When the government annouced a ban on public auctions and open houses as part of its measures to deal with the novel coronavirus (COVID-19) pandemic, many properties switched to private treaty sales, and many more pulled out.
However, a small but growing number of auctions are switching to virtual (online) auctions as the market adjusts.
So, here’s everything you need to know about online real estate auctions.
Virtual Real Estate and Virtual Tour:
Virtual real estate allows hundreds of potential buyers to ‘walk’ through a property on their smartphone or computer. They can view the property in full 360-view from the comfort of their own home.
It’s significantly more comprehensive and realistic than photos and allows you to get a full view of every angle of a property almost like you were standing in it yourself.
You can surf through virtual real estate websites and tour the properties. Registering for online auctions is easy as well.
There are plenty of websites where you can simply complete the registration form and once verified, you will be able to bid.
Advantages/Disadvantages of online real estate auctions:
An online real estate auction is a natural and intuitive solution for buyers and sellers. Buyers are already comfortable conducting their property research and due diligence online, so an online transaction makes sense.
It’s a secure, fully compliant process that enables buyers to bid in an auction wherever they are, meaning increased buyer reach and participation, resulting in better outcomes.
A virtual auction is a valuable tool for the real estate industry designed to benefit buyers, sellers and agents. It’s a natural evolution in real estate transactions.
Benefits:
- You can view your next home from the comfort of your lounge.
- You can be contact-free and risk-free while continuing to sell and purchase property during this time.
- While each bid is visible online, the bidder’s details remain confidential at all times.
- Virtual auction is a secure and legally compliant platform, with genuine identified bidders and enforceable contracts.
- You can watch and bid multiple auctions at the same time.
- The final call countdown means buyers always have the chance to bid before the auction closes.
- The virtual auction is open 24/7 for bidding or managing the bids from any location.
- Online auction websites feature user friendly and intuitive with simple guidelines.
- Virtual property auction runs over several days giving all participants valuable time and comfort.
Drawbacks:
- Online auctions take away the experience of viewing the property in person.
- Every business is not able to take part in online auctions because they need their auction websites and for this purpose they have to hire trained technical staff.
- Since online auctions do not sell face to face, the bidders may be anonymous.
- Some illegal live auction websites may sometimes be fraudulent and trick you.
Auctions both virtual and public are risky!
When you buy at auction there is no cooling-off period, so the risk is higher for the buyer.
In normal times, that risk is acceptable for most buyers. In times like this, the risk is high for some people and low for others.
Currently amidst the coronvairus pandemic, most lenders will not accept people working in certain industries such as tourism or hospitality and casual employees from any industry. They are cautious around overtime, commission & bonus income although they are still accepting it if we can see that it is ongoing
Therefore, if you have a large deposit and a government job then an auction isn’t too risky. However, If you’re a casual employee with a 5% deposit then it’s a big gamble.
The reality is that many high demand suburbs are still going to auction and so if you’re buying in those areas then you need to know the risks before you proceed.
Finally, the most important thing is to get a reliable pre-approval before bidding at an online real estate auction.
Virtual auctions and tours have been around for a while
Virtual tours and virtual inspections were available to support overseas buyers and those unable to attend open homes to inspect properties. Now, the call for social isolation has driven people online to adopt these emerging technologies.
The virtual auction essentially facilitates a house sale with next to no personal contact, allowing everyone to support social distancing. For years people have been able to take virtual tours of listed properties and watch, or even participate in, live-streamed auctions.
Regardless of current challenges around COVID-19, it is the future of real estate transactions.
A lot of real estate transactions are already being digitised, such as property marketing, eConveyancing, virtual inspections and settlement – bidding at online auctions is the next logical step.
How do online real estate auctions work for a seller?
An online property auction from websites replicates a standard property auction usually held onsite or at an auction room.
The online system manages it all: the registration of buyers and sellers, a process for receiving and accepting bids, it even notifies buyers when a property’s reserve price has been reached.
These online auctions give the exclusive right of negotiation to the highest bidder should the reserve not be met. This unique feature creates competition.
This process is done in a secure digitised environment with an audit trail that stores the records for future reference.
Upload Property
Once registered, uploading a property is easy and can be swiftly done within 5-10 minutes. The auction site will provide a highly experienced auctioneer for you.
Auction Settings
The actual auction commences after the typical marketing campaign comes to an end and is typically five days long but can range anywhere from 1 to 14 days.
Other critical auction information such as the reserve price, bid increments and starting bid can all be decided and specified later.
Registering Bidders
As prospective buyers view the property, the agent encourages them to pre-register for the auction even if they are unsure they will bid.
All bidders must prove their identity with the agents using an institutional form of photo identification which shows current residential address (e.g. typically a current drivers licence).
24 Hours To Go
One of the unique strengths of a virtual auction is to commence auctions with a starting bid.
This is not a vendor bid, but rather a price guide at which offers under would not be considered.
Time to Think
An online auction will enable the seller and agent the time and space to make decisions. It allows you to see the competition and gives you the flexibility to review your reserve or cast your “vendor bid”.
The Hammer Falls
Once the virtual hammer falls at a price you are happy with, your selling agent will finalise the transaction by exchanging contracts offline. Bidders ARE NOT required to pay for the property or any part of it.
Convert “Property Passed In” to “Property Sold”
If the reserve has not been reached and the property passes in, the highest bidder will immediately be shown the reserve price.
As the top bidder, you will receive the exclusive right to negotiate an outcome for 60 minutes. The agent will facilitate this process between vendor and bidder.
How do online real estate auctions work for a buyer?
Virtual auction removes the stress associated with physical auctions. The convenience and ease of bidding for a property online when and how you want, means you, the buyer, experience increased comfort and control in the process.
Getting Started
As a buyer, the first step is to browse the desired property on an online auction site. Make sure that you use an authentic virtual auction platform where everything is transparent and regulated.
The bidding
Bid in private, from the comfort of your home. You will finalise the registration process online. When the auction opens, there will be a starting bid.
When you decide to make your first bid, you will need to choose a bidder number which is valid for the duration of one auction only.
The Auction
The duration of an auction can be set anywhere between 1 and 14 days. You will be made aware of the duration before the auction starts.
You will also see a starting bid appear. It’s important to note that this is a starting guide, not a vendor bid.
The Final Call Stage
At the Final Call Stage, any bids received within the last 5 minutes will push the clock out a further 5 minutes, that keeps things fair for all bidders.
It Pays To Be Up The Top!
If the reserve has not been reached and the property passes in, the highest bidder will immediately be shown the reserve price.
As the top bidder, you will receive the exclusive right to negotiate an outcome for 60 minutes. Your agent will facilitate this process and this is an excellent opportunity to negotiate a successful outcome.
The Hammer Falls
If you are the highest bidder at the time the clock runs out and the reserve has been met, then congratulations, the property is yours!
Once the virtual hammer falls, there is a binding contract in place. If you are the successful purchaser, you can relax in the knowledge that the property cannot be sold to anyone else.
Seal The Deal
As the successful bidder, you will need to contact the agent and arrange to meet to exchange contracts. You will pay your deposit as per the normal auction process.
Now it’s time to crack open the champagne and celebrate!
This simple process now needs to be finalised offline.
Get pre-approved before bidding at an online real estate auctions!
Always get pre-approved before bidding at auctions, online or public.
Our award-winning mortgage brokers are here to get you approved and to help you through the home buying process.
To get started on your pre-approval, speak with one of our specialist mortgage brokers by filling in our short assessment form or call us on 1300 889 743.