In the down economy, the housing market has taken a turn for the worst, with landlords struggling to fill apartments and developers having trouble offloading new properties. iBidCondo is a new site launching this summer that’s looking to help: the site offers an auction system that gives property owners an alternative method to sell their real estate (and make a profit doing it), while also giving users a chance to acquire real estate at very, very low prices. The site just held a test auction in May that sold off a $690,000 condo for only $86,840, and it’s going to begin another auction later this month.
The auction strategy is one that reminds me of Swoopo, a controversial auction site we recently covered that allows users to buy inexpensive ‘tokens’ that they use to make bids (even if you don’t win the item, you’re still out the cost of those tokens). With iBidcondo, the site requires potential bidders to pay for a $100 ’seat’ to have the right to bid on the real estate auction. The auction itself has no reserve and often sells for much lower than its normal price, and over half of the final auction price goes towards the charity of your choice. If you don’t win, you’re still out the $100 seat fee.
It almost sounds too good to be true, but a look at the details reveals how iBidCondo manages to pull it off. The site recoups the costs of the real estate through the seat prices — if it’s looking to sell a property worth $280,000, it will sell a maximum of 2,800 seats which will pay for the entire price of the property before the auction even starts (developers can choose if they’d like to wait until the maximum is reached or if they’re comfortable starting with fewer purchased seats). The developer who owns the property takes this money, as well as half of the final auction price (the other half goes to charity), with iBidcondo taking a 5% cut.
It’s definitely going to confuse some people, and it isn’t hard to forecast some problems. The auction is time-limited (sometimes as short as 7 minutes), and price increments are limited by which stage you’re in: first you can only increase your bid by $10, then $100, then $1000. In effect, the only time period that actually matters is the last minute or so, when every bid coming in is going to be $1000 and anyone seriously interested in buying the property is going to be clicking furiously. There’s no limit to how many times you can bid, so if you wind up in a horse race with a few dozen people the price can easily increase very quickly, perhaps far beyond those magical low price points the site is currently advertising. An iBidcondo spokesman says that the company can typically guess how high these bids will go and sets the time limits accordingly, but I’m wondering how effective that will be. After all, it would only take a 30-person horserace with each one bidding 30 times in the last minute to add $900,000 to the final auction price.
That said, there’s at least a chance that you’ll walk away from an iBidcondo auction with a new condo in tow for 15% of its list price, which may well be enough to entice people to try their luck. If you’d like to try it out for yourself, use the code iBidTC, which will get you $25 off the $100 fee.
Interesting!
Shouldn’t a site dealing with such large amounts of money look a little more premium and reliable?
Agreed ! ~ It looks almost like a phishing site.
At least they have a catchy domain name.
LOL! It’s right up there with, “I go United States” from Tom Hanks in “The Terminal”.
“I go Americaaa!!!”
-Borat
I’ve umm-ed and ahh-ed about doing a property auction site (I did do a commercial avaition version though).
Humraz (http://www.humraz.com) do the same thing in the UK but it never seems to change, that same property in Northern Ireland has been listed for a good 12 months now, I just wonder the auction is actually going to start.
As an auction format I don’t think it appeals to many folk at all.
They have seem have stolen the idea from humraz and swoopo, so its quite funny that they refer to it as a patent pending business model.
From swoopo they have taken the bidding against the clock and the bid goes up in increments and the timer starts again. Though swoopo make a charge for every bid and make money that way.
From humraz they have stolen the pay for a ’seat’ idea. Except humraz don’t charge anyone for the seat until there are enough people signed-up so if there is no auction no one pays. Also there you don’t pay the final bid price, so the seat price is all you pay.
You’re right Jason it is taking a long time on Humraz and they have had way more publicity than these people so I would question whether ibidcondo have actually ’sold’ anyhthing.
When was the last time you looked at the humraz site, I’ve signed up for the apartment in London and am trying to spread the word so that others sign-up too so that the bloody auction will start. BUT AT LEAST I HAVEN’T PAID ANYTHING.
It all sounds good until you discover that recently evicted owner poured cement down the drains and trashed the place on the way out.
All properties are new and not in foreclosure I’ve learned.
You are correct. The properties featured on iBidcondo.com are not foreclosures. All properties are new developments or individual home-sellers placing their homes on the market.
The key will be to have enough interest to always have a full group of bidders — likely hard to keep going. Also, there has to be some tax implications to the buyer and seller that aren’t evident yet. Nonetheless, awesome concept.
WOW. Super interesting – id like to see this on a luxury scale.
Isn’t this basically a lottery?
No, because there is no element of chance. As long as you’re willing to keep bidding, you will eventually win the item. It’s a clever scam, though, because there will be enough people playing it like a lottery (ie, with no commitment to pay anything near the value) that they’ll make up any shortfall.
I think it will be regulated like gambling though, because all the same social problems are there: the first time some retiree blows his pension on a failed condo bid, that’ll be the end of this model for big-ticket items.
My comment applies to Swoopo; looks like this is a different model. Much more like a lottery, yes, since the limited time frame means the final bidder will be determined to some degree by chance.
The highest bidder wins the auction, therefore this is not a lottery or raffle. Just like a traditional physical auction where people are guided by an auctioneer, we follow the same platform.
I actually just finished a paper on the game theory behind Swoopo. After talking with several bidders and reading reports, the auction is usually decided by chance as the time expires before the sheer number of bids can be registered by the server.
Otherwise, the economic theory behind such sites would drive the price up to at least the actual price, if not beyond.
This is obviously not good for the auction sites as their business would dry up. Thus it is decided almost entirely by chance amoung the hundreds of bidders clicking in the final seconds.
But isn’t their a final clock? So no matter what the auction ends at whatever time it ends, like 20 minutes. So if 100 people all place their bids at the final 2 seconds, it has to be chance.
both swoopo and this seems to be scams which will last for a short period of time, allowing cofounders to make enough money and retire.
Doesn’t Econ 101 suggest that the price that these units sell at will equal the actual market price? Of course the test auction in May sold off a $690,000 condo for only $86,840; no one knew about the site. It’s certainly possible that the first half-dozen units will go for deep discounts, but after that the number (or capacity) of bidders should increase to the point where the benefit to the buyer evaporates.
This is my biggest concern. Let people throw down their $100 if they want, but ensure that the prices will stay in the low ranges, otherwise it’s sort of pointless.
How can you ensure that?
Hi all! Jason here, general manager of iBidcondo,
Great to see some colorful commentary here, and thanks for getting it started Jason! We’d invite anyone with questions about iBidcondo to visit our Web site (www.ibidcondo.com) and watch the video from our founder Eugene Marchese on how iBidcondo works. You can also hear directly from the winning bidders of the last auction, who are now the owners of a $690,000 condo and paid just $86k for it.
More questions? Drop me a line at Jason@ibidcondo.com, or hit us up on Facebook or Twitter: http://twitter.com/ibidcondo
http://www.face...k.com/iBidcondo
I did some research here. The price of the sold property is covered by seats sold to the auction. The price for the condo stays low because the ability to bid up the price is both time constrained and is limited to $1,000 per bid in the final phase. Long term, the number of bidders will remain capped and the capacity issue is irrelevant because its constrained by the number of bids that can occur in a finite time period (just like ebay, inly you can’t make a maximum offer.)
You’re a rocket scientist.
It’s ultimately just a gimmick, and not a sustainable business model for buyers or sellers.
Reminds me of the so called “cent auctions” we have here in Finland. You have to pay a 2 euro token in order to bid and bidding is done in 1 euro cent increments.
The biggest one of those sites get into trouble with the law about a year ago and moved their operation to the UK.
They are still in business after two years and apparently make a hefty profit.
http://news.nin....aspx?id=688685 You have chance to win a 1.9million house for just $195. I think this story inspired ibidcondo to make it mainstream.
I bid on the first iBidcondo property, it’s totally legit. In fact, a couple from San Diego walked away with a deal of a lifetime. I heard about them on Facebook and then started following on Twitter @iBidcondo – I think it’s a clever concept and I’m glad some people think it’s a scam because that helps my chances. I don’t know about you but this helps make buying a home affordable.
Unless you’re the second place guy that bids $85,000 for exactly NOTHING.
Imagine how that would make you feel.
You still only payed $100 for the seat. Only the winning bidder has to pay the bid amount. I don’t see how you could confuse this, what bidding system has EVER made anyone pay for a non-winning bid?
Hey! I work for iBidcondo and I really appreciate all the comments on our company. Feel free to direct any questions our way as we’re more than happy to provide walkthroughs of our platform, talk about financing available and how we limit the auction to ensure we offer those massive discounts. We’re excited about all the feedback so feel free to hit us up anytime at @iBidcondo on Twitter or http://www.face...k.com/iBidcondo !
Is Otis Murdoch’s comment good spam or bad spam?
Just as Rick mentioned above, it sounds like a raffle. Except in this case, the winner shells out even more money.
Cool concept though.
If there’s a time limit, isn’t it exactly like a lottery if all the people bid in the final second whose going to win if the timer runs down? If there was no timer it should go to retail price right?
Watch iBidcondo founder Eugene Marchese personally answer your questions. First up, “Is iBidcondo a raffle or lottery?”
http://www.face...30;..amp;ref=mf
http://www.face...30;..amp;ref=mf
People have tried similar things here in New Zealand. Sell “seats” at an auction to cover the cost of a house then raffle off the house.
This was found to be gambling which is illegal in this form, in New Zealand.
very interesting idea, a way for the owner to get what ever price they want….
For it to truly work, the “seats” would have to fill up fairly fast, and the faster the seats fill up, that means more people are using it… The more that use it the higher the end price will be. It needs numbers to work from a sellers point, but from a buyers point the more people the less they save…
Also not too sure how many people will fork over $100 just to try and bid on a condo?
Chris,
Correct me if I’m wrong, or maybe the guy from iBidcondo above can confirm, but basically the # of seats/participants is a set number. So they need that # of people to buy and once they hit it, no more can join. That would seem to be the way to keep it semi-private and contain the cost of the condo…and when they hit a sales threshold, the developer makes his $. So similar to a raffle I suppose, only you can actually bid.
Yes, the number of auction seats sold is set and limited to cover the retail price of the property.
Also, the bidding is controlled by a timer. Our last auction lasted only 20 minutes, therefore there are only so many bids to be submitted in that time period.
Traditional Real Estate Agency Model- FAIL
ibidcondo- FTW
If it sounds to good to be true, it probably is
I remember thinking about selling a car this way on a car forum once. Basically get 300 people to pay $100 each, and then just raffle off the car, so a lucky guy gets a $30,000 for $100. But, there was sort of tax implication on both ends, though I can’t recall what they were.
This is an interesting idea, but I can’t say I’d ever buy anything costing over $50,000 site unseen.
A similar auction for property was tried as a one off here in New Zealand. The auction never went ahead, it was deemed illegal as it is basically a lottery and the government has a rigorously defended monopoly on those here.
I will go to America with the first airplane
They have a few condos in Austin on their site and the “retail price” of these units is easily 20% above market value. And they are in hard to sell locations, which is why the are on this weird auction website in the first place. They are all nice looking condos, don’t get me wrong, I actually looked at one of them last year, but: One unit is facing a rundown office strip center where I used to work at, another one is right next to the interstate on the bad side of town usually busy with panhandlers, and another one used to be a rental apartment community turned condos. These are all bets gone possibly wrong if you ask me…
That sample sale they quote is a complete joke. As is their “retail prices” they list, for Texas anyway.
The sample sale is off Riverside in Austin – East of I35. This is a bad location; crime, schools, everything. I lived there a few years ago: a hooker got stabbed in front of my apartment. Yup, it’s that kind of neighborhood. No way condo’s are going for $690K retail.
We are definitely seeing more lowest unique bidding sites featuring property prizes these days. While to my knowledge popular sites like swoopo and bidster haven’t yet focused on real estate, there are many examples of sites attempting this – including in the UK, Australia and Germany.
As they are usually considered auctions or skill-based competitions, they are legal in many jurisdictions. One of the benefits from a player’s perspective when it relies on selling ’seats’ in advance is that unlike a normal auction, the winning bid usually doesn’t have to be paid (just the price of the ’seat’).
As a number of people have noted, the flipside is that this relies on attracting a large number of entries for such a big prize.
I’m sure we will continue to see more of these types of house competitions given many payment providers seem to be comfortable with this business model (as opposed to certain other types of skill-based competitions).
Thanks to the Austin folk commenting on the neighborhoods. I hear nothing but good things.
Andrew’s comment reminds me of a reverse auction. Where the bidders each pay a token amount to view the current price (which drops each time someone views) and each time the bidder views, he/she has a chance to buy at the current price. I recently purchased a $1200 LCD TV for $300. http://www.roadway2wealth.com
bidonthecity.com did it a bit classier
Watch iBidcondo founder Eugene Marchese personally answer your questions. First up, “Is iBidcondo a raffle or lottery?”
http://www.face...3473&ref=mf
http://www.face...8473&ref=mf
My question: if it’s not a lottery, how are the prices kept so low? Wouldn’t one of the folks who paid $100 for a seat happily pay $87.000 for a $690,000 condo? We can assume that they did not because the time ran out on the auction. If this is the case it seems much like swoopo.com in that whomever gets the lucky last bid in will win. As all the bidders will be clicking wildly to get this last bid in, the winner is essentially random. This then becomes gambling and not an auction. Answer this simple question: how can you have such low prices and a meaningful bidding process? It seems in the rest of the auction world the two can’t coexist.
If all bids come in at the same time at the end and it’s defined more or less by chance, isn’t it a raffle more than an auction? If so, in the US I hear that it needs to be run by a nonprofit to be legal in most states.
Interesting how each country seems to have a different take on this, I came across this ‘treasure hunt’ type contest in France: http://winahous...asure-tube.html
Just received email from iBidCondo that their next auction which was originally in July then delayed to October is now delayed until 2010. fail?
This kind of an innovative auction model is definitely a fresh take on the bidding process, but I question the likelihood of it coming into the main stream.
The auction format itself is inherently more novelty in nature and I just don’t think your average buyer is going to be willing to deal with the added chance variable to what is already a somewhat complicate buying process.
I think that this format has more viability when its selling consumer goods as several sites are currently doing. I just think the mindset between homebuying vs electronics buying is different enough that it will cause them problems.
http://www.mana...emyproperty.com