Generally speaking, prospective homeowners do not actively seek the opportunity to participate in an online auction when they begin their search. Although internet activities such as research and virtual viewings have become more commonplace in the real estate sector, online auctions have not. When you find the perfect ad while house hunting online, you may be disappointed to learn that the sale is contingent upon an auction. It shouldn't stop you. A binding contract is formed between the buyer and the seller if an offer is accepted. The earnest money deposit is in danger if the contract is terminated.
Decoding Bidding at Online Auctions
The auction process can be observed live on several websites. The pace of the bidding can be intense, so it's important to know how much your desired home is worth in the current market before entering the fray.
The Opening Bid
To get your attention the bid price will be displayed prominently on the website to get your attention. It may have little to do with the property's true market value and is not necessarily the final sales price. The seller's expected price may be between 50% and 75% of the projected price. Typically much lower than the seller's minimum acceptable offer, it serves as the auction's starting point. Most online auctions will start at the highest bid and go higher.
The anticipated selling price is often included on auction sites. It would help if you looked at recent sales of similar properties in the area to get an accurate price. Recently sold homes with similar features and locations had ultimate sales prices like these. Since sellers can set their prices for homes on the market, asking prices are not indicative of actual sales prices. A sale price within the past few months is only relevant if it has already closed.
A subsequent bid, sometimes known as an "incremental bid," may need to meet certain minimum standards. With a $10,000 increment and an opening bid of $100,000, the following bids would need to climb by at least that amount. The second offer of $100,000 would therefore be rejected. In this situation, the minimum acceptable second bid is $110,000; the minimum acceptable third bid is $120,000, and so on.
The asking price is rarely the final price for a seller. If the minimum asking price is not met, the seller is not obligated to complete the transaction. A seller might market a $400,000 house with an attractive beginning bid of $200,000. Buyer A may place a $200,000 bid. Possible second-place bidder $225,000. Potential Buyer A could then place a second bid of $235,000. No one will be able to buy this house if the seller has set a secret reserve price of $375,000. The auction won't end until that amount is met.
A binding contract is formed between the buyer and the seller if an offer is accepted. The earnest money deposit is in danger if you change your mind after agreeing. Most of the time, when a buyer loses their deposit, it's because they misunderstood the terms of the agreement or failed to fulfill their obligations. Most auction sites sell properties "as is," meaning buyers have to take the property "as is" without guaranteeing its condition. If you find hidden flaws in the product after the sale has closed, you won't be allowed to renegotiate the price unless the seller has committed an egregious or outrageous breach. If your bid is successful, you must complete some formal paperwork, which may also be started online.
In an auction, there is no need for prolonged negotiations. The time it takes to buy a home, or other property might be cut in half at an auction. Both the purchase and completion deadlines are set in stone. Buyers have confidence that they are competing on a level playing field. After the auction ends, the auction house will normally contact you to arrange payment, or you can contact them yourself. Some will provide an electronic payment option, while others will accept credit cards or wire transfers. After that, you may either pick up your item at the auction house or have it shipped to you. A simple web search will reveal many dedicated online real estate auction sites that host sales on estate agents' behalf. Real estate brokers sometimes promote their listings in online auctions.