How Do Online Real Estate Auctions Work
In a COVID-19 world, after the ban of public inspections and auctions, the real estate market had to adapt and make the switch to a primarily digital environment. Online real estate auctions have been around for years. However, with a newfound necessity for this method of sale, home buyers stand to receive a new level of convenience and ease of bidding for their dream property.
Easy to organise, online property auctions are now one of the two main methods to sell a property (private treaty being the other one). While the process is the same as a traditional auction, there are some things which must be done differently. So how exactly do these virtual auctions work?
In this practical guide, we answer the 5 main questions you might have:
- How are online real estate auctions different from traditional in-person auctions?
- How can buyers register and participate in an online real estate auction?
- Is the bidding process the same?
- What are the advantages of a virtual property auction?
- Are online auctions as successful as traditional in-person auctions?
How are online real estate auctions different from traditional in-person auctions?
Online real estate auctions work the same way as in-person auctions but are conducted virtually. This means no crowds. It is simply the auctioneer and the agent in a room (generally the office or the property), equipped with a camera and a couple of computers to live-stream the auction.
Online auctions provide the safety and comfort of being able to bid from your own home or anywhere you have access to a mobile device. This isn't a bad trade-off for the "street theatre" and competitive environment that buyers would traditionally have to face.
As the seller, you will be able to log into the virtual auction platform to follow the interactive bidding happening in real-time. Every step of the way, you will know exactly what is going on.
How can buyers register and participate in an online auction?
As soon as a property is listed for sale, the listing should also appear on the online auction platform that will host the event. This is also where buyers must register. They can do this right up until the start of the auction. This is why your real estate agent will advertise this link in your marketing campaign.
To make sure potential buyers are comfortable with the process when auction day comes, your real estate agent will encourage them to register early so they can become familiar with the platform. They should also be encouraged to watch a few auctions prior, so they feel comfortable when bidding.
Is the bidding process the same?
The bidding process is exactly the same, and only the human face-to-face element is removed.
People can bid with confidence from behind the computer screen, very much like you would on eBay. Just like a traditional on-site auction, the auctioneer is ultimately the conductor. He/she can suggest increments to rise by, can accept or deny bids, and ultimately control the direction and the outcome of the auction.
This means that the flow of bids and the process of bidding is still very similar, and buyers can feel increasingly comfortable bidding behind a screen. In fact, for most people, technology has always been an integral part of their lifestyle. This is why they believe that it minimises the pressure that an in-person auction would put on them.
What are the advantages of a virtual property auction?
Online auctions offer great benefits that will guarantee a successful sale.
Because buyers are bidding online from the comfort of their own lounge room, the pressure is usually reduced. It becomes easier for them to stay level-headed and make better decisions. At the same time, they can also consult with advisers that might not have been able to attend the on-site auction with them. This will help attract serious, quality buyers.
In some cases, using an online platform can also encourage more activity due to a fear of missing out. As bidders cannot see and gauge the other buyers, they might be tempted to bid more to try and get ahead of the competition. Buyers will feel the need to bid now before someone else takes their bid and beats them. This will help achieve a higher sale price for your property.
Are online auctions as successful as traditional in-person auctions?
No matter if the auction happens in-person or online, the success of it always comes down to the skills of the agent and auctioneer. This recipe for success will never change.
As an example, LJ Hooker Granville | Guildford recently sold 22 Fowler Road, Merrylands
(NSW). This property was auctioned virtually using the Auction Now
platform. After 51 bids between 8 registered bidders online and via telephone, it finally sold for $1,251,000, which exceeded the owners' expectations. The buyer had inspected the property via a virtual tour at 9.30pm the night before the auction.
LJ Hooker Newtown recently sold 156 Denison Street, Newtown
(NSW), a 2- bedroom terrace on 89sqm of land, by online auction for a whopping $1,753,000. That's more than $500,000 over the $1,250,000 median sale price for a 2-bedroom house in Newtown (27 March 2020). There were 3 registered bidders on the property with 21 bids placed on the property.
With this sale, LJ Hooker Newtown established a new record. Indeed, this home was not only the highest 2-bedroom sale in the last three years in Newtown, but also the highest 2-bedroom sale on the street.
This example illustrates how efficient online auctions can be. At first, the owners who were not familiar with the virtual environment were concerned that people would not get emotionally attached to the property. But the sale of their Newtown home proved them wrong. In the end, they were ecstatic with the result and the seamless nature of the online platform. Moreover, they were astonished by the aggressive nature of the bidding.
DISCLAIMER - The information provided is for guidance and informational purposes only and does not replace independent business, legal and financial advice which we strongly recommend. Whilst the information is considered true and correct at the date of publication, changes in circumstances after the time of publication may impact the accuracy of the information provided. LJ Hooker will not accept responsibility or liability for any reliance on the blog information, including but not limited to, the accuracy, currency or completeness of any information or links.