An Introduction to Buying and Selling Houses through Online Property Auctions
Property auctions offer speed and certainty when buying and selling property. While conventional auctions held in an auction room have been around for many years online property auctions are a relatively new arrival. In this report, we will look at the pros and cons and how to buy and sell property through an online property auction.
Selling through Online Property Auctions: The Pros and Cons
A big advantage of selling at an online property auction is that putting your property up for sale can be much faster. You don’t need to wait for the next physical auction sale which could be weeks away. You can put your property up for sale at an online property auction today if you want to.
You can also attract potential buyers from a much wider area – nationally and even internationally. Attracting more bidders may mean you can achieve a better sales price.
As with physical auctions, a sale at an online auction is effectively considered final, so there is less chance of a buyer withdrawing, reducing their offer (known as gazundering) or a sale falling through.
Now to the disadvantages of selling at an online property auction: One disadvantage is that you may not benefit from competitive bidding in the auction room on the day – a situation where bidders compete fiercely with each other to secure the lot. Also, as online property auctions are relatively new you may find that fewer buyers find out about or bid on your property. That means you may not necessarily achieve the best sales price.
Buyers and sellers considering online property auctions should note the difference between physical auctions that simply allow live online bidding on lots as well as bidding in person or by proxy and online property auctions which are held wholly online.
How to Sell Property Via an Online Auction
Start by locating online property auctions and choosing one you feel may be most suitable for selling your property online. Discuss your proposed property sale with the online auctioneer. In particular, ask them for a valuation, ie. an indication of the price they feel your property will achieve at an online property auction.
Online auction houses will also be able to suggest a guide price and a reserve price. The guide price is what the auction feels the property might achieve and is disclosed to buyers. The reserve price is the minimum your property can be sold for. The reserve price is not disclosed to potential buyers.
Be sure to ask for details of the fees the particular online auction house will charge a vendor for entering a property into the online auction and for selling it. Depending on the particular auction there may be an entry fee, buyer’s pack fee or seller’s commission to pay. Often, however, with online auctions, the buyer is required to meet most of the costs.
If you decide to enter your property into an online auction your lot will normally be listed on the online auction site for a specified period, which is often 30 days but can be less. At the end of the listing period, assuming the reserve price is reached, the virtual gavel falls and the property is considered sold.
Something buyers and sellers should bear in mind, is that unlike physical auctions which are unconditional auctions online property auctions tend to be conditional auctions. This is sometimes known as the modern method of auction. With an unconditional auction legal exchange of contracts occurs at the fall of the gavel with automatic completion typically after 28 days. With a conditional auction the buyer is normally granted what is known as an exclusivity period, usually, 28 days, to progress things and then a further 28 days to exchange contracts and complete the sale.
If you are interested in selling your house through an online auction, we can help. Property Investments UK has partnered with an auction company, who can oragnise the whole sales process - including access to to a bespoke group of buyers - giving you 100% market value for your property, in just 28 days.
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Buying through Online Property Auctions: The Pros and Cons
There are a number of advantages of buying at online property auctions. It can be faster – you don’t have to wait for the next auction room sale date to come around. You don’t have to visit the auction in person. This saves time and expense and means you can bid on a property, to buy, anywhere in the country.
Bidding at an online property auction is easier too, in some ways. It is less intimidating for those who may be uncomfortable in an auction room atmosphere. You can also bid from anywhere, anytime 24/7.
Online auctions are more transparent. It is easier to follow the progress of the bidding on lots compared to a fast-moving auction room. Online property auctions are in some ways safer for the buyer because you are less likely to be drawn into a bidding war and end up paying more than you anticipated.
A little known aspect to consider is that you will probably have longer to complete the transaction. Online property auctions sometimes call for completion within 56 days rather than the 28 days that is common for physical auctions. This gives you more time to, for example, arrange your finance. It means that buying auction property with a mortgage is more practical with online auctions.
One potential disadvantage of buying at online property auctions is that it may be more expensive than buying from either a conventional auction or from an estate agent. Buyers will probably have to pay some or all of a reservation fee, buyer’s commission and part of the seller’s costs including the cost of a legal pack or buyer’s pack. VAT may be charged on top and Stamp Duty could also be applicable to these fees. These costs can vary from auction to auction so be sure to check what they are and factor them into your overall budget.
It is important to remember that if your bid at an online property auction is successful then, because of the way conditional auctions work, although you are not legally committed to the purchase you will probably lose your deposit or reservation fee if you pull out.
Those who plan to buy property at an online property auction should bear in mind that property prices are not necessarily any cheaper than buying at a conventional auction. However, these auctions may attract vendors who want a quick sale so there is the possibility of finding a property bargain.
How to Buy Property Via an Online Auction
Start by searching for lots you are interested in bidding on using online property auction sites.
You will normally need to pre-register before you can bid on a lot. This may include payment of a reservation fee or deposit in advance. You may also need to undergo ID and anti-money laundering checks.
View the property if you wish to, assuming viewing in person is available. Obtain the buyer’s pack and take any expert advice you feel you need.
Next decide your maximum bid for the property, taking into account the costs of buying.
Once the online property auction opens make your bids online, subject to any minimum bid. With most online auctions you can make an opening bid and opt to receive notifications if you are outbid. You can then decide if you wish to increase your bid or not.
Although online auctions offer more time for the sale to complete than conventional auctions it is still a good idea to look into loan or mortgage finance if you need it, and have a solicitor or conveyancer in place, before bidding. This way you will be ready to move quickly if you win the online auction.