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BANKER & TRADESMAN ,
May 1, 2000
Bartering
Web Site Promotes Online
Trading of Property
Weston Entrepreneur
Envisions Cash-less Downpayments By Business People Trading Services
on the Internet
By
Mark J. Grady
In
a move that shows that the real estate market has apparently come full
circle, a Weston businessman is using the modern technology of the
Internet to conduct a type of transaction that dates back further than
recorded history: bartering.
Although
other business-to-business Internet-based bartering systems have been
established, Richard Cravatts' Web site, www.BarterItOnline.com, also
allows members to buy and sell parcels of real estate. The Web site,
just over a month old, has listed about $2.7 million worth of
property.
"Part
of the challenge of putting together a Web site is to address a niche
that has not been addressed before," said Cravatts, who added
that real estate is just one of many categories of barter items on the
site. He said he has worked with both bartering and real estate
transactions for years, and it was a natural progression to bring the
concept to the Internet.
BarterItOnline
facilitates trading between businesses and professionals by creating a
common currency, called E-dollars, which members use to buy and sell
at the site. Members of the online community earn E-dollars whenever
they sell goods or services on the site, and they can apply that
currency to any purchase on the site. The site is supported by
transaction fees from buyers that are assessed at the time of
purchase.
Although
theoretically a BarterItOnline member could accumulate enough
E-dollars to purchase a piece of property outright, Cravatts said he
envisions people using the barter system as a down payment on a
parcel, and he promotes that type of transaction as "real estate
for nothing down in the digital economy."
"For
example, if someone is buying a piece of property for $100,000, the
bank will give you a mortgage for 80 percent of the value,"
Cravatts said. "You can take care of the down payment through
bartering, assuming the person you're dealing with has use for $20,000
worth of barter. The bank will look to see you made the down payment
they don't care what form it's in and give you a mortgage for
the rest, so you just bought a piece of real estate for no money
down."
Currently,
the site lists about 41 undeveloped sites for sale in New Hampshire
and Maine, as well as a timeshare unit in Martha's Vineyard.
"The
benefit from the seller's standpoint and this why people do a lot
of transactions in barter is that if you're the seller and you give
good terms for the transaction, there's less negotiation, and you
generally get a lot closer to your asking price," Cravatts said.
"With no cash down, there's a lot less haggling.
"On
the buyer's side, they get to conserve cash since this is a cash-less
transaction," he added.
Though
he touts the advantages to bartering real estate, Cravatts admits
there are limitations. "You have to be a business owner to take
advantage of this," he said. "You have to be able to sell
items online before you can buy the land."
Business
owners may also not think to turn to a business-oriented site such as
an online bartering community when looking to make personal purchases.
"But business owners have personal lives too," Cravatts
countered. "People will frequently use barter credits from
business transactions for personal things, like taking trip a with
their family. Real estate is not what business owners come to the site
for, and they don't normally look [to a bartering site] for it, but
that's just because previous sites haven't had this."
'Tricky
Business'
Several
of the parcels up for barter are being sold by a Massachusetts
attorney with several years' experience with land deals and bartering.
Bartering his land online "opens up the possibility of bringing
in more transactions" said the seller, who asked not to be named.
"If
you have property for sale and demand all cash, that will limit the
sales because not everyone has all the cash," the seller said,
"or he might not have the power or the connections to get all the
money from a bank.
"I
wanted to open up other avenues to make sales go forward," he
continued. "I want as much action as possible coming across my
desk."
The
properties for barter on BarterItOnline are the seller's first in the
online environment, though he has completed many similar transactions
without the use of the Internet.
"I've
done some wonderful exchanges," he said. "But you have to be
careful. This can be a very tricky business."
None
of the advertised properties on BarterItOnline has been sold, Cravatts
reported, but he attributed that to the fact that the site has only
been officially up and running since March 27. "It's too early
right now," he said. "People have to sell their services
first to be able to afford the land." If a business person were
to join the site offering a set of goods or services Cravatts thought
would sell quickly, he said he would extend them a line of credit,
which could be used to purchase the real estate.
Though
the properties on the site right now are situated in the Northeast,
Cravatts said his site has national and international reach, so
properties from other areas could appear. The Web site also has an
area for commercial property, though there are no listings yet.
"There
isn't any office space because this format is good in times when the
space is not selling in a cash market," he said. "If this
was Houston in the '80s, you'd see business space on here.
"I'd
like to do office space; that would be useful," he continued.
"Who wouldn't want to do it? But as you know, it's a hot market
out there right now."
Experts
Wary
Industry
experts say they'll be observing this latest addition to the world of
real estate transaction.
"Bartering
will be interesting to watch," said John M. Peckham III,
executive director of the Real Estate Cyberspace Society.
"There's nothing new about bartering, but the Internet brings
something to real estate and bartering that should make it
interesting."
The
speed of the Internet, along with the widespread information available
and the sense of urgency online could all affect the transaction,
Peckham said. "The combination could be quite powerful."
While
real estate auctions have proven themselves thus far on the Internet,
Peckham said the impact of online property bartering is still somewhat
uncertain.
"Some
types of property lend themselves to bartering, like a timeshare or
undeveloped land," he said. "I don't think it will have a
major impact on the single-family, owner-occupied residential unit
market though. That market is already very well attended to on the
Internet with big sites like Realtor.com."
In
terms of big sites, Cravatts is hoping to form strategic alliances
with well-established business-oriented sites to tap into their
audiences. He is also seeking venture capital funding with which he
hopes to expand the team working behind the scenes for the site and
establish business partnerships.
"This
is just another form of money," Cravatts said. "People are
obsessed with cash, but once they get cash, they turn around and get
something else with it. This just removes the intermediary," he
said of the $16 billion per year bartering business in the United
States. Still, as the unnamed property seller observed, not everything
can be done through bartering.
"It's
another way of moving products or services, but it can't be the only
way," he said. "I still need cash to pay the phone bill and
the electric bill."
19:45
EDT Monday
Boston
Business Journal, August 21, 2000
Weston-based BarterItOnline.com recently struck a
deal with Publications Management Co. to help promote its
e-marketplace for bartering media, products, services and skills. In
exchange for a stake in BarterItOnline.com, Publications Management
will help the site access print media space in its various properties,
as well as committing additional broadcast and print advertising from
other sources. BarterItOnline can use the dedicated media either to
promote its own brand or to make it available to its member
businesses, the companies said.
http://www.bizjournals.com/boston/stories/2000/08/21/daily1.html
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