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In light of COVID-19, online auctions are becoming the norm. Here’s what you should know about the process.
In more ways than one, the COVID-19 pandemic has had a significant impact on how Aussies do property investing. Particularly, the auction market is facing unprecedented times.
When the pandemic began, the government announced a ban on public auctions and open houses/tours as part of its stringent measures to control the spread of the COVID-19 pandemic.
While this has led to some keeping their properties from going under the hammer and some vendors opting out to sell by private treaty, it also had a positive impact: innovation and adaptability.
To circumvent the restrictions of holding face-to-face auctions, a growing number of real estate agents switched to online auctions to adjust to the changing property market landscape.
While online auctions and remote bidding are not entirely new concepts, most agents and vendors are now using online auction platforms when buying and selling properties online.
As various states and regions continue to move in and out of lockdown, online auction platforms are providing a safe, stable and reliable place to do transactions, according to Grays Australia, the online retail and auction company.
“Buyers continue to seek out properties for occupation or investment, and [an online] marketplace helps make this easy for local buyers or those across state borders, even when snap lockdowns occur,” Grays said.
Here is our basic guide to help you navigate the online auction process.
How do online auctions work?
Basically, online real estate auctions work the same way as live auctions but are conducted online.
In an online setup, the auctioneer and the agent are in a room (usually an office setting or the property itself) equipped with a camera and a couple of computers to live-stream or digitally broadcast the auction.
When the property is listed for sale, the listing will appear on the online auction platform that will host the event. To participate in the bidding process, buyers can join by creating an account on the relevant platform. In Australia, some of the most popular online platforms used include Gavl or Auction Now.
If you are planning to bid, you will usually be required to submit proof of identification and credit card details. Usually, your account will need to be approved by the property’s listing agent.
Upon approval, take note that some auctions website or platforms will put a hold on the bidder’s credit card, which can range between $1,500 and $2,500. This is to ensure bidding on a property is open to genuine buyers only.
There are also auctions that are hosted on traditional video conferencing apps, such as Zoom and Google Meet. For these online auctions, prospective buyers are usually given an invite by the listing agent.
The terms and conditions to participate in these types of online auctions are usually set by the auctioneer and the agent.
How do I make a bid?
The process of actually bidding online is relatively simple. The bidding process is exactly the same, with the human face-to-face element removed.
You can watch an online auction and bid on a property using either your computer or mobile phone, and you can bid directly on the platform or app in use.
Just like in the traditional auction process, the auctioneer is the orchestrator. He/she can provide suggestions on the bid increments to rise by, can accept or turn down bids, and ultimately control the flow and the result of the auction.
To make a bid, your options include un-muting yourself on the platform and vocalising your bid, using the chat function to submit a bid (submit to all for transparency purposes), or you can put your hand up if the auctioneer nominates a raise (make sure that your video sharing function is on!).
Make sure to familiarise yourself with the platform or the website’s bidding functions so you won’t miss out on bidding.
During the bidding process, you can also expect the auctioneer to leave the session to consult with the vendor and refer the bid from time to time.
The auction closes when the highest bid is accepted and the property is deemed as sold. For some platforms, when the property is sold, the session automatically ends and a follow-up or a notification will be sent to the winning bidder.
How contracts are handled after an auction really depends on the online platform that the listing agent chooses to use. If you have the winning bid, you are required by some platforms to sign the Contract of Sale in the app or online. In both Gavl and Auction Now, the winning bidder can sign contracts online or in the app. Gavl allows you to transfer deposits directly into the agent's trust account.
For video conferencing auctions, non-winning bidders may be politely requested to leave the virtual room so that the highest bidder and the agent can usually continue their conversation and finalise the deal.
Can I observe an online auction?
If you’re a bystander who just wants to observe how an online auction happens and you’re not a prospective buyer, you can usually still watch auctions on platforms or apps, as long as you have a registered profile.
Some real estate agents or agencies hosting online auctions will request participants who don’t intend to bid to turn off their video or to mute their microphones throughout the auction to avoid unnecessary distractions.
What are the advantages of online auctions?
Online auctions provide buyers the safety and comfort of being able to purchase or sell a property from virtually anywhere as long as they have access to the internet.
Because buyers are bidding online and usually from the comfort of their own home, it removes the pressure usually seen in person-to-person auctions. This allows them to stay level-headed and make better decisions. Additionally, buyers can consult with advisers who, in the traditional setting, might not have been able to accompany them during on-site auctions.
The vetting process for prospective buyers also helps to sort out the genuine buyers from those who will not take the bidding process seriously.
For sellers, they will be able to log in to the virtual auction platform and they can track the interactive bidding occurring in real-time, which can mean not missing out on anything that happens. Another upside is that the fear of missing out is heightened in an online setting, as bidders cannot see and gauge other prospective buyers, making them more tempted to get ahead of the competition by bidding higher and more aggressively. This will help achieve a higher sale price for your property.
Are online auctions as successful as traditional in-person auctions?
Recent data indicates that sellers and buyers are transitioning smoothly to online auctions, with LJ Hooker Group’s head of sales, Troy Malcolm describing the online auction process now made “as simple as buying groceries online”.
“The transition to online auctions has been smoother than previous lockdowns, with increased buyer confidence and easy-to-use technology,” the sales head highlighted.
While online auctions still lack the emotions of a live auction, Mr Malcolm noted that online auction platforms made up for it with a straightforward and “extremely user-friendly” process that anyone who has used an e-commerce site can definitely navigate.
He said that the success of online auctions came down to two main components: communication and accessibility.
“Agents are being more involved with the buyers, checking in with them two or three times a week to make sure they have all the information they need to be able to make a bid,” Mr Malcolm explained.
“Auctioneers are also speaking to buyers and coaching them through the process, while the platforms have also helped out a lot.”
Looking ahead, the majority of property experts expect online auctions to remain popular as technology continues to evolve — even in the post-COVID market.