How to Buy a Property at an Online Auction
In a brave new post-COVID world, online auctions have been growing in popularity - and out of necessity - with no signs of slowing down. So it makes sense that this form of sale is likely to remain popular well into the future.
And although it offers convenience, flexibility and easy participation from potential buyers no matter their location, does it change how auctions should be approached?
Do even experienced bidders need to develop new skills to win in the new digital age?
The answer is yes - and no.
Fundamentally, an auction is an auction, featuring a vendor, a bidding ‘war’ and a whole lot of nervous excitement, so some cross-over skills are a given.
But taking things online has its own set of challenges - and benefits - that buyers need to understand so they can take full advantage of the situation.
With house hunting and market research already heavily skewed to online, virtual auctions seem a logical progression to ensure the entire transaction - from house hunting to settlement - is smooth, transparent and enjoyable for everyone involved.
So is it time to take a leap of faith into the digital space? We think so.
Here are 4 tips to help snap up your dream home… virtually!
1. Do Your Research
As with any property purchase, knowing your market is crucial.
Without it, you could find yourself getting caught up in the excitement of the auction and paying too much - especially online where it can sometimes feel like you’re playing a game rather than conducting a real life transaction.
Make sure you’re across what’s been happening in the area you’re buying in, check out recent sales and clearance rates, and don’t forget to look at the auctions that have been passed in, as they can tell you a lot about what people are prepared to pay (or not).
Also keep in mind that every bidder - virtual or not - has done their own research and has a rough idea what the property is worth.
So to give yourself the best shot at winning, make sure you’re offering genuine bids that accurately reflect what your research has uncovered (too low and you’ll just get knocked out anyway) - and stop bidding the minute it becomes unreasonable.
And finally, ensure you’ve conducted an inspection of the home. If location - and restrictions - allow, a private, in-person inspection is still best, but if this isn’t possible, set up a virtual inspection with the selling agent so you know exactly what you’re buying.
2. Prepare Finance
Understanding a property’s worth is super important. But the biggest question is - can you afford it?
Having your finances in order before you place that first bid will help you stay in control.
Whether in-person or online, auctions are literally designed to whip up a serious case of F.O.M.O. (fear of missing out) and drive prices up, so it’s crucial to keep your wits about you and not let emotion get in the way.
Making bids based on what you think you can afford, rather than what you know you can afford can be a disaster waiting to happen. Especially since auctions, virtual or not, aren’t subject to a cooling-off period - meaning you could get stuck with a home you can’t pay for, with no legal leg to stand on.
Unless you’re lucky enough to have a whole lot of free cash floating around, crunch the numbers with your bank or broker well ahead of time and get pre-approved for a set amount so you know your bids are within budget and things don’t get out of hand.
3. Online Software & Features
Even though it may seem daunting, participating in an online auction has some real advantages for buyers.
For starters, the software used means you’ll have access to a range of information normally unavailable to bidders at traditional auctions.
Things like knowing how many other verified bidders there are (to gauge competition), being able to view information about the sales history of the home, plus avoiding the usual frenzy of an onsite auction - with virtual auctions, you get a bit of time to breathe between bids - letting you to play the game whilst staying in control.
Depending on the platform used, you can sometimes even negotiate price if the reserve isn’t met.
Plus, online technology means you can get all your ducks in a row well before the auction begins. This makes the lead up (and aftermath) much more streamlined and allows you to focus on what matters most - the bidding.
Unless it’s set up as a simple live-stream, online software like RESO enables you to register all your details, place (and view) bids in real time, pay deposits and sign all your contracts and ‘paperwork’ in one place. So simple!
And even better - you can gain a real edge by registering as a spectator to other auctions before yours comes up, making sure you’ll be ready and waiting to bid like a pro when the time comes!
4. Price Limits & Strategy
While online auctions can seem pretty straightforward, it’s important to remember that - like with any auction - it can still be a gamble.
There are no cooling-off periods, and you run the risk of getting caught up in the excitement of the sale.
But having a solid strategy in place means you’ll go into the process prepared, confident to face whatever comes your way.
The best place to start is by setting your limit.
Work out what you can afford, and be prepared to walk away if the price goes over this. Even if it seems like your dream home, it’s important to keep emotion out of it.
Not only will you avoid paying too much, you’ll also dodge some serious buyer’s remorse when the adrenaline inevitably wears off.
Plus, having a limit can be a great strategy in itself.
If you know what you’re prepared to pay, you can go in strong with your first offer - and take your time with the rest.
Waiting for the first few bids to roll in before making a solid one of your own can be a smart move, giving you time to work out what the reserve price really is. You may even find it knocks a few low-ball bargain hunters out of the game instantly.
And one final trick unique to virtual auctions - they allow you precious time to stop and think before placing your next bid.
So don’t feel pressured to haphazardly throw in a large bid quickly just to outprice the competition.
And when you do put your bid in, try offering them up in uneven numbers. Although you may think an extra $10K might be the best move, a tiny $1,000 could actually make all the difference!
Just like any traditional auction, bidding for a property online can be an exciting (and sometimes terrifying!) experience.
And even though there are many similarities, going digital adds a new layer of convenience into what has often been a very time consuming - sometimes limiting - process. And it looks like it’s here to stay.
So if your dream home is about to go under the (virtual) hammer, don’t fret. Just remember the fundamentals, do your homework, plan your strategy… and dive straight in!
*All advice given here is general in nature. To ensure accuracy, we strongly recommend seeking independent, professional and legal advice - tailored to your specific situation - before making any decisions.