Online auctions, just like traditional ones, provide a fast and transparent transaction without the risk of losing the property before completion. They are open 24/7 for you to place bids on available lots. Unlike in-house auctions, they provide a platform from which to bid without any pressure. This is ideal if you’re worried about nerves getting the better of you or if you feel you might get carried away with bidding amid the excitement of a live auction. Online auctions also save time if you have a busy lifestyle and cannot attend a traditional one.
How to begin the process
To start with, you need to register an account on the auction site. Having an account allows you to view properties, watch online auctions, read each property’s legal documentation and place bids. Before bidding, you need to enter your payment details to cover the bidder security deposit.
Once your account is set up, look through the available properties and arrange viewings for any that you’re interested in. You can add a property to your ‘watch’ list, check its bidding history and see the current bid. The remaining time the property is to be advertised for is also shown so you know how long you have left to place a bid. Sellers can usually list their properties for up to 30 days.
The next step
Having viewed the property, you need to do your due diligence before bidding. Instruct a surveyor to check that the property is structurally sound. Check what prices similar properties in the area are selling for. Read through the legal pack and forward a copy to your solicitor for him/her to check. This is important as your solicitor will quickly notice any issues you may not be aware of.
In particular, you need to pay attention to the special conditions of sale. These can include additional fees that the seller has included, arrears on the property that you will become liable for and restrictions on occupation, for example.
It’s essential to check the legal pack before you begin bidding as there is no legal recourse once you have secured the winning bid. At that point, you are obliged to complete on the agreed date as indicated in the auction terms for that property.
Bidding on a property
The deposit/reservation fee
As mentioned earlier, you need to register a payment method (a debit or credit card) for the security deposit. This amount is then held on your account while the bidding takes place. When successfully winning a bid, the security deposit is deducted from your account to secure the sale. If you’ve been unsuccessful, the amount being held is released although please note this can take several days.
Depending on whether the seller has agreed to pay the auction fees or not determines the type of deposit you pay with a successful bid. A normal deposit is usually 10% of the purchase price, leaving you with 90% to pay upon completion. When a seller chooses not to pay any auction fees, these fall to you to pay. In this case, you are required to pay a reservation fee instead of a deposit. A reservation fee is separate from the purchase price so you need to take this into account when calculating your auction finance.
Ways to bid
There are different ways to bid during an online auction. With live online bidding, you can take part in the auction in real time online. You place bids against others in incremental amounts and receive immediate notifications as to whether your latest bid was successful.
When late bids are made just before the countdown finishes, a small bidding extension is placed on the auction clock. This gives all bidders the chance to submit a new bid if they want to. When a bidding silence has passed of 60 seconds, the auction closes. Be careful not to leave your bidding to the last minute as there could be a lag between your server and that of the online auction. If this is the case, your bid may not be registered in time.
As an alternative to placing real-time bids, you can take advantage of online proxy bidding. For this, you set the maximum amount that you’re prepared to buy the property for. The online auction system then places incremental bids on your behalf. The system continues to bid automatically to ensure you are the highest bidder until your maximum amount has been reached. If your maximum bid has been placed and you’re subsequently outbid, you can choose to increase the amount if you want to.
Winning the bid
When the virtual hammer falls, what happens next depends on whether the seller has opted for an unconditional auction or a conditional auction. This is clearly shown on the auction site so that you understand the auction method before you begin bidding.
With an unconditional auction, the exchange of contracts occurs instantly. You normally have 28 days to complete from this point.
A conditional auction provides you with an exclusivity period before you have to exchange contracts. This gives you more time to secure your auction finance, which is ideal when you’re arranging a mortgage. Usually, from the point you win the bid, you have 56 days to complete with a conditional auction.
Is an online auction for you?
Auctions are becoming increasingly popular for buying properties. Online auctions provide the same fast and secure process as traditional auctions but from the comfort of your home. If you have a busy lifestyle, this method saves you a lot of time. If you’re uncomfortable with bidding at an in-house auction, this lets you proceed without any pressure. With your auction finance in place and your due diligence carried out, there’s no reason why you shouldn’t buy a property via an online auction.