Several months ago this writer wondered out loud whether eBay could capitalize on its consumer traffic as it moved into the business of marketing foreclosed assets on the Web. With almost 3,500 assets and hundreds of thousands of visitors per month, it looked like eBay might become the leading foreclosure portal on the Web. It took a while to get this momentum for eBay’s offer management technology, but many REO property sellers had started requiring listing agents and brokers to use the technology for offer management to take advantage of the time saved by collecting data from an electronic offer.

The eBay business model for selling everything and anything on the Web is a simple one: To create a marketplace for products big and small and have demand for those products drive prices via an auction format. Sellers of REO property paid approximately $99 per property to post their listings on the eBay Web site until the property was sold. eBay added the foreclosure category to its home page and a list of key real estate search words to accelerate interest in the properties and said that more than 500,000 people registered through the foreclosure site. The property descriptions directed interested buyers to contact the listing agent for details. Agents were invited to “enroll” to use eBay’s offer management technology and to complete an Internet offer form, which would be directed to the desktop of the appropriate asset manager at the seller’s office.

The use and adoption of the eBay offer management technology was an innovative new platform for servicers who need to create back-office efficiencies and reduce time frames on the sale of their REO portfolio. Until relatively recently, many didn’t permit use of the Internet for security and other reasons. In addition, many sellers don’t have Web sites for the purpose of providing prospective buyers with a list of REO inventory, so eBay was in the right place at the right time. In a recent survey of the top servicers with REO inventory, more than half don’t have Web sites with REO properties for sale. Additionally, most asset management companies don’t have the kind of resources to drive traffic to their Web sites in any measurable numbers.

So it certainly came as a surprise to most people in the REO industry, especially clients of the Web giant, when eBay decided to pull the plug on its offer management technology in September 2003.

The word on the street was that catering to the servicer just wasn’t the core eBay business model. So despite its relative success, eBay decided in August, with only one month’s notice to clients who had become quite dependent on the benefits of offer management, to shut the doors and keep its real estate business focused on selling properties other than foreclosures.

Frankly, the eBay economics just didn’t make sense. The fee for a seller looking to list residential property on the eBay Web site starts at $395, almost four times the $99 servicers were being charged for a foreclosure property. Add to that the customized programming necessary to bring each servicer online with its inventory and the customer service support needed for such an endeavor and the numbers just don’t add up, especially when the company didn’t provide any other core services to the REO industry.

Several companies pursued the Web leader to buy its Offer Management Software and consumer database and five companies submitted bid packages in early September. Matrix Bancorp, a third-party asset management firm in Colorado became the exclusive successive owner of the architecture. Matrix re-launched the software under the label “ReoSource,” but has not yet secured the core eBay clientele who quickly gravitated to another provider.

The good news is that the technology has become accepted as a standard in the servicing industry providing asset managers with additional communication tools and the ability to manage offers that were traditionally faxed to their office. Offer management software has taken hold and held on despite eBay’s exit from the market.

FNAMS, the largest third-party asset management company, uses Offer Management Software as just one of the many technology tools that comprise a suite of products that creates efficiencies for asset managers.

“Our clients expect us to be at the forefront of any new developments that will enhance the process…that is one of the primary reasons they choose to outsource their asset management to our company,” said Bradlee Marick, chief technology officer at FNAMS.

“We have seen a huge paradigm shift towards internal efficiencies created through the use of technology,” said Ken Blevins, president of Matrix Bancorp’s third-party outsourcing division. ReoSource, the Matrix Offer Management Web site, will launch a new suite of technology products to enhance the former eBay offer management technology in the first quarter.

FNAMS President Tom DiMercurio has been a strong advocate for new technology and one of the early adopters of offer management technology in the back office.

“Our group continues to invest in technology in order for our clients to have the benefits of the latest technology advances in the business and OMS is just one of those tools,” he said.

In addition to the entrance of Matrix as the owner and operator of the former eBay technology platform, some former eBay folks quickly launched a competitor in the offer management space called ReoTrans in September just as eBay was finishing its final days. The ReoTrans office is just a few miles away from another OMS provider, Reo.com. One of the early entrants, Reo.com, like ReoTrans, isn’t a provider of outsourced asset management services, but is solely a business-to-business technology provider. Both companies charge the seller a fee for the use of the technology on a per file basis similar to the eBay model. Neither company has the consumer traffic that eBay generated.

Asked why eBay decided to pull the plug, Dana Keith, president of Reo.com, replied, “I can only imagine that it had to do with conflicts in strategies with the overall eBay model. It is clear to me after working with previous eBay OMS clients that eBay had a good product and an excellent team of people running the unit. I imagine that the level of customization required for each lender client was difficult to deal with given that eBay typically does not provide such services to sellers in their other verticals.”

The sellers of REO property now have a choice of where to turn for this technology, and so far none of the sources appears to be the clear winner; however, companies that bundle services have traditionally had a leg-up when it comes to gaining market share.

Does the market have room for three competitors in this niche? Are more on the way? That remains to be seen as portfolios grow and sellers look for better ways to manage their growing inventory. Increased competition can only help servicers looking for low-cost technology solutions in the back office. ReoSource will put the heat on Reo.com and Reotrans when it begins advertising its “no cost” offer management to agents and sellers who use its asset management services.

In addition, online auction company AMS (formerly RealtyBid) is gaining momentum as a good way to generate additional interest in hard-to-sell inventory. AMS President Mike Keracher sees 2004 as a time of additional growth and market share as the frenzy in real estate flattens out and REO inventory grows.

In addition to the launch of ReoSource and ReoTrans, a new Web site has emerged dedicated to marketing REO assets to fill the gap created when eBay vacated the portal space. Targeted at consumers and investors who have an interest in finding REO property for sale, BuyBankHomes.com was launched in August and had more than 45,000 registered consumers as of year-end.

BuyBankHomes.com has more than 15,000 assets on it Web site. The company’s goal is to be a neutral aggregated marketing platform where consumers, investors and agents who want to purchase foreclosed property can find such listings.

“What BuyBankHomes.com is offering is hitting a direct target–serious investors wanting to deal with serious sellers. In the real estate game a lot of time is wasted by tire kickers on the selling end as well as the buying end. BuyBankHomes.com is creating a portal for the trading of real estate as it relates to serious players wanting better liquidity, faster transactions and greater net returns. This is a significant platform for the future of non-earning real estate sales,” said Dean Williams, president of Williams Auction Services and a sponsor on the BuyBankHomes.com Web site. Williams has shown significant growth as sellers utilize its services for quick disposition of aging assets.

All this activity confirms that the Web is emerging as the leading medium for the selling of real estate, including REO property. As efficiencies are gained in the back office and more new products and services come to the market via the Web, we have eBay to thank for being a pioneer in offering services to the REO market.

Julie Brosterman is an independent consultant to the real estate, mortgage and servicing industry. She has worked as a consultant for REO.com and BuyBankHomes.com.

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