Sramana Mitra: You bought these parcels of land and you ran this auction. What was the outcome of the auction?
Jeff Frieden: We made a million dollars in one day.
Sramana Mitra: Oh, wow! Terrific!
Jeff Frieden: There were thousands of people there betting competitively on this land. It was the 1987 to 1988 timeframe. The real estate market was good then until the recession in 1990. We actually got a second one in before the market crashed in 1990. We bought 200 more right after that. When the market crashed, they had really built a lot of new homes and condominiums in Southern California.
It was the Gulf War recession. There were a lot of developers who had built a hundred homes in Riverside or had built homes in LA but nobody was buying. They were just selling around 50 out of 100. We had this idea that we should go to these developers and try to have an auction on these houses. We don’t need to own them like the land. We’ll just do it with a fee.” That started a company called Real Estate Disposition, which was known as REDC. That is the roots of Auction.com. These were offline ballroom auctions. There was a bunch of advertising in the offline media at that time. We had a bank come in and do the financing for these home owners that wanted to buy these homes in an auction.
We did our first one in 1990 out in the Riverside. There were 50 homes and each home was a couple of hundred thousand dollars. We sold them all. There were a thousand people inside the hall. That went on until 1997 when we did 500 of those developer auctions. We got to start selling their foreclosures with us during that time period. We continued with the land auction business. We really had two businesses running from 1990 to 2007 where we would buy this land and have these auctions. We were doing about 30 auctions a year at the peak of the market. That was 2005. Then we were also doing the fee business, which eventually became Auction.com.
In early 2000s, we used a technology from eBay where you could have these live auctions and people could hear the auctions over the Internet. They could press their mouse and put a bid in. If there were a thousand people in the Irvine ballroom buying homes or lands, they could bid against the people on the Internet and the Internet people could bid against them. We called it a hybrid auction.