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.