• by Eric Butterman , February 2, 2009

Real estate attempts to avoid foreclosure by turning to online auctions

eBay isn't a Web site - it's an obsession. Ever since Internet users learned how easy it was to shop from home, it's been a credit card and click. Shopping for a home, however, is a different story, considering that one click would equal a $200,000 mortgage and, therefore, a death wish to many economically uncertain consumers. However, real estate is optimistic that by improving the experience and value-add information, the Internet might just be the thing for an industry desperate to avoid its own foreclosure. In fact, Stephanie Singer, spokesperson for the National Association of Realtors, says that, according to a recent study, 87 percent of home buyers are using the Internet as part of their search for a home.

Sean Black, vice president of sales for Trulia, a real estate search engine based in San Francisco, analyzes how the Internet upswing has grown from limited beginnings in the real estate sector. "The information used to be inconsistent. We helped start the trend of going to the source for listings to show what houses were actually sold," Black says. "The brokers and the agents can give information in real time now, but there's other interesting information Internet users now want - crime statistics, a better look at price trends. We started out limiting photos and videos because we felt we were the place to start, then link off to the broker sites. But you realize in the end that Internet users want everything in one place." Trulia has roughly five million unique visitors a month but still doesn't believe that the Web will replace the real estate agent, focusing instead on educating consumers through Q&A forums. "Despite so many buyers starting their search online, negotiation doesn't happen until they're ready and that could take months," Black says.

Trulia's site follows an advertising-based model that places product offerings where consumers are likely to be interested, instead of just blitzing the home page. "It doesn't seem like an advertisement if they're viewing material that directly relates to where they're at in the buying process," Black says. "You want them to believe you're helping them every step of the way. By contrast, if you have an ad about switching cable providers for a move when you're just at the start of your home search, that's going to turn the consumer off."

Rick Sharga, senior vice president for Irvine, Calif.-based search engine RealtyTrac, says his company, which specializes in selling foreclosed homes, has set up its site differently because it believes the foreclosure buyer will not be as emotional a buyer. "Foreclosed homes can often be bought sight unseen, so there's even more chance of a direct sell from online," he says. "That means you have to give buyers as much information as possible to get to a deal. There's also help on the bank's end, because they are much more willing to rid themselves of a foreclosed house where they're just trying to get sometimes anything for it. The painted pictures of little Johnny and Susie playing in the backyard as part of the sales approach isn't so necessary here."

The site, which has approximately 3.5 million unique visitors a month, is also focused heavily on written content aimed at educating the consumer and has hired three full-time journalists. Sharga also plans to make the site more interactive - "patterned after amazon.com with intelligent filtering," he says. "And we'll continue to improve on record data. That doesn't get updated often on many real estate sites. We compare data every night to see if a property changed hands to show it as 'sold,' but it's still not a perfect process." He also contends that the site will be able to shorten the tedium of the paperwork process. "There are so many inefficiencies in real estate that we can help with. Why doesn't the homeowner get to select their own title insurance? Or why do they have to dole out 20 pages of credit information when lenders will ask the credit bureau for the same report that's online? Internet users won't put in the same time compared to those who walk into a real estate office."

Sharga says the ultimate future of real estate online comes down to two fundamental themes: transacting through auctions and personalized applications. "First, you will see an increased number of transactions in the foreclosure cycle," he says. "Real estate is now at a tipping point. As more investors are buying properties through online auctions, that will become more of the general real estate process. The second part will be online applications having personalization. Imagine if you didn't have to search through a million properties and could have a profile that allowed us to instantly find the homes you'd be interested in, along with providing features and functions that cater to your buying strategy. It's about doing the work for the consumer."

Black believes that sites will eventually become the stock ticker of home sales. "The site that can predict where prices are going by analyzing historic trends will gain users," he says. "Knowing when to bid on a house is more important than ever and you don't see that kind of specific knowledge getting into the consumer's hands like it could."

Sharga also thinks real estate sites will have to interact more with the home seller to make sure the listing answers all potential questions. "It's amazing to me how many online listings lack simple features like good pictures of homes or have no pictures at all," he says. "Buyers have to see themselves living in a house - the address alone won't sell it." Sharga says this flimsy attitude was a byproduct of how easy, until recently, a home could flip. Now, the Internet may be the only thing saving sellers from a flop.