In this article, guest contributor, Lyle Solomon, goes over the basics of buying and selling property during an online auction.
Who buys and sells online
People who wish to acquire or sell real estate as fast and profitably as possible are the target market for online auctions. Sellers are frequently property owners, agents, or asset managers, and buyers might be anyone interested in the property.
Online real estate auctions are a lucrative option for those who want to make quick money without a hassle.
Houses are sold at auctions for various reasons, and the sellers might be:
- a private party;
- a real estate professional;
- financial institutions;
- local governments; or
- even the federal government.
The market is now accessible to a broader audience thanks to online auctions. As a result, sellers can frequently demand higher prices for auctioned properties. Then, it’s up to them how they want to use the money. They can use it to invest in other properties or pare down debt. It’s their choice.
What is an online property auction?
As the name implies, this is the place to post properties online, sold at various price points. Like a live auction, the auction will either take place in real-time or over several days or weeks.
Steps to take during online real estate auctions
Property owners can both buy and sell properties at online auction sites. Consider the following steps when choosing how to sell a property at an online auction.
- Find a website for house auctions online.
Naturally, your first step is to look for online real estate auction sites. You can browse several websites that provide online auctions to find out what kinds of real estate properties are being sold, how much they are worth, and the criteria for the auction.
Some of the top online auction websites are:
- Check out the types of houses you can list for sale.
A real estate sale online auction can be used to sell various properties, including:
Short sale properties
A homeowner who can no longer pay their mortgage responsibilities starts the transaction. They sell the property at a significant discount to its fair market value to consolidate credit cards or pay off a mortgage and other debts.
A foreclosure occurs when a borrower defaults on their mortgage payments, giving the lender ownership of the property so they can sell it to recoup the amount in full.
Real estate owned (REO) homes
The sale of a foreclosure occasionally falls through. The bank consequently acquires ownership of the property. Only banks’ websites and online auctions offer such bargains. Due to the typical significant reduction in home prices, REO properties frequently draw real estate investors.
Owners of stores, malls, and other enterprises seeking investors are the ones who start these deals. These options also help those new to real estate investing by enabling them to diversify their portfolios.
This group comprises homes owned by business owners who have spent money improving the property and getting it ready for sale. The majority of buyers of such real estate are first-time homebuyers.
- Create an account and list your property
Create an account on the auction website and list your property. Define the duration of bids, and describe the property’s features (a 3-D visit function is a great addition). It is a stringent requirement for sellers to publish recent photographs and videos in addition to an accurate description.
Keep an eye on the notes and disclaimers relating to the property, where you can describe legal rights, obligations, property details, and payment modes.
Complete the Online Real Estate Auction Bidding Procedure
In this type of auction, there is no commitment to a particular venue because everything is conducted online. The seller has set a time limit for the event. The bidding procedure continues until either the specified time has passed or just one bidder is left.
You can limit the maximum bid price and admit determined bidders to the event by requiring buyers to deposit a bank-held 5%–10% deposit before they can begin bidding.
Check if the auction item’s web page has comprehensive statistics so buyers and sellers can access updated information on how many people visited the page, the average bid and the highest bid.
You can also put these things into practice to make the procedure even more convenient and welcoming for auction participants:
- a countdown clock, excellent for raising a bid with a timer set for two to three minutes — the last bidder wins the auction if it is not presented in time.
- a specialized proxy software, which enables users to place automatic bids — in this manner, a willing user can continue placing the highest bid without actively participating in the auction; and
- a “Buy It Now” option, which enables users (confident of the price at which they will sell their property) to choose a price so that purchasers can close the deal immediately.
Finalize the Bid
A seller, and a buyer eventually connect and sign a contract after enduring the arduous process of bidding in the auction. It outlines the prerequisites for the agreement to complete successfully and the deadline for participants to fulfill their financial or other responsibilities before the deal is concluded. The online auction platform places the implementation of the legal portion of the transaction under the control of an official office.
The contract needs to provide a specific date for the bid closing, which may take several weeks to 60 days. The official office finally conducts the necessary preparations to transfer the property ownership to the successful bidder formally.
The Final Note
On average, publishing one lot costs between $150 and $200. But reputable companies figure out the fee as a percentage of how much the property is worth. This fee is never refundable, no matter how the bidding goes or how well the deal works.
Moreover, the contract should spell out the tax that the seller needs to pay when the buyer takes over ownership of the property. The payment depends on the laws in the area. For example, when a deal like this is made in California, $1.10 will be added to the final price for every $1,000.
Editor’s note — When assisting a buyer to purchase homes at online auction, secure your fee with an Exclusive Right-to-Buy Listing Agreement. Under a buyer’s listing, a prospective buyer employs a broker to locate suitable properties of the type the buyer wishes to purchase. [See RPI Form 103]