Homebuyers like to get the lowest possible mortgage rates. In the United State, Priceline.com will try to find you a mortgage if you "name your own price." However, a better deal may be available to home buyers in Singapore, where reverse auctions are combined with "group purchasing," saving about $20,000 over the life of a mortgage for each homeowner, plus $1,200 in waived legal fees. Dollardex.com offers the service in Singapore, Hong Kong, and other countries.
Here is how Dollardex arranged its first project: The site invited potential buyers in three residential properties in Singapore to join the service. Applications, including financial credentials, were made on a secure Web Site. Then, seven lending banks were invited to bid on the loans. In a secure electronic room, borrowers and lenders negotiated. After 2 days of negotiations of interest rates and special conditions, the borrowers voted on one bank. In the first project, 18 borrowers agreed to give the job to United Overseas Bank (UOB), paying about 0.5 percent less than the regular rate. The borrowers negotiated the waiver of the legal fee as well. From this first project, UOB generated $10 million of business. Today, Dollardex allows customers to participate in an individual reverse auction if they do not want to join a group.
The banks involved in the auctions can see the offers made by competitors. Flexibility is high; in addition to interest rates, banks are willing to negotiate down payment size ad the option of switching from a fixed to variable rate loan. On average, there are 2.6 bank bids per customer.
As of spring 2000, in addition to mortgages, Dollardex.com offers car loans, insurance policies, and travel services. It also allows comparisons of mutual funds that have agreed to give lower front-end fees.
Source : Compiled from moneyq.com.hk, 2002 and Dollardex.com, 2002.
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