see if the homes they like are priced fairly. Why, homes appear as easy to resell as beanie babies or a used set of golf clubs. At least that is what home sellers using the new real estate auction section on eBay will think.

Do-it-your-sellers may post their listings in droves, but what they will find is what other online FSBOs have found before them - that eBay's auction-based marketplace is broad but not deep. If a buyer is looking for a never-been-out-of-the-box Barbie collectible, a broad market works well, but it fails miserably in the resale home market.

Just ask any Realtor. At least forty percent of sellers want to save money on commissions, according to the National Association of REALTORS, but four out of five end up hiring a Realtor anyway. That is because they find out the hard way what the industry knows but eBay doesn't - that buyers want to look at quantities of homes. They want access to all the homes in the area.

Realtors also know that home sellers, particularly FSBOs, tend to be cheap, obstinate and inclined to overprice and underprepare their homes for market. Many don't understand that to market a home they must incur the risks and the costs to do so - up front, instead of at the end of the transaction when they typically pay their broker out of the proceeds. Those $50-$200 FSBO Internet marketing programs add up in a hurry when you have to buy a position on several sites, let alone pay the local paper $20 to $40 a day for a classified ad. Because they are cheap, do-it-yoursellers often will try the least expensive marketing methods - putting a sign in the yard, and one or two advertising means to sell their home. When the home doesn't sell, they grudgingly call a Realtor.

Just ask Hans Koch, who owns the largest for-sale-by-owner online marketing company, Owners.com. After only accumulating about 35,000 listings nationwide, the adamantly anti-Realtor Koch was forced to invite real estate agents to market their homes on the site. With few takers, the site is now nearing a cash-flow crisis, according to recent news reports.

The real estate auction section has another strike against it. Auctions are an elegant way to buy Princess Diana's ball gowns, or private collection Old Masters, but in the world of real estate, the word auction still means "fire sale." Real estate auctions for decades have received their inventory from government take-backs, banks and other sources who no longer wish to operate a property. While not all auction properties are foreclosures, enough are to stigmatize the concept because foreclosed properties are often poorly maintained. If a seller couldn't make the house payment, they surely didn't have the money to operate the property properly.

Just ask Kevin Hickey, CEO of Homebid.com, whose original business model was based on providing automated home auction technologies to broker-represented sellers. Sellers and brokers were skittish about the auction model, because of the stigma, and they were leery to empower buyers by allowing them to view other buyers' bids. That is what an auction means - buyers get to see what other buyers are offering. In a broker represented home, only the seller and broker get to see the offers - why give the buyer any advantage? After lukewarm roadshows, the company dumped any association with auctions, regrouped and now provides offer management software to brokers - in which offers can be shown among buyers only as an option.

Meanwhile, the bids from buyers on eBay aren't even binding. According to the site, home sellers are invited to "contact the high bidder to discuss entering into a contract for the real property. However, neither party is obligated to complete the real estate transaction," according to the site disclaimer. This may be the kind of soft-pedaling it takes to acclimate buyers and sellers to the idea of auctions without any stigma. Eventually, the concept of broker and seller-auctioned homes could become more widely accepted, but any company plowing the field first is going to encounter a lot of rocks and not enough rain.

Another question about this venture is if eBay picked the right partner by selling the real estate section sponsorship to zipRealty. A relative small fry, zipRealty currently operates in only 12 cities in the U.S. The pilot launch with eBay is only for nine cities. zipRealty's penetration is neither deep nor broad.

That makes the partnership a stroke of genius for zipRealty. As buyers flock to the site and find only nine or so homes for sale for the entire country, what will they do next? Will they spend the few seconds to click over to zipRealty's inventory of homes?

That's what zipRealty is betting on, and as a full-service discount broker it is positioned to help buyers and sellers. The site further proves its consumer-friendliness by clearly outlining its simple rates, including a cash-back-back-at-closing guarantee. Cash back to buyers? Publicize rates? When has a broker ever done that on such a scale before? Because of its deep discounts, zipRealty's service model is compatible with eBay's goal of providing value to the consumer. But eBay is going to make a lot better partner for zipRealty than the other way around. In fact, zipRealty has pulled off a marketing coup, and still has venture capital to spare, according to CEO Scott Kucirek.

"If you try to spend into getting market share, there is not a well deep enough," explains Kucirek. " This gives us quicker exposure to a lot more people and that is what we are interested in."

If traffic is the name of the game, zipRealty certainly came to the right place. eBay boasts 1.72 million unique visitors a day, according to Media Metrix, easily making it the largest marketplace in the world. That means that a lot of people are going to find out two things - that real estate brokers can be found online, and that they can deeply discount their commissions.

So what the eBay/zipRealty partnership really means is not that home sellers can auction their homes online. That's the red herring. The real news is now millions of consumers are about to find out that they don't have to pay six to seven percent commissions to Realtors anymore, and that will have a much more far-reaching effect on the real estate industry than the introduction of an online home auction community for sellers.

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Published: August 4, 2000

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