Online real estate auctions are coming to Greater Boston, but don’t expect to hear the bang of any gavels.

Hoping the latest trend in real estate proves fruitful in and around the Hub, two Internet-related companies recently unveiled their intentions to enter the market and bring the real estate transaction into the 21st century.

Cambridge-based 1RoofRalty.
com, a sister business of C.B. Noonan Real Estate, last week launched its Web site where, in addition to purchasing homes the traditional way, homebuyers also have the option of bidding on homes as part of an online auction.

Another Internet company,, also announced plans to enter the Greater Boston market later this year. Instead
of customers bidding on homes, the concept ventures further into the uncharted waters of real estate by giving the tenant population an opportunity to bid on how much rent they’re willing to pay for an apartment.

The whole concept came out of frustration trying to find an
apartment, said Matthew Smith, who cofounded with his partner, Brian Shanley, less than a year ago. We were both frustrated renters.

Smith said the idea for auctioning apartments sprouted when he and Shanley lived in London. Renting there was crazy, he said. You literally get up in the morning and grab the paper, and by the time you get to the place, it’s already rented out or it’s a rat hole. We thought there had to be a better way.

I’m from Australia, and in Australia we already have a lot of homes that are sold by auction, he continued. I was thinking about apartments, and I’m prepared to pay £50 more for an apartment, but it doesn’t work that way. It’s first come, first served.

Using the business model, which the company is in the process of patenting, apartment information and photos would be posted online and open houses may also be held while interested parties submit their bids for what they would be willing to pay for rent. Bidders would have to submit information to a rent-screening company that partners with the site, assuring property owners that the bidders are legitimate. At the end of the auction, theoretically, the high bidder can move right in.

Like most Boston rentals today, Smith said there would most likely be rental fees, though he said he was unsure what the final fee structure would be.

The auction process, Smith said, would benefit both tenants and landlords in several ways.

We’ve been talking to a lot of people in the industry, from brokers to property managers, and their biggest problem is pricing, he said. If the rent is too low, they’re not going to get as much as they should out of the property. If the rent is too high, it might sit vacant for a while before a renter comes along, costing them money. This is the best way to determine how much an apartment should rent for.

The renting process is also easier for tenants, he continued.

In markets like Boston, with a lot of people being mobile and coming into the city to work from out-of-town, people will be able to secure their rent before they even arrive, he said.

For other prospective tenants, Smith said the auction process is less tense than using traditional apartment hunting methods. With a normal rental, if you see an apartment, you feel a bit rushed because someone could take the apartment if you don’t sign right away. With the auction, we can leave an apartment open for a week, allowing you to stroll around and look at properties before you decide to make an offer. It’s fair game, and there’s no rush to it.

He added that the auction is a transparent transaction, allowing both sides to see what is going on through the Web site.

With a rental market as hot as the Boston market is now, an auction leaves open the possibility of lower-income renters being further priced out of the area because of people willing to foot the extra money. But Smith said he doesn’t see problems arising out of that concern.

I think people will know when to pull out of an auction [if the price gets too high], he said. And people can participate in multiple auctions with different price ranges. We’re not forcing anybody to bid.

Smith said allows for fair housing because landlords accept bids from qualified renters without ever meeting them face-to-face. The owner can’t be biased at all, he said. The renter passed the screening, that’s all that matters.

After completing beta testing, Smith said should debut by this fall. He added that the company is still looking to partner with investors. In addition to Boston, also plans to launch in another hot rental market: San Francisco.

The other auction platform, selling homes online, has been tested in markets like Las Vegas and Arizona with some success, but appears to be the first company to focus its auction model on the Boston area.

Christopher J. Delaney, president of the company, said the online auction was a natural progression for an area that’s home to an Internet-savvy, educated population – though he quickly added that one does not even have to have Internet access to participate in the auction.

People are doing more and more online, he said, they need agents less and less.

‘Prove It Here’
If the excitement of an online auction doesn’t draw people to his company, Delaney said, the fees it’s offering will. The commission on a sold home is 2.5 percent of the minimum bid price, compared to 5 or 6 percent with traditional real estate firms. Those who buy through get a rebate of 0.5 percent of the sales price.

We’re not a discount broker, Delaney said. We’re just able to offer a lower commission because the Internet takes a lot work out of the transaction, and we pass the savings on.

In addition to virtual tours online, Delaney said traditional open houses will be scheduled for properties, or they can be viewed by appointment, so homebuyers can visit the property before bidding.

Currently has three houses up for auction on its site. There will be a lot more in a couple of weeks, Delaney said. We’re just waiting for the April season to get going before we roll them out.

Though New Englanders can sometimes be known for resistance to change, Delaney said that convincing sellers to put their homes up for bid in an online auction hasn’t been too difficult.

It’s an easier sell with the tech-savvy, he said. They realize the benefits of managing everything online. He added that the 2.5 percent commission has also proved persuasive to sellers. also sells homes the traditional way, and it is a member of the Greater Boston Real Estate Board and lists homes on the Property Information Network multiple listing service.

Delaney said one challenge the company may face is breaking the stereotype of a real estate auction. This is not a ‘bang the gavel’ thing, he said. This is not a distressed property sale. We’re managing offers and processing everything online.

With his real estate roots in the Boston area, Delaney said will focus on Boston for now, but plans are in place for expansion. We wanted to show people in Cambridge that this works, he said. We’ll prove it here, then take it out. Offices are already planned for the North Shore and South Shore, as well as New Hampshire.

Fred Meyer, 2000 president of the Massachusetts Association of Realtors, expects most Bay State Realtors to adopt a wait-and-see attitude about the online auction.

It will be met with hesitancy, he said. People will want to watch how other people do it before deciding whether it’s successful or not. If it’s a valid concept, I think you’ll see many more Realtors interested in this.

In case the auction idea catches on, I’ve already secured the domain name, Meyer said. I don’t want to be a pioneer in the field, but I think it can be a great alternative for clients that want it. I’m trying to be ready.

Going, Going, Gone: Home Auctions Hit Web

by Banker & Tradesman time to read: 5 min