What you need to know about buying a property at online auction

Online auctions are now the new normal in the Australian property market. The shift to virtual selling, video inspections and online buying started back in March when Prime Minister, Scott Morrison axed all real estate auctions and open for inspections in an attempt to curb the spread of the coronavirus.

Online auctions today are streamlined, user-friendly, and highly interactive. In many cases, online auction platforms can perform all the transactions involved in the buying and selling process, including signing the contract and paying the deposit.

Auctions are highly competitive environments, whether in-person or online. But they can be extremely rewarding and are one of the most exciting ways to purchase a property. If you are a first home buyer planning to buy through an online auction, here are some tips that’ll help you secure your dream home.

What you need to know about buying a property at online auction

1. Do your research.

Do your research first before you participate in an online auction. Ask your real estate agent to provide you with a list of recent comparable sales in the area and look at sold data. In your research look at the auction clearance rate (the proportion of successful auctions in that area). Knowing the clearance rate and how much similar properties in the area have sold for at auction gives you a useful guide on the amount you should offer for the property. That way, you reduce the risk of overbidding on auction day.

2. Prepare your money.

Just like an in-person auction, as soon as the hammer goes down, you are legally required to fulfil the purchase if you have the highest bid in an online auction.

Consider applying for a loan pre-approval. A pre-approval is an indication from the lender to honour your loan application subject to terms and conditions.

3. Understand the online auction process.

Online auctions today are sophisticated, user-friendly, and highly immersive platforms. You can browse property listings, follow your favourites, and send reminders to yourself about auction dates. Online auctions give you the freedom and convenience to watch or participate in an auction in the comfort of your home via a digital device. If your bid is successful, you can sign the contract digitally and pay the deposit directly to the Trust Account of the listing agent.

Registration

All participants of an online auction must complete a simple registration process. The listing agent approves the registration. During the registration process, you will have to provide proof of identity and your contact details.

Once you have registered, you will be sent a link to the live stream. You can access the auction via any digital device whether it’s a smartphone, a tablet, laptop or desktop PC.  

Transaction

Some platforms have fully online contracts you can digitally complete and sign at the end of the sale. If this function is not available, the listing agent will contact you directly.

Security

Online auction platforms today are transparent and legally compliant. Bidders have to complete a rigorous but straightforward registration process that includes identity verification and a fraud check. The platforms are encrypted and firewall-protected.

Trial run

To gain some experience in auctions, consider registering yourself as a spectator. The registration process is similar to registering as a bidder. This will ensure you’re comfortable with the technology before you want to place a bid and you know what to expect.

4. Inspect the property.

Don’t just bid on a property you have seen online. Make an appointment with the real estate agent to view the property privately or virtually before you commit.

When viewing a property, consider having a checklist of things to inspect. Our guide ‘The seven most important things every first home buyer must pay attention to’ lists the things that even seasoned buyers can miss out when inspecting a property.

Melbourne home buyers please note: Currently, one-to-one inspections are not permitted under strict stage four restrictions in metropolitan Melbourne. However, private inspections will resume as soon as these restrictions are eased.

5. Do your due diligence.

Make sure you know what you are buying before you bid on a property. Building and pest inspections can protect your interests and prevent you from making a costly mistake.

Also, request a copy of the sale contract and section 32, and it is advisable to have your conveyancer read through the document thoroughly before you commit to any purchase. 

6. Seek professional help.

Buying a property can be overwhelming. Finding the right property to buy may require the help of a professional real estate agent. The agent can do the initial groundwork of narrowing down the suitable properties for you.

They can also help you plan a strategy as well as provide valuable advice and guidance on the online auction process.

7. Formulate a strategy.

To succeed in an online auction, you will need a bidding strategy. Here are some winning tips from the experts:

• Fix your price limit and pledge not to exceed it regardless of what happens on the day of the auction. The limits you set should be uneven because bids usually occur in multiples of $10,000, $5000 or $1000. For example, if you set your limit at $603,000 that extra $3000 could win you the auction.

• Put your best foot forward to succeed in an online auction. Bid strong at the start of the auction – close to your limit. First-time buyers tend to bid tentatively in an auction. Still, the experts say a bold bid at the beginning is more likely to discourage others from bidding and thereby enhancing your chance of securing the winning bid.

• Do not become emotional during an auction. Put your bid in as soon as you are notified that another bid has been placed but stay focused and do not exceed your price limit – no matter what happens – to avoid overextending yourself.

Acquiring your dream home today through online auctions is becoming more and more prevalent. For the most part, the Australian property market has remained stable despite the economic disruptions caused by COVID-19. There are plenty of good properties on the market, and one of these could be the dream home you are looking for.