The Ins and Outs of an Online Real Estate Auction
Auctions are not new to the real estate industry, however recent years have started to see a shift of them moving from in person auctions to the Internet. Online real estate auctions are growing in popularity. The constant advancement of technology will only help this trend to continue to grow.
The Online Real Estate Auction Difference
Most real estate transactions involve at least some back and forth negotiating between the buyer and the seller. Auctions speed up the process by eliminating the negotiations. The sellers are able to set the terms that they want from the start and then the potential buyers can choose how much they want to bid based on the terms.
There are two types of real estate auctions: absolute basis and reserve or minimum bid. An absolute auction means that the bidder that places the highest bid will be able to purchase the property at the end of the real estate auction. If an auction has a reserve or minimum bid it means that the seller will only sell the property if the highest bidder has met the lowest amount that the seller is willing to sell for.
The entire process can be easier for the seller because the house can be sold “as is,” which means no appraisals, no inspections and a much faster closing.
How to Be Successful at an Online Real Estate Auction
Since there are so many steps removed from the buying process during an online real estate auction it is important to do your work ahead of time. Even with an online auction it is important whenever possible to drive by the property. If you are able to attend a showing or open house to see the house it will benefit you greatly before placing a bid; at the very least drive by to see the exterior of the home, the property, and the neighborhood.
Do not allow yourself to get carried away during the auction process. Remind yourself that you are not “winning” the real estate auction; you are “purchasing” a house. Before the auction begins set your dollar limit and do not allow yourself to go over it, no matter how exciting the process seems. Emotional purchases usually lead to buyers’ remorse.
Bidders need to have their financing lined up before the auction begins. If you are the highest bidder you are expected to have the means to pay for the full price of you bid, plus any fees. During traditional sales you can place an offer contingent on financing, but that is not the case in the auction world. Do not bid unless you know that your financing is squared away and ready.
You Can Buy Before the Auction Begins
Pre-auction bids allow you to place a bid on the seller’s terms before the auction begins. If the seller is happy with the bid they can accept it without having the house go to the full auction. This is a good strategy if you do not want to risk losing the house and you are willing to give your top dollar for the property.
You Can Buy After the Auction Ends
If a property doesn’t meet the reserve during an auction and you are still interested in purchasing it you can attempt to make post-auction bid. When the seller or lender knows that the minimum was not reached during the auction they may be willing to sell at a lower price to get the property off their bottom line.
With the increasing use of the Internet for our daily activities we will continue to see the growth of online real estate auctions. Understanding the alternative ways that you can bid during the process might just help you get the winning bid in before others have a chance or after they have lost the opportunity to bid. Always do your due diligence before the real estate auction begins so you can bid with confidence.