It’s no secret that more people are buying more products through online auctions, and real estate is no exception. Large numbers of homes are still sold through traditional methods, but for today’s buyer and seller there’s much to like about online auctions.
You may be familiar with the scene of foreclosed homes being auctioned on the steps of the county courthouse. Or, you may have heard advertising inviting you to an impersonal hotel ballroom where large numbers of properties will be sold. Some buyers prefer this environment; but years of conducting online auctions have taught us that many people prefer to do their buying and selling online. Let’s look at some of the reasons.
“I bought a house in my underwear.” Yes, we actually heard this from someone who bought a property listed on bid4homes.com. For millions of bidders, it’s this ultra-convenience and a feeling of being in control that draws them online. During the auction period, which lasts from days to several weeks, bidding can occur 24 hours a day from any computer with Internet connectivity. That means potential buyers can bid from home, the office, an airport, a restaurant — virtually anywhere and anytime.
Contrast this with standing on the steps of a local courthouse in a sleet storm. Contrast it with the craziness and inconvenience of a jammed hotel ballroom. Then consider the privacy, anonymity, and easy availability of an online auction — for many there’s simply no comparison.
Online auctions present a special opportunity for investors who are looking for undervalued properties or properties that will be on-going income producing assets. Bidders can start by viewing property from all over the country or can look at numerous options in a location of their choosing. They can consider thousands of opportunities instantaneously, many miles away, and quickly identify properties that fit their investment needs.
Sites rich with information let bidders assess the value of a property. Good online auction sites allow bidders to easily get information about comparables and about a home’s proximity to places in the area that matter. Strong online auction sites provide potential bidders with extensive information describing the essentials of any property they are considering. Sites may also have a link built in allowing bidders to communicate with potential sellers. Many homes posted for auction even hold open houses.
Online auctions listed on RealtyTrac, for example, are paired with an estimated market value, detailed comparable sales and a history of liens and loans against the property. You can also use RealtyTrac to search for other properties listed for sale in the area as well as to view a map displaying foreclosure properties in the vicinity.
Oh yes, let’s not forget another aspect of participating in an online auction — exhilaration. As auctions draw to a close, and the pace of bidding picks up, bidders tell us that there’s an element of genuine excitement. On properties auctioned by bid4homes.com, if bidding is still going when the auction is scheduled to end, the auction will move into “Overtime” until there have been 5 minutes without bidding.
Leading online auction sites even make management of settlement available online.
Sellers of real estate in the online auction environment come from many different “places.” They can be like you — owners of a home or a plot of land that needs to be sold. They can be a U.S. government agency trying to sell forfeited property. They can be an REO asset manager from a large bank holding hundreds of pre-foreclosed homes. They can even be a real estate agent with a very hard-to-sell property. But they all have one thing in common: they want to move their property as quickly as possible at the highest price possible.
There are many advantages to an online auction, but sellers find one aspect particularly appealing. Online auctions happen relatively quickly. A “preview” of the property will be available online followed by the bidding period. Total elapsed time for both preview and bidding is three to four weeks. The old saying, “time is money,” rings particularly true when an owner absolutely has to sell a property.
On sites like bid4homes.com, winning bids are legally binding, and there are no contingencies!
Here’s where the appeal gets even stronger. Unlike on-the-ground auctions, online auction companies charge only a nominal amount to list a property. The seller pays a commission only when the property sells. During times marked by an overabundance of supply and an under- abundance of buyers, this is comforting to sellers. An online auction is a no-risk method to move property quickly.
Many sellers think they can attract far more bidders online. After all, auctions can be accessed by anyone in the world. For example, Bid4Homes has over 400,000 subscribers worldwide who have registered to bid on real estate in online auctions. And Bid4Homes properties listed on the RealtyTrac site enjoy exposure to RealtyTrac’s 3 million unique monthly visitors.
If the property is priced right, there should be bids — each one higher than the last. Quite different from a traditional sale through an agent where the price is set high and offers usually start below the asking amount.
If the property doesn’t sell, the owner will learn a lot about how to set the property’s reserve price. This will help the seller adjust pricing accordingly, whether they list the property with an agent or try another online auction. Think of the auction as a pricing “beta test”.
There’s also another appeal to this “beta test.” Sellers with large pools of homes can place a small number in auction and judge the effectiveness of online auctions relatively quickly.
The managers of good online auction sites often work with sellers to move property. Say the highest bid received is just under the reserve price, but the customer service managers for the auction site know how badly the seller wants to move the property. At the conclusion of the auction, a customer service manager quickly confers with the seller and then contacts the high bidder and negotiates on behalf of seller. Often this final personal touch is able to satisfy both the seller and the buyer.
Above all, both buyers and sellers must remember that the company holding the auction does not own the property. They simply provide the marketplace to bring sellers together with as many qualified buyers as possible. Their interest is to satisfy both parties.
With convenience, speed, and the power of the Internet, it’s easy to see why hundreds of thousands of real estate buyers, and many sellers, say online auctions bring unmatchable value.
Bid4Homes is an online auction site for real estate. Since 1999, more than 50,000 properties have been sold through auctions on Bid4Homes and its sister site Bid4Assets.