Buying a home on eBay may be a virtual bargain (© Raoul Minsart/Masterfile)

© Raoul Minsart/Masterfile

EBay deals in merchandise ranging from rare vinyl records to designer clothing to antique furniture, but one category has retained an air of mystery to some users since the online auction site launched in 2001: real estate. (Bing: How is eBay's stock performing?)

Armchair real-estate gawkers have likely seen eBay home auctions pop up in the news: when the Disney Haunted Mansion replica went up for sale, when the cave that became a house was listed,  when Madonna's childhood home sold or when Eminem's childhood house did not sell on the site.

But how does this work? Who buys a house in an online auction? Are the homes as cheap as they seem, as with this abandoned Michigan house that went for $1.75, or is there a catch?

First, to "buy" a house on eBay is not the same as winning a normal eBay auction, which is a legally binding contract. Because eBay is not a real-estate agent, and because laws and regulations vary around the country, an eBay home auction win is nonbinding. The buyer agrees to purchase the home from the seller, eBay acts more as the vehicle to advertise the property to a global audience and for sellers to meet interested buyers and learn how much they're willing to spend.

Home affordability calculator

After the auction ends, the winner and the seller are expected to contact each other to proceed with the sale through traditional channels. As with any real-estate purchase, the transaction is not guaranteed to close, but if the buyer does not follow through with a purchase attempt in good faith, the bidder is subject to negative feedback and eBay account suspension.

As far as what's in this unusual market, the listings on eBay include a 21-acre Florida country estate with a picturesque canopied oak alley, several gold-mining claims, two houseboats, a farmer's family home in the central Italian countryside and a lot in a gated community on a Florida key. That makes two properties from Florida. In fact, nearly half of the residential listings are in Florida, with Michigan coming in second.

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In a recent sampling of 100 completed auctions in the residential-property category, roughly two-thirds sold, and the other third ended without a sale. Half of the homes sold for less than $5,000, and a quarter of those 100 homes sold for less than $1,000.

Read:  Is it time to sell your home via an online auction?

On the higher end of residences for sale is a 23-acre compound in Southern California for $14.9 million, and 10 others above the $1 million mark. But when it comes to real estate, it seems eBay is still a place people go to find a bargain, even when buying a house. The highest-priced active auction to have attracted a bid so far was $100,000, with the next highest bids in the $60,000 range.

What's your home worth?

As for those homes that sell at rock-bottom prices, the stock on eBay has numerous self-declared handyman specials. So it seems bargain-hunting homebuyers will have some homework, and likely months or years of home work, ahead of them.

Due diligence is the name of the game when buying a home online. One eBay user who is a real-estate agent and investor wrote a user guide to warn those who might be scammed.

Much of that user's advice boils down to research. Research the house, find out who has the title, confirm the square footage and lot measurements, find out if that lot can be built on or subdivided. The estimated value of the property could be out of date. Find out if there are any development plans for the neighborhood. Are there code violations, back taxes, demolition orders? Does the seller really own the house?

Maybe that fixer-upper house in the listing costs only a few hundred dollars now, but if you want to buy a house online, do as the bank lender would do and spend some more to get an appraisal, do a title search, maybe hire an attorney to go over the details and paperwork.

Attempts to reach an eBay representative for this article were not successful. However, eBay's official policies state that eBay Real Estate is not involved in the actual transaction between buyers and sellers and, as a result, "has no control over the quality, safety or legality of the properties advertised, the truth or accuracy of the postings, the ability of sellers to sell items or the ability of buyers to buy items. EBay cannot ensure that a buyer or seller will actually complete a transaction."