Online property auctions have been around for some time, but the Covid-19 pandemic has made them more popular because there’s no need for an auctioneer and no need for an auction room! However, it’s important to bear in mind that online property auctions are very different to conventional, physical auctions in some ways. Here we’ll look at how to buy and sell property at an online auction.
How to sell at an online property auction
As a seller, the advantages of using an online auction include that it can be quicker, as you won’t have to wait for the next auction sale date. It may also work out cheaper in some cases as the buyer may be required to pay the majority of the costs.
To sell your property successfully online you’ll first of all need to choose your online auction carefully. Be sure to choose one which already sells a good number of properties online, and who will advertise and promote your property extensively. This is essential if you are to attract as many bidders as possible and obtain the best price.
Here are some online auction houses to consider:
I Am Sold Online Property Auctions
With an online auction it’s especially important to set a competitive guide price. Because your property isn’t sold in an auction room as such you won’t have any ‘spur of the moment’ bidders. You need to set a competitive guide price to attract bidders from the outset. Talk to your chosen online auction houses about what is the right guide price to set, alongside a suitable reserve price. (Reserve price is the minimum price your property can sell for but unlike guide price this isn’t revealed to bidders.)
With an online auction it’s also very important that the description of your property is good and that you have plenty of good quality photos. This should help encourage more bidders to bid, including those who don’t view the property, and hopefully result in a better price. You might like to consider offering a video tour or even live viewings too.
Sellers should bear in mind that online auctions may be what are known as conditional auctions. When a buyer buys your property they have (in most cases) 28 days before exchanging contracts and then a further 28 days before the sale completes. They aren’t the same as conventional physical auctions (which are unconditional auctions) where the sale is final at the fall of the hammer.
How to buy at an online property auction
You can buy property at an online auction either for your own use or as a property investor. However, be aware that there is more than one type of online property auction. Some conventional auctions allow live online bidding, as well as the usual in-room and telephone bidding. However, fully online property auctions are held purely online and you can only make bids online.
In some ways, buying property at an online auction is easier since you can bid on lots all around the country without ever leaving your home or office. Some people feel that there is more scope to get a property bargain than with a traditional auction because it is easier for bidders to control their bidding online and less likely that they will overbid. There may also be less fierce or competitive bidding with an online sale since it is conducted over days rather than minutes.
One of the advantages of an online auction is that you can easily buy without viewing the property if you want to. You need to ask yourself whether this is really a good idea though. Either way, be sure to read the seller’s pack or legal pack carefully and take any expert advice you may need before you bid.
Buying from an online property auction is generally more expensive than a traditional auction in terms of fees. You may have to pay a reservation fee, buyer’s commission, and some of the seller’s expenses. Although this varies from auction to auction this is likely to add 5% or more to the purchase price, so be sure to allow for this when deciding your bid for a property.
As with any property auction, decide your maximum bid before bidding and stick to it!
How to bid at an online property auction. You can’t normally just turn up and bid at an online auction. You’ll need to register in advance of the starting date. You’ll normally need to give your credit or debit card details. This will be charged with the relevant fees and/or a deposit if you are the winning bidder. Note that these fees are normally non-refundable.
Online auctions run for a fixed period of time – normally 30 days although it can be less. You can make an opening bid at the start of the auction, during it, or wait until near the end of the auction if you prefer. As well as watching the bidding ‘live’ online you can usually opt to receive notifications when the bidding reaches a certain level, or if you are outbid, so you can decide what to do next.
Some online auctions have what is called a proxy bidding facility. With proxy bidding you set your maximum bid for a lot and the online auction system will automatically bid in increments (typically £1,000) in competition with other bidders until your maximum bid is reached.
One of the benefits of online auctions, so far as buyers are concerned, is that there is more time when you are the winning bidder. You’ll usually have 28 days to exchange contracts and then a further 28 days to complete the sale compared to physical auctions where the sale usually goes through in 28 days overall. This means that you’ll have time to arrange a mortgage if you need it.
Will online property auctions ever completely replace physical auctions? Although the technology is now available to do this, it’s doubtful whether online auctions will totally replace physical auctions in the medium term at least. Physical auctions have a buzz which many buyers (and auctioneers) like and which can also benefit sellers. Nevertheless if you are looking to buy or sell a property at auction it is well worth considering if an online property auction could work for you.
