During the first wave of the COVID-19 pandemic, real estate auctions were banned across the country. Real estate agents are a resourceful bunch, though, and quickly pivoted to an online environment. In fact, many found that online auctions and virtual inspections were so successful that they’ve kept them going even as the country has opened back up.
So, whether you’re in a part of the country that is still in lockdown or one that is not, you might well come across sellers who have chosen the online auction path. As a buyer, what do you need to know?
How does an online auction work?
There are two types of online auction. One works via live-stream. The other is a ‘genuine time online auction’. In both cases, the auctioneer and agent are in one room. Bidders log in from anywhere, including the comfort of their sofa. Sellers can also log in and follow the action in real time.
Bidders need to register ahead of time. It’s a good idea to register a day or so beforehand so you can familiarise yourself with the platform. If you intend to bid, you will usually need to pay a deposit to the agency as an indication that you’re genuinely interested and qualified to bid. The deposit will be returned if you’re unsuccessful.
You can also just watch an online auction if you prefer, by creating a profile on the app your agent is using. It’s good practice for the real thing.
Once the auction gets going, you can make bids in the platform on a computer, or via app on a mobile phone. If you get outbid by someone else, you will receive a notification via text or email. You can usually set preferences up when you register.
The auctioneer will declare each bid as it is accepted, and it proceeds like an in-person auction. If the reserve isn’t reached and the property is passed in, the agent might schedule a phone or Zoom meeting with the highest bidder to try and negotiate an outcome.
What strategies can you use to win the auction?
Take it steady, but not too slow. Online auctions run at a slower pace than a traditional auction does. The sense of urgency to get your bid out there isn’t present, offering you more breathing time to think about your strategy.
However, try and avoid the temptation to pause the process so you can check with friends or family. Other bidders can see this behaviour and might realise you’re uncertain. Pay attention to other bids coming in so that you know where you stand, and place your next bid once you’ve received notification of another one coming in.
As with in-person auctions, consider odd numbers. Most people have a round number in mind as their top limit, such as $600,000. If you can go to $606,000 you can out bid them for a mere 1% more.
Have finance approval before you start. This is always best practice, as it gives you the confidence to bid knowing that you can raise the funds. Your confidence will come across to other bidders and help calm your nerves.
Whether you’re bidding on-line or in-person, some caveats always apply. An offer accepted at auction has no cooling-off period, so make sure that you’ve conducted your due diligence. That means getting a building and pest inspection, ensuring that you have or can raise the funds and making any other enquiries you feel appropriate.
Online auctions mean that you can bid from anywhere you want. Get comfortable with the technology and get bidding!