High-Tech House Wars:
More Buyers Bid Online

May 18, 2004 -- John and Chandy Andre had never been to Punta Gorda, Fla., when they bought a three-bedroom home there last summer. In fact, they had to look up Punta Gorda on a map. But when they saw the $310,000 waterfront house on the Internet, the California couple fell in love and bought it on the spot. "Our friends thought we were nuts," says Mrs. Andre, "but it seemed like a real deal."

More people than ever are buying a home -- or at least making an offer on one -- without ever stepping foot in it. Some 28.8 million people shopped online for real estate in March 2004, up 18% from a year earlier, according to comScore Media Metrix, an Internet-data source based in Reston, Va. That's almost three times the growth rate of total Internet users in the same period. Graham Mudd, senior analyst for the company, says people are flocking to online sites to snap up real estate, particularly in hot markets like Naples, Fla., and Newport Beach, Calif., because it saves them the time and shoe leather of "going home to home" at a time when interest rates are rising.

In a recovering economy, people "afraid to let deals get away," are buying homes blind, says Bill Hoyle, a Florida real-estate agent. Realtybid.com, a three-year-old online real-estate auction house, says about 10% of the homes they feature now sell sight-unseen, while Lori Emmons, a Fort Myers, Fla., broker, says she has had about a dozen such buyers just in the past year. "They e-mail me ready to make the leap," she says.

This new breed of cyber settlers is taking some big chances -- and not just obvious ones like arriving to find the neighbor's lawn choked with weeds. People who fall in love with a house over the Internet, brokers warn, can tend to overlook a lot when they get there. Online or CD tours and "virtual reality" simulations omit some key determinants of a home's value: the neighbors, local traffic and plumbing defects, for example. And that romantic Victorian white front porch in the photograph can turn out to be grayish-beige up close.

Too Busy to Kick the Siding

But for some buyers, the simple convenience of online house shopping overwhelms those concerns. Mark Cuban, owner of the National Basketball Association's Dallas Mavericks, recently bought a $13 million Dallas home without ever seeing it in person. A business partner scoped it out and negotiated the deal, which was contingent on Mr. Cuban's later visit. "I'm not into shopping," explained Mr. Cuban, who noted that he bought a $41 million jet before stepping on that, too. He saw the house one time before moving in, lives in it now and dubs it "a great deal."

Just as some in-person sellers bake bread to entice visitors with homey touches, there are some tricks to the online home-selling trade. Phil Kirsten, a broker for RE/MAX Suburban in Schaumburg, Ill., says the multiple-listing service takes its own pictures for the Web, but agents sometimes add ones correcting defects with brighter lights or new camera angles. Photographing a room from the staircase makes the ceiling look higher, for example, wide-angle lenses make rooms look bigger and shooting a backyard pool from low to the ground can stretch it to Olympic size. Dave Gay, chief of operations for the Tour Factory, a Spokane, Wash., company that does virtual real-estate tours, stresses they "don't do anything deceptive," but will "shoot what the agent wants us to shoot."

In many cases, that means something big could be missing from an online home tour. Oliver Koechli, director of imaging for Homestore, the main investor in IPIX, an Internet virtual-tour company, says that though virtual tours generally supply 360-degree views of a room or view, they can, literally, cut corners, doing a 270-degree tour if an agent requests it. "So if there was a sewer plant next door," Mr. Koechli says, "the photographer could deal with that."

"Pictures don't show you the bad things," says Amy Maddux, a homemaker. When her husband's job was transferred to Fort Worth, Texas, from New Mexico last summer, the couple had only two months to find a new place. Online, they found and bought a three-bedroom house with a big backyard. But the Madduxes were disappointed when they moved in. All sorts of little things needed fixing: a leaky faucet and air conditioner, sagging kitchen cabinets, a sloppy paint job and a stuck door. In all, they spent $1,500 correcting the defects. "It was frustrating," says Mrs. Maddux.

Buying real estate online is a natural extension of the overall rush to the Net. Total Internet sales have risen 27%, to $45 billion over the past year, according to Forrester Research, and the firm, based in Cambridge, Mass., expects sales of bigger-ticket items to rise 9% or more in the next five years. Meanwhile, an explosion of real-estate information on the Web has coincided with the growth of high-speed Internet access, which makes virtual tours easier to view.

E-Walking Around the House

On Realtor.com, the largest Web site for home shopping, virtual tours are now found in 240,000 listings a year, up more than two thirds from two years ago. San Diego builder Shea Homes's computer simulations at strip malls and on-site sales trailers let buyers walk through rooms and see the facade from several different angles. The builder says it has sold 800 homes this way.

The job of a broker has changed as a result. Instead of escorting people through homes like she used to, Phoenix real-estate agent Eileen Harris says she often finds herself walking through them alone, cellphone stuck to her ear, taking digital pictures and describing kitchen cabinets to potential buyers. "I'm their personal virtual tour," she says, adding it's hard to guess the preferences of people she's never even met.

For buyers, meanwhile, shopping long-distance is still hard work. Last year, retiree Rick Steinbach decided to move to Naples, Fla., and asked five agents to help him, but he says they spent little time screening properties for him. So Mr. Steinbach got up at 6 a.m. every day for four months, scrolled through thousands of Web listings and finally bought the house he wanted. "By the time I was done, I felt I knew the area better than the agents did," he says.

A Long Commute

Even online home shoppers who feel they've done due diligence tend to forget a host of factors: local traffic noise, the commute and the age demographics of the neighborhood. For the Andres family of Punta Gorda, they felt their new house was fine, but the town fell short of the tropical paradise they pictured. It was too "remote" from restaurants, grocery stores and cultural attractions, says Mrs. Andre, who has already decided to move to Cape Coral, Fla., and may rent out the Punta Gorda home. Terrie Hoyle, the agent who sold it, notes "there's no substitute for a personal visit."

Atlanta consultant Terry Spitzer bought a Florida home last fall based on e-mailed pictures of it, emboldened by his earlier purchases of cars, motorcycles and even a $100,000 yacht sight-unseen. He says he relies mostly on recommendations from friends or "must sell" want ads in local papers. (He managed to bargain down the $389,000 asking price of his home by more than $100,000.) His advice: When buying blind, bid so cheaply that even a lemon becomes a steal. "You've got to be willing to almost insult someone with the price," he says.

With home prices rising an average of 9% nationally from a year ago -- and even more in resort areas -- some buyers figure they just can't lose. Peter da Puzzo, senior managing director of financial services company Cantor Fitzgerald, sticks to well-known golf resorts where the architecture may be predictable, but appreciation often is, too. He and his wife have purchased several properties on Hilton Head, S.C., including a four-bedroom $850,000 house, based on only brochures and some e-mailed photos from his agent. Mr. da Puzzo said they didn't have time to visit the properties before closing, but he has no regrets. "I'm not worried," he says.

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