Recently, the auction of resort property in Muskoka made headlines. It was notable because of the low minimum bids, transparent nature and because the auctions were being held online. These particular auctions were for fractional property, but for many buyers, an online auction is an excellent way to purchase property. Online auctions of single and multiple properties have developed and offer many advantages over a live auction.
So what are the benefits of online auctions of real estate for the consumer?
It's so much more convenient. You can bid on a property in Ontario while on a train travelling through Europe, and pay online as well. Live auctions have very limited durations and you have to be on the site of the auction. Online auctions generally last several days, and you can place bids anywhere, keeping up to date on competing bids via email or text message.
There is transparency in the pricing. Traditionally, when you find a property you love and there is competition, you have to make a blind offer, and the best offer wins. Sometimes you don't have all the information about the property, perhaps the home inspection isn't done. Often you have to make a decision quickly. Do you even know if you can get financing? I've listed homes and received offers that are $50,000 more than the assessed value of the home, and $60,000 more than the next highest offer. An online auction lets you see every bid made, and your bid will always be one increment higher than the next highest bid. Online real estate auction is a system that instills more confidence and participation from the marketplace.
Similar properties can be grouped together. These groupings are not a single auction of a number of properties, rather they are a set of auctions that interact with each other. This kind of auction has 3 main benefits:
- Similar units are available, so you can bid on the lowest priced property. For many kinds of property, including condominiums and fractional property, the specific unit you purchase generally will not matter. So, for example, let's say a developer has 5 condominiums of similar size up for auction. John bids $250,000 for Unit 1. A few days later, John is outbid at $300,000. However, since Unit 2-5 are all similar, he could bid on any one of them and still get what he wants, and so he looks for one at a lower price. Eventually value evens out among all 5 of the units, bringing much the same, instilling buyer confidence.
- None of the auctions will close until all bidding activity has ceased. Whenever someone places a bid on one of the auctions, all of the auctions in the group are extended by a few minutes. This prevents people sniping at the last second, and gives all bidders a chance to review all the available property and if they want to bid again. Going back to John, the auction is closing soon, and he has been outbid again. He now has some time to look at the current price of each unit, and decide if he wants to bid again.
- There is so much less pressure than a live auction. The tension of a live auction is gone, and you can freely talk with your spouse, kids, lawyers, accountants or whoever you want for input or advice about what to do. You know exactly how much time you have to make a decision, and if you are outbid again you will still get a chance to place another bid.
The auction of real estate via online auction is a relatively new thing. However, the value to buyers and sellers of property guarantees they are going to become more and more common.
