The Los Angeles Times Media Group has joined a real estate auction venture that is selling bank-owned foreclosure properties and builder-owned properties.
The effort, dubbed Zetabid, seeks to bring new advertising opportunities to the media company in a time of declining ad revenue while broadening the pool of potential buyers for properties sold at auction.
Brokerage company Catalist Homes earlier this year announced a partnership (see Inman News Special Report) with auction company DoveBid to conduct live ballroom-style auctions and parallel online auctions for bank-owned — also known as real estate-owned or REO properties — and builder-owned properties.
The first auction is scheduled Sept. 27-28 at the Ontario Convention Center in Ontario, Calif., and there are plans to expand the auctions to other regions.
"We saw the need for somebody to step in and clear the inventory out of the marketplace," said Bob Bellack, chairman of Zetabid and president for digital media, classified and development for the Los Angeles Times Media Group.
The National Association of Realtors reported this week that the for-sale inventory of resale homes topped 11 months in July — a for-sale inventory of six months is generally considered to represent a balanced market, with inventory above six months considered to be a buyer’s market.
Bellack said ad revenue has been declining for the media company, and agents and brokers have shrinking ad budgets to promote for-sale properties. The Times and other newspapers in the Chicago-based Tribune Co. media chain have cut staff and pages to trim costs – the newspaper cut its weekly editorial real estate section and consolidated some real estate news content with other sections of the paper (see Inman News article).
"Right now the brokers and agents do not have the money to invest in promotion — the fact is that we have a vehicle we believe does bring buyers and sellers to the table," he said.
"We are going to create awareness and interest in the space and hopefully through the process create greater liquidity." He noted that foreclosure problems are most severe nationwide in states like California, Florida and Nevada..
The newspaper group plans to run ads promoting the auction properties several times each week, he said, which "should drive substantial call volumes to agents" who are representing the properties that will be up for sale at auction.
Under the auction model developed by Catalist and GoIndustry DoveBid, the properties will remain listed in the MLS during the auction process and listing agents will remain in place and will be compensated if there is an auction sale.
A goal of the partnership is to expand the pool of potential buyers beyond the realm of experienced real estate investors, Bellack said. Buyers from around the world can participate in the online webcast of the auction.
"What banks need is the average investor. We’re reaching the owner-occupant home buyer, as opposed to just the savvy investor," he said. "We are looking to expand the market pool outside strictly the savvy investor pool."
In June, a RE/MAX broker and other individuals who attended a Southern California auction event filed a lawsuit against a group of real estate auction companies, including DoveBid, charging that some "modern real estate auctions are nothing more than a bait-and-switch scheme to lure hopeful buyers to submit offers that can later be accepted or rejected by the lenders/sellers, despite the general public’s perception that once the auctioneer declares, ‘Sold,’ the property is in fact sold."
That lawsuit alleges deceptive and illegal business practices in the real estate auction industry.
Shawn M. Olson, a lawyer for Spainhour Law Group, which filed the lawsuit on behalf of the auction attendees, said on Monday that the case – filed in California Superior Court — was moved to federal court in Los Angeles, and the auction companies named in the lawsuit have filed motions to dismiss the case. Hearings are planned next month in that case.
Bellack said he could not comment on the case and noted that Zetabid is working to promote "awareness and understanding of how real estate auctions function. We take the position as consumer advocate here. Where there may be some confusion, we err on the side of over-communicating."
In addition to publishing ads related to the upcoming auction in the Los Angeles Times newspaper, the company also is planning to broadcast advertisements through KTLA, a Los Angeles television station owned by Tribune Co., and through the newspaper’s Web site at latimes.com and other affiliates.
GoIndustry DoveBid has operations in 28 nations and has conducted more than 1,000 webcast auctions. CataList Homes is backed by Hal Ellis, founder of commercial real estate firm Grubb & Ellis, Marcus and Millichap, and other companies and investors.
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