eBay and House Flipping

Below is a letter that the Anti-Flipping Task Force sent to eBay:

(from Buffalo Issue Alerts)

April 13, 2006

Michelle Mallory Peacock
Deputy Director, State Governmental Regulations
eBay, Inc.
2145 Hamilton Ave.
San Jose, CA 95125

Dear Ms. Peacock:

We appreciate that eBay is taking our concerns seriously, as stated in
your letter dated February 21, 2006, as well as your stated commitment
to work diligently with us to combat flipping., we However have been
involved in this dialogue for over one and half years with no
measurable result. In the meantime, Buffalo neighborhoods continue to
experience the harmful impact of flipping which occurs directly as a
result of real estate transactions fostered by your website.

While we are aware that eBay claims to do no more than create an
advertising forum where buyers and sellers meet and exchange goods, it
clearly does more. eBay has created a marketplace that crosses local,
state and international boundaries. Real estate transactions that
were once a very local matter have now turned into global transactions
largely because of internet auction sites. It is our position that
corporations that make millions of dollars from these transactions
should take steps to ensure they act as good corporate citizens in
this venue, just as they should in any other.

Neighborhood destabilization has tremendous negative effects for
cities like Buffalo, and we cannot sit idly by while the problem
continues to devastate our communities.

If eBay has the resources to add numerous guides and helpful tips on
transactions, why is it “impossible” to list or link to the applicable
state law from which the transaction takes place? We know eBay has
the resources to compile a comprehensive list of the applicable state
regulations that are required for real estate transactions it
facilitates on its site. Simply reminding buyers to be careful and do
their due diligence does little to ensure compliance with applicable
state law.

Furthermore, it is incumbent upon eBay to ensure that warnings and
links are prominently displayed at the location where the transaction
is likely to ensue rather than being buried in other pages that are
hard to locate.

In order to list with the Multiple Listing Services, the parties must
provide a property condition disclosure statement, a lead paint rider,
and sign agreements. eBay cannot liken itself to a newspaper site
that uses MLS listings and then not follow even the minimum
requirements that those sites use to protect against fraudulent
claims.

You indicated in your previous letter that your complaint process is
better than any other. While your complaint process might be
appropriate for a used CD player or a book of rare stamps, it is
inadequate for real property transactions. eBay must develop a forum
where people outside the transaction can weigh in to rebut false and
misleading claims made about a property or a neighborhood. Anyone
from Buffalo can tell you that some of the rental income claims for
properties in certain neighborhood are substantially overstated, for
any property, let alone for one that sells for $2,000. Many of these
properties cannot command any rental income because they are in
dilapidated condition.

There must be an avenue to combat false and misleading claims about
properties. For example, eBay user fmdc123 is known in Buffalo as a
seller named Jesse Isaacs. He posts properties on eBay for sale. Mr.
Isaacs does not live in Buffalo. Isaacs cannot come to Buffalo
without risk of being jailed as he has two outstanding warrants for 2
properties with housing code violations. In addition, Isaacs had 3
judgments filed against him in City of Buffalo Housing Court for code
violations on three properties. He has 2 pending matters for housing
code violations on 2 additional properties and one of his properties
is scheduled for demolition. Isaacs has even listed and sold Buffalo
properties on eBay without providing the street number or name for the
houses.

You can imagine how incensed Buffalo residents become when they see
Isaacs selling yet another property on eBay.

Unless there is a forum for those most involved with the community to
weigh in, the complaint process will do little to address neighborhood
destabilization and the problem will continue.

New York State has a developed an extensive set of laws that govern
real estate transactions including the requirement for a written
agreement. By giving people a forum to buy and sell real estate they
have never seen, without ever having to set foot in New York, eBay has
effectively provided a forum to circumvent state law. While eBay is
not the only site offering this service, it is by far the most well
known and popular. We are asking eBay to take the lead by seriously
addressing the devastating effects these transactions have on cities
like Buffalo.

Once again, we invite you to visit Buffalo so that we
can show you the actual condition of the properties that are listed on
ebay and the neighborhoods that are suffering because of these
transactions.

Since you are committed to working diligently with us to resolve this
serious problem, we wish to meet in person in Buffalo to discuss a
resolution to combat this practice. Please provide convenient dates
and we will arrange a meeting and tour of the properties

We look forward to meeting with you as soon as possible.

Sincerely,

WILLIAM STACHOWSKI STATE SENATOR

SAM HOYT MEMBER OF ASSEMBLY

I’ve had discussions with Michele Johnson and the other members of Broadway Fillmore Alive about eBay’s role in house flipping. Frankly, I initially sided with eBay, saying that it just lists the properties for sale, it’s up to the buyer to verify the condition of the property before buying it.

I’m still of the belief that the sole responsibility ends in the hands of the buyer. I can’t imagine that people will engage in the expensive and cumbersome process of buying a house, even a cheap one, without checking out the merchandise before signing the papers. Shame on them. However, I think there are some good points made in this letter. I found myself frustrated when I couldn’t find a way to comment on properties posted on eBay that were obviously misrepresented. I think it’s in eBay’s best interest to do whatever possible to ensure they’re not being used to scam people. That was the point of the mostly successful feedback rating system. But, with real estate sellers, they don’t have the volume of transactions needed to make that system work in the buyer’s favor. So, I think that adding a public comment section to their real estate listings could help mitigate the risks. Even if the seller tries to discount any negative commentary, it might cause the buyer to think twice before purchasing. Maybe give them enough incentive to come look at the house and the neighborhood before buying.

So while I don’t think eBay is at fault in the flipping process, I think they can definitely make improvements to protect their reputation as a marketplace.