The Covid-19 lockdown regulations have necessitated many changes in the way estate agents conduct their business, including virtual home tours and digital signing of contracts. Estate agents, sellers and buyers are also recognising the effectiveness of the online trading space, with a number of local estate agencies teaming up with online auction platforms and reaping the benefits.
Close to R42 million in residential properties was sold in Pam Golding Auctions’ first online auction, powered by established international online auction platform, BidX1.
“The positive response to our first live online auction on 22 October 2020 exceeded expectations, with several properties being sold before the event. Competing buyers came from all over South Africa and from overseas,” says Dr Andrew Golding, chief executive of the Pam Golding Property group.
Rawson Properties, which has had its own traditional auction division for many years, has elected to team up with the Instant Property auction, sales and tender platform to manage online auctions of properties on Rawsons’ mandate.
What to expect
In an online auction, a property is sold at a specified time and there is an immediate result. A private treaty sale, on the other hand, is conducted over an unspecified time period. This can be one to three months or even several years.
Golding says serious sellers are committed and receptive to competitive offers from bidders, and buyers are attracted to the process as they can conveniently transact in real time on a secure, online trading platform from anywhere in the world and on any device. Buyers also enjoy complete anonymity when bidding. All transactions are completely transparent and concluded immediately on the day of the auction.
How online auctions work
Each online auction platform has its own specific rules and deposit requirements, but generally follow these steps:
• The sellers sign an exclusive mandate with an estate agent for their property to be sold as an item in an online auction, which usually features several lots for sale. There could also be a dual mandate with the online auction platform partner, if applicable.
• The seller agrees to a reserve price and an opening bid amount. The opening bid is the amount for which a property is advertised, and creates competition between interested bidders. The reserve price is the lowest cash offer the seller is prepared to accept, and is usually not divulged to bidders.
• Once the required number of properties has been mandated, the auction date is set and the properties are advertised.
• Bidders register for the auction, paying a registration fee, which is usually refundable if the bidder is unsuccessful.
• All relevant documentation relating to the property is available on the site before the auction starts. Bidders will also be able to view the property before the auction by arrangement with the listing agent or on advertised viewing days.
• Due diligence is an important part of the online auction process because these sales are unconditional, from the bidders’ perspective. Once a property has been sold, a contract exists and the buyer is legally obliged to complete the purchase. However, all final bids are subject to acceptance by the seller, whether or not the reserve price has been met.
• Once bidding opens, all registered bidders may place bids on their chosen properties. Bidding on all properties open simultaneously, but each lot will have a different closing time. Bidding is live and bids and counterbids are visible to all participants, with bidders identified only by their registration numbers.
• Once bidding has closed, the offers are presented to the seller for acceptance or rejection. If the highest bidder is accepted, he will be notified and will have to arrange payment of the deposit, usually within 48 hours of the auction. The balance of the purchase price is usually payable within 30 days of the auction. After this the usual process of transfer of the property will commence.
Benefits for agents
The Covid-19 regulations have meant that most estate agents are now working from home and are making extensive use of modern technology. This trend seems set to continue, and online auctions are yet another useful tool for 21st Century estate agents to meet the huge increase in demand for a more modern, flexible approach to property sales.
Online auctions are among the trends that have become increasingly evident during the lockdown period and are expected to continue in a post-Covid environment.
