4 tips for bidding in an online real estate auction
During COVID-19 restrictions, real estate agents and auctioneers were prevented from holding in-person auctions. Luckily, we were able to pivot online auctions utilising leading technologies.
How do online auctions work?
“There are a couple of different ways that agents can run online auctions. You can either use a dedicated platform or utilise a live streaming option like Zoom,” explains Mark Larmer, sales agent for Independent Property Group. “Both are run in real-time, but they have different advantages.”
1. Dedicated auction platforms
Auction platforms, such as Auction Now, are specific software platforms. Bidders need to register ahead of time so that their identity can be verified. Sellers, and observers, can also log in and follow the action in real-time.
Once the auction commences, bidders make bids within the platform via computer or app. The auctioneer declares each bid as it is accepted. If you’re outbid, you will receive immediate notification. You can then decide whether to increase your bid.
“We prefer using an online platform because we find it makes for a smoother process,” Mark says. “However, it does cut down on the interaction between auctioneer and bidder. In a live scenario, auctioneers can keep an eye out for body language, note who’s interested, and ask a bidder if they want to carry on. Online, the buyer takes control. They ‘talk’ to the auctioneer through their bids, but they can’t hold an actual conversation.”
In this scenario, the auctioneer utilises a live stream mechanism like Zoom. You still need to register as a bidder ahead of time, or you can observe.
“With Zoom auctions, there is more communication between agent and buyer,” explains Mark. “Everyone is on mute as a default, but the buyers are in constant communication with the agent, and the agent can take over the bidding on their behalf.”
Mark’s top tips for success
1. Watch some auctions before jumping in
Both auction styles allow people to watch even if they’re not intending to bid. Mark strongly recommends watching a few auctions before you’re ready to try your hand at buying.
“It’s the best way to get familiar with the software and also to get a feel for how things are going to run. On the day, the action might move a lot faster than you’d realised. If you’ve watched a few beforehand, you’ll be expecting the pace.”
If the agent is using a dedicated platform, there will be a button to click that lets you follow the auction. If it’s live-stream, you can just watch on mute.
2. Register well ahead of time
If you do intend to bid, be aware that you’ll need to register as a bidder and be approved.
“When you are ready to bid, make sure you register at least a day before the auction is scheduled. The registration process is quite involved. You need to upload your identity documents and then the agent needs to view those and approve them. If you leave it until the last second, you might discover that you don’t have everything on hand, and by then it’s too late. Definitely don’t call the agent 10 minutes before the auction and hope for the best!"
3. Be bold with your bidding
In the online environment, because auctioneers can’t talk to the buyers, they often slow things down and give buyers a long time to decide if they want to increase their bid. “I’ve seen auctions run for up to 45 minutes when they could have been concluded in 15,” says Mark.
If you’re confident about your budget, you can often gain an advantage by being decisive. “I always tell clients, it’s okay to be a bit aggressive. With online auctions, there’s a small delay between bids. If someone else is thinking about whether to increase their bid to the next increment, and you want the place, jump in! Now you’ve captured that bid, and if they want to stay in the game they have to go to the next increment.”
He also warns against dropping down to small bids just because others are. “Buyers have a tendency to follow a pattern. If you’re competing against someone else, and they reduce their bid increments, you might instinctively want to do the same. So let’s say the house is still $10,000 under your top price, and the other buyer has started bidding in $1,000 increments. The temptation is to also go up to $1,000 because if they’re about to reach their cap, you don’t want to pay more than you have to. However, a larger bid can often seal the deal. If it’s within budget, bid $5,000 instead. Best case scenario, you send a signal that there’s plenty more money where that came from, and the other bidder drops out. Worst case scenario, you’ve sped up the pace and wasted less time."
4. Go into the auction as prepared as possible
Don’t forget, properties bought at auction have no cooling-off period or ‘subject to' conditions. The contract is binding when signed, and you’ll need to provide a 10% deposit.
Therefore, it’s important that you know what you’re buying and that you have the funds to settle.
Talk to a broker or your lender and organise finance pre-approval. The property market is very active at the moment, so approvals can take a little longer: the earlier you apply, the better.
If possible under lockdown rules, consider getting a building and pest inspection ahead of time as well. That way, you’ll cut down on any nasty surprises.
“It’s always a good idea to factor a few surprises into the price,” says Mark. “That way, if you find out after settlement that the property needs a little more work than you realised, you’ll be able to take care of it.”
Once you’re familiar with online auctions, you’ll quickly see their advantages. No more standing out on a crowded street in the rain: now you can buy your next house from the comfort of your couch. Happy bidding!
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