By acquiring HomesDirect, the operator of a Web auction site for foreclosed homes, eBay Inc. has added to a year-old auction operation of its own that already included traditional homes, land plots, time-shares, and commercial real estate.

The purchase gives the brash company thousands of additional foreclosed home listings and a Web site that fits its overriding strategy well.

HomesDirect, of Pasadena, Calif., was majority-owned by Idealab, a five-year-old company that helps Internet start-ups get off the ground. Last year HomesDirect sold more than 116,000 properties, eBay executives said.

“The acquisition of HomesDirect is one step of our overall strategy to expand in the categories where we think eBay can add value,” Doug Galen, eBay’s general manager of real estate, said in an interview Tuesday. “We also think we can help three constituencies: the consumer, the Realtor, and the seller — or in a foreclosure, the lender.”

The price of the deal and other terms were not disclosed.

Real estate eventually may become eBay’s largest business line, Mr. Galen said. But first the San Jose, Calif., company hopes to bring liquidity to the foreclosure market and bring more real estate buyers and sellers together, he said.

Most lenders deal with foreclosures on their own, and may spend up to $20,000 to foreclose and dispose of a property, Mr. Galen said. eBay can shorten the time it takes to sell a property, bring down a lender’s costs, and add value to the transaction, he said.

Close to $1 billion of real estate was foreclosed last year, eBay executives said, and HomesDirect holds an 85% market share in the sale of foreclosed Veterans Administration and U.S. Department of Housing and Urban Development homes.

HomesDirect also has deals to sell foreclosed properties for Chase Manhattan Mortgage Corp.; Option One Mortgage Corp., which is owned by H&R Block Inc.; and Equicredit, the subprime mortgage unit of Bank of America Corp.

Mr. Galen, a former E-Loan executive, noted that many consumers need substantial handholding when buying a home, a typically complex and stressful undertaking. To help these people, eBay plans to partner with lenders and other companies that provide mortgage-related services, such as title, escrow, and appraisal companies, to offer their services on the site.

“We think that we have a great base of users, and if any one of them completes a transaction, they’re going to need a loan,” Mr. Galen said.

Though eBay will not offer loans itself, it wants to give users all the tools they need to buy and sell real estate, he said. “We need to find ways to make it easier for buyers to get loans, sellers to pre-qualify buyers, and make that process easier.”

HomesDirect already has a business relationship with First American Default Management Solutions LLC, a subsidiary of First American Corp. of Santa Ana, Calif.

“We hope to identify other opportunities with other lenders, escrow companies, and other players in the industry to help our users,” Mr. Galen said.

In addition to offering lenders a place to dispose of their foreclosed properties, Mr. Nalen said that eventually eBay will offer them a chance to unload properties that are in default but have not reached the costly foreclosure phase.

“We represent a fantastic outlet for foreclosure properties, but the great untapped market for lenders are all those properties in default that are in pre-foreclosure,” he said. “Imagine if a liquid market could be created so the lender could avoid foreclosure, reducing costs, selling the property, and getting repaid right out.”

To be sure, Internet sales of mortgage lending and big-ticket homes have seen slow growth. So far, most consumers have balked at spending hundreds of thousands of dollars with the click of a mouse. The list of flops includes,, and the independently run HomeAdvisor Technologies Inc., a joint venture majority-owned by Microsoft Corp.

James Punishill, an analyst with Forrester Research in Cambridge, Mass., said foreclosed homes are a natural for auctions. Participants bring a lot of knowledge to the process, he said, so it it makes sense that eBay would want to enter this market.

But as for eBay’s ability to sell real estate to the general public, “that’s where I start to get skeptical,” he said. “Most people are not buying real estate for an investment. They’re buying it to live in. They want to see it, touch it, feel it, and know what it’s going to be like. We’re talking about a lot of money here.”

The eBay auction model for real estate works well in niche markets, where buyers are know what properties should cost, Mr. Punishill said. But most consumers are doing research about real estate online, rather than actually making the purchases there, he said.

However, Mr. Galen said that the largest force behind the real estate move was eBay’s consumers. They demanded the service, he said.

Five years ago eBay was not thinking about selling million-dollar items, but over time its customers have pushed the company into new markets, and real estate is just a continuation of that, he said.

The company now sells a real estate item every 30 to 60 minutes, Mr. Galen said. That figure includes time shares, which are particularly popular, he said

Other high-end items sold by eBay include works of art, planes, and cars. And after just a year in the real estate business, executives at the company say they are confident HomesDirect will succeed.

“We think that the eBay real estate category has the potential to be one of the largest within eBay,” Mr. Galen said. “We’re still in our infancy. We still have work to go, but we’re very excited about where we’re starting from.”

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.