The Virtual Realtor
The glowing white sign outside the cream-colored, red-trimmed Econo Lodge promotes the budget hotel's "Complimentary Deluxe Breakfast Bar" and encourages the passerby to "Think Spring." Built in the 1960s, the budget hotel is located just a few blocks east of the University of Minnesota's Stadium Village, which bustles with steady student traffic. You wouldn't know it to look at the place, but the Lodge's owners are trying to unload it. There are no For Sale signs stuck in the small patch of grass lining the building. The only place the property is listed is on the Internet, at eBay (www.ebay.com), the nation's dominant online auction site.
There, just a few clicks away from eBay's home page, interested parties are told the minimum they can bid for the Econo Lodge is $2.5 million. The hotel was first listed for an initial ten-day period at the end of April; it's now posted for a second time. But so far, no one has put up any bids for the 81-room hotel--a fact that doesn't faze the owners one bit.
"You may never see a bid, but [a sale] still might close with somebody that we made contact with on eBay," explains Vicki Richman, vice president and chief financial officer of the Golden Valley-based American Hospitality Management Company, which owns 50 percent of the hotel and manages the property. Richman says she and her husband Kirby Payne, American Hospitality's president, hadn't been thinking of selling the property, which they bought into in 1992, until they received an unsolicited offer. Richman declines to name the prospective buyer, who walked away from the deal for unspecified reasons at the end of April, or the price they had discussed. But those talks got them in a selling mood. Rather than retain a broker, Richman says, they decided to give eBay a shot: "We were just thinking of the various alternatives. We just wanted to see who was out there that might be interested."
Richman's eBay listing doesn't feature any pictures of the Econo Lodge, located at 2500 University Ave. SE, but it's thick with financial details about the hotel's business operations since 1993. According to the numbers posted on eBay, last year's average room rate was $58.70, with an occupancy rate of 52 percent. Total revenue was $935,000. The listing notes that occupancy rates have been falling at the Econo Lodge since 1998 due to "our absentee management" and the lack of promotion for the hotel, but posits that it "should jump right back up with even the slightest attention."
Richman says that so far she has had about a half-dozen inquiries. Curious surfers have been asking questions about the financials and the hotel market near the Econo Lodge, though Richman declines to say what they originally paid for the property. "I've just been e-mailing back and forth with some people," she explains, conceding that so far her use of eBay is something of an experiment. "I think that it's something that over time might become more viable. It's not a place that people are necessarily going to look."
Of the more than 4 million items listed on eBay this past Friday, only 318 were real estate ads. (Meanwhile, there were 442 items for auction related to Dean Martin and 1027 pieces of Ricky Martin memorabilia.) Listed properties included a home in Kailua-Kona, Hawaii, (opening bid: $199,888), undeveloped acreage from all over the country (40 acres in Wyoming starts at $50), time shares from St. Thomas to Cape Cod, and a "steakhouse with 'Old West' eye appeal" in Spencer, Nebraska (opening asking price of $185,000). Closer to home, local eBay surfers could find a five-bedroom home in Minnetonka (opening bid sought: $495,000); 200 acres near Ortonville; 40 acres of land near the Canadian border; and four cemetery plots in Minneapolis's Sunset Memorial Park (asking price for the set: $4,000).
Jennifer Chu, manager of public relations for the San Jose, California-based eBay Inc., says that real estate listings are handled differently from goods offered in the site's 4,000 other categories. Typically, eBay collects a listing fee (from 25 cents to $2, depending on the price of the item, with other charges for features like boldface type). There's also a commission for items sold (ranging from 1.25 percent to 5 percent, depending on the price). But when eBay lists real estate the site charges a flat fee of $50 and collects no cut of the final sale.
Legally, Chu explains, a real estate sale can't close on eBay. That's because winning bids for property on eBay are nonbinding agreements, and laws governing such transactions vary from state to state. "A lot of the closing details and contingencies are handled offline," admits Chu. At the end of last year, the company reported that it had more than 10 million registered eBay users (registration is free). "What we're doing is providing a way to bring more buyers and sellers together and generate more exposure for those sellers who are listing real estate," says Chu. But since eBay has no way of knowing how many real estate deals are consummated after an initial contact on eBay, information about success and failure rates is mostly anecdotal.
For Scott Pahlen, a real estate broker in Roosevelt--a town of 100 located in northern Minnesota's Lake of the Woods County--eBay provides a new way to find customers in the sparsely populated region. He says Pahlen Realty Inc. enjoyed "tremendous action" when he posted a ten-acre piece of undeveloped woodland near the town of Williams on eBay. Bids on the property topped out at $4,450, Pahlen claims; a good percentage above minimum list price of $3,500. Unfortunately, the winner didn't follow through on the deal, so now Pahlen's haggling with the second-highest bidder.
"I think this marketing method is extremely useful for lower-end pieces of property or recreational pieces of property. There's people that just want some wilderness, you know?" says Pahlen, who speculates that selling more expensive homes and businesses isn't as well suited to eBay as a lower-priced lot because more risk is involved.
Pahlen has a 40-acre wooded lot listed on eBay; at press time there had been 29 bids, the highest of which was $6,300. Ultimately, he sees the Internet as a marketing tool that shouldn't be overlooked. "It just opened up a whole other avenue to reach people we never would have reached otherwise," he says, and then chuckles. "I have people call me yet who ask me if we have electricity up here."
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