I’ve sold a handful of my own properties over the past few decades. All of these sales have been private sales, with the assistance of a realtor. There’s no specific reason as to why I chose the private sale route. I did of course have the option to sell my homes through another preferred avenue – auctions.
Since my last home sale many years ago, there has been a surge in popularity for online real estate auctions. From a quick Google search, I came across at least seven online auction houses.
I’ve outlined my thoughts on why the online auction process will be the way forward in real estate sales, and why it will be top of my list for my portfolio.
Brief overview of the auction process
For those unfamiliar, an auction process works quite differently to a private sale. For starters, auctions involve a truncated sales process that is transparent to all parties involved. Instead of two to three potential buyers, there could be several. Further, while sellers have little control over the final sales price, they can set a price floor (or a reserve).
Sellers prefer auctions over private sales if they need expediency and finality. Private sales can oftentimes be protracted and underwhelming. Trust me when I say I know this first hand. I’ve had multiple homes placed on the market for months, only for them to be withdrawn and put on rent. An auction process can offer a quick result, which is ideal for sellers who require that option.
Auctions are disproportionately balanced in favour of the larger capital cities. For instance, Melbourne and Sydney had 1,120 and 566 auctions scheduled, as at 24th July, 2021. Alternatively, smaller markets like Perth have maybe 15-20 auctions scheduled at any given time.
The rise of online auctions
Online auctions operate under a similar premise to traditional auctions. Obviously, the online version requires no physical presence.
The emergence of online auctions couldn’t have come at a better time. The widespread social distancing restrictions and lockdown measures meant that traditional auctions were not always permitted.
Moving auctions to an online platform elegantly resolved this challenge, while also accommodating demand for a hot property market. Furthermore, it expanded the market to a wider buyer pool. For instance, foreign buyers have historically been indirectly involved in Australian auctions, typically through an intermediary. However, online auctions bridge the gap between foreign investment and domestic supply.
The availability of foreign buyers has also contributed to an increase in median sales prices. I know of a property in Perth’s southern suburbs that was the subject of an intense online auction between a foreign investor and a potential Sydney buyer. The end outcome? A final sales price that was $300,000 over the reserve!
While this was an isolated incident, it certainly demonstrates the impact that online auctions can have on property prices.
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Now that online auctions have burst onto the scene, I foresee them being a mainstay. Not only are they convenient and transparent, but they provide access to a much larger buyer pool. The increase in competition also suggests that more sellers are warming to the concept.
For my next home sale, perhaps I should depart from my historical approach…
The content outlined above was written, edited and published by the Lost Realtor. The author has over 20 years or real estate sales and investing experience in the Australian property market. He has held senior positions in Australian building companies, including being the General Manager of the residential sales division of Collier Homes. His qualifications include a Bachelor of Commerce degree and a Graduate Diploma in Building and Construction Law.