Following the Coronavirus crisis and the subsequent banning of public inspections and auctions, the real estate market has made a switch to a digital environment. Online auctions have been around for a couple of years, but have recently become the norm in selling properties. Thousands of auctions have been scheduled across Australia and are continuing to grow as agents are seeing momentum with buyers.
What are online auctions?
An online auction works more or less the same way as an in-person auction, but is conducted virtually. This means there are no crowds (except for the virtual ‘crowd’), but instead the auctioneer and the agent will be live streaming and auctioning the property as offers come in from prospective buyers, usually in the form of a text or the virtual auction platform.
For agents, online auctions are easy to organise and multiple can be run in a day. For home buyers, online auctions are giving them a new level of convenience and ease of bidding from home for a property. Online auctions take away from the competitive environment that public auctions offer, and could be advantageous to some buyers. It provides the comfort of being able to bid anywhere. Online auctions also work great for sellers, who can follow the interactive bidding easily in real time.
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How do they work?
Online auctions are usually held on specialty platforms. One such as AuctionNow for example, has two ways of conducting an online auction. Damien Cooley, owner of AuctionNow, explains the first method of live-streaming. “The live stream runs and we have bidders registered from remote locations from laptops, iPhones, iPads. Buyers need to be approved before they are registered to bid on the auction.” “The auctioneer can accept or decline the bid. You can communicate with the online bidder through the website and that’s how they can see you.If the property meets the reserve or above, the property sells. If it doesn’t, you can pick the phone up and negotiate with the highest bidder,” Cooley mentions.
The other form of online auctions is a ‘genuine time’ online auction, which works similar to selling an item on Ebay. The auctioneer will oversee the auction and buyers have a start and finish time to get their offers across before the bidding ends. “You can set the minimum bid increments, you can announce the winning bidders and at five minutes to go, if someone bids it extends by another five minutes,” Cooley said. If someone bids and there’s a minute to go in the auction, it will extend for another five minutes so that other buyers have an opportunity to see the new bid and present a new one. Once the highest bidder is successful, a digital exchange of contracts is completed through the platform.
Cooley remarks, “Online auction platforms are safe, fast and secure, not to mention you can watch, bid and exchange on any auction on any device anywhere in the world.”
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The impact of online bidding to the real estate market
Though there has been hesitancy over online auctions, there have been successes whereby properties are being snapped up at high prices. Since the banning of public auctions, Domain figures have revealed that out of 1,248 Mid-april auctions that were scheduled in Melbourne, only 6% moved forward to an online auction. 65% were converted to a private treaty instead. These figures are looking different in Sydney, where 21% of the 1224 scheduled public auctions were moved to an online platform and 36% went to a private sale.
The movement of auctions to online platforms will continue to come onto the market during the next few months says President of REINSW, Leanne Pilkington. Many real estate agents have also seen a large number of listings coming onto the online market as far as September. “Some agents will still be comfortable in the [online] auction process and others will go towards private treaty. But what we all know is that when there is a lot of stock coming onto the market, it’s good for buyers but it’s not good for vendors,” Pilkington says.
This new demand-supply structure is what agents foresee in the future, and is one of the reasons why they are having talks with vendors about how their overall property value is likely to be impacted if the sale is postponed further.
The benefits of online bidding
Online auctions offer benefits from traditional auctions that can guarantee a successful sale for both the buyer and the vendor. Pressure of the bidding environment is reduced, as buyers are bidding in the comfort of their own homes – it becomes easier to make skill deduced decisions as opposed to falling into the pressure and making a mistake. Additionally, buyers can also discuss with their advisors as the auction is happening, something that might not be possible if the auction was happening on-site. Using online bidding platforms can also encourage more interest and prospective buyers due to the ease of accessing the auction.
Through online auctioning, the buyer is presented with a wide variety of properties which they can bid at in any time. The number of options they have are quicker and easier to search through, rather than having to travel and make time for traditional auctions. Online auction platforms can also allow the buyer to select what properties they’re interested in and filter out the ones that are irrelevant.
Online auctions can also highly benefit vendors, attracting more buyers. This can potentially increase the final selling price of the property.
How are real estate agents using this new platform to help their customers buy and sell property?
Since the banning of public auctions, online auction platforms have been teaming up with property agencies to move all auctions across to the web. One such platform, SoldOnline, has ensured a transparent and competitive environment so that property owners and buyers are free from the potential of unwanted external forces. Founder David Scholes mentioned an already existing client, Harcourts Australia, and how SoldOnline were quick to resource Australian agents because of technology and training developed around online auctions. “In just over two weeks of online auctions being mandatory practice for Harcourts franchises, we have seen terrific success for our clients,” Scholes says.
A large part of purchasing a home is getting to walk through the property and imagine yourself living in it. Having a virtual online tour can decrease the emotional feeling that a buyer has towards the house. When video inspections fail to show the buyer the full perspective, buyers are inclined towards agents to represent them on one on one private inspections, to be their ‘eyes and ears’ on site. Real estate agents are now combining online auctions and one on one private inspections to maximise results for both their buyers and sellers. The common walkthrough would be first a virtual inspection for the buyer, then if they’re still interested, then a private inspection with the real estate agent is booked.
When asked how real estate agents will progress with these new technologies, Leanne Pilkington from the Real Estate Institute of New South Wales (REINSW) comments “It would mean that a lot of agents would be comfortable to do online a moving forward, but I still think that there are a lot of agents that prefer the ambience created from a live auction.”
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Will online auctions be staying?
Though traditional auctions are slowly being re-introduced in Sydney and Melbourne, the possibility of online auctions becoming the new normal for Australia on-site auctions is likely. Ray White Victoria chief auctioneer Matt Condon mentioned that although both bidders and real estate agents love on-site auctions, there is going to be a digital component from now on – this may have been considered rare in the past, but moving forward, online bidding will become a component in auctions, whether they be over the internet or on-site.
Online auctions not only allow for added convenience, but it also allows for onlookers to watch a livestream of the auction in process. This means that neighbours wanting to know how much the home had sold for or others that are just interested in seeing how an auction takes place can watch online.
With online auctions becoming the new norm, this could pave way for the overseas market to enter, snapping up properties in Australia virtually. More companies are also investing in making it easier for real estate agents to conduct online auctions through their own websites rather than using a platform. Although on-site auctions will become the norm again in the future, it will be very different to the way real estate will be transacted post-pandemic, especially now with the use of online auctions.
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Words by Joanne Ly
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