In today’s digital society, you can buy pretty much anything online and partake in almost any activity without leaving the comfort of your home. The same is true for buying properties at auctions. During the Covid-19 pandemic, businesses across all industries had to reimagine how they worked on operating remotely during uncertain times. Property auction houses across Ireland rose to the challenge and began offering online property auctions.
In fact, they were so popular that many auction houses now continue to offer online property auctions to increase their reach and make them more accessible. This allows even the busiest potential investors, near or far away, to attend a property auction without the commitment involved in travelling to a set location.
But how do property auctions work alongside the traditional auction setting? We have put together this guide to answer that question and to provide you with some online property auction tips to get you ready for any upcoming online property auction.
What is an online property auction?
Online property auctions are very similar in their fundamental operations to a traditional auction which is attended in person. The main difference is that auctiongoers place their bids online rather than in person. There are numerous benefits to attending a property auction remotely. It can be done from anywhere worldwide, offering investors a calmer and more practical option to buy at auction without causing disruption.
If you are new to the world of buying an auction property, you might want to check out our complete guide to buying a property at auction.
How does the online property auction work?
Even if we’ve never attended one ourselves, most of us have a pretty good idea of how the traditional auction works. People attend a bustling room full of hopeful buyers ready to raise their paddle at the right point, all coordinated by an enthusiastic auctioneer.
Online auctions allow buyers to view all the available properties online which they can then go on to bid on and buy all from their devices. Bidding online offers the same benefits you get from attending an auction room, with a few slight differences and variations. Here’s a quick rundown of how things work in an online auction environment and the steps you need to follow in order to partake.
Stage 1: View properties
Just as you would expect from any auction, the first step is to view the properties online and, where possible, arrange a visit. Most online property auctions offer open house dates rather than individual appointments.
Stage 2: Create an account with the auction house
If you’ve found a property you are interested in bidding on, you’ll need to create an account with the auction house’s website. This is usually free and straightforward, but you will be expected to provide an email address and proof of identity.
Before you bid, you will need to enter some payment details. This is because if you bid on a property and that bid is successful, you will need to pay a deposit immediately. Just like you would at an in-person auction.
Stage 3: Confirm the sale type
There are two possible sale types for online auctions. You should confirm which one applies to the property you intend to bid on:
- Unconditional auction – Just like a traditional auction, the purchase becomes legally binding as soon as bidding closes. This means that everything you need to complete the sale, such as mortgage funds and surveys, needs to be sorted in advance.
- Conditional auction – This means you have the right to buy the property after the auction closes. You don’t need to have everything finalised before you bid. However, you will be expected to pay an immediate deposit.
Regardless of the type of sale, any potential buyer will need to input their payment details ahead of bidding in order to pre-authorise the sale. In addition, the successful bidder will be required to make an immediate deposit payment to guarantee the sale.
Stage 4: Bidding
When it comes to bidding, there are usually two options. These may differ depending on the auction company selling the property.
- Bid by proxy – This is an automated option. What this means is that you set your maximum bid, and the bidding system will slowly increase your bid during the auction until you reach your set limit.
- Real-time bidding – This operates more like a traditional auction where you bid directly against others. Every time you are outbid, you can enter a new amount into the system until the auction time ends. If a bid is made within the last five minutes of the online auction, the auction time will automatically be extended by a further fifteen minutes to give every prospective bidder a fair chance.
How do I pay for an auction property?
A lot of properties bought at auction are paid for by cash. It is still possible to get a mortgage on an auction property, but you may find you have fewer options available, and you will also need a quick turnaround on the property once you have it lined up.
If you are planning on taking out a mortgage to purchase the auction property, you will need to have an agreement in principle from your lender stating the maximum amount they are willing to lend you against the property. You will also need to have a deposit ready to pay the auction house after bidding closes if you are a successful buyer.
Typically with an unconditional auction sale, the buyer will have fifteen working days to pay the balance or risk losing their deposit. However, mortgages can take anywhere from 2-6 weeks to arrange. Because of the tight timescales involved, many mortgage-paying auction buyers find a conditional auction sale is preferable because it gives them a longer turnaround to secure their funds – the typical conditional sale takes forty days to complete.
Even when things don’t go quite to plan and a mortgage is taking longer than expected to arrange, there are other short-term financing options available such as an auction bridging loan. An auction bridging loan can help bridge the gap between paying the auction house, securing property, and getting mortgage funds approved. Bridging loans can run for up to twelve months but can be paid off earlier.
Tips for online auction day
Ready to take part in your first online auction? Here are our top tips to give yourself the best chance on auction day:
- Register your interest with the auctioneer. They will be able to answer your questions and bring you up to speed on the current status of the properties they have ready to auction.
- Understand whether a sale is conditional or unconditional and what that means for you and your finances if you decide to bid.
- Find out when you need to register for a particular auction. Some are open for registration right up until auction day whereas others close earlier.
- Find out exactly when bidding will open and close as well as how the bidding will work on the day. For example, some properties are listed one after the other, and some auction houses may list multiple properties simultaneously.
- If this is your first online auction, the auction house may offer a demo of how the live auction works which is really useful for first-timers.
- On auction day, make sure you are somewhere with a solid internet connection. You don’t want to miss out on your dream property because you lost the signal on your device.
- Have your finances lined up, deposit ready, and decision in principle if you will be mortgaging the property.
- Know your budget. It’s easy to get carried away, but knowing your budget and when to stop can give you confidence on the day.
Conclusion
Online property auctions have transformed auctions and made them accessible to more people all over the world. How they work is similar to an in-person auction, except everything can be managed from your home or workplace. If you are planning on registering for an online property auction, the above has provided some useful guidance on getting started and things to look out for. Don’t forget, the Novellus team can help if you require short-term bridging finance to secure your auction property whilst a mortgage is being arranged.
