Online property auctions have risen in popularity in recent years, fuelled by increasing use of technology in the real estate industry. In this article, you’ll learn about the key types of online auctions and how they differ.
‘Online auction’ is often used as an umbrella term for any property sale that is conducted remotely via an internet connection and offers transparent bidding. However, not all online sales processes fall under, and are protected by, the auction legal framework in Australia. Many are actually classed as a private treaty sale, where the agent is able to control price transparency settings and a cooling off period applies.
At Openn, we offer both online private treaty (Openn Offers) and online auction (Openn Negotiation) sale processes. The Openn Negotiation process has undergone a thoroughly legal review to ensure it complies with auction rules in all Australian states.
Online auction vs online private treaty: 5 key differences
When looking to participate in an online sale, there are 5 key areas where the experiences can differ, depending on whether the campaign is classed as an ‘auction’ or a ‘private treaty’ sale.
- Price transparency: If it is an online auction, bids will be visible to participating buyers, at all times. Additionally, in an Openn Negotiation, the agent is able to reveal the bid on other online portals. In instances of a online private treaty sale, the agent can control (turn off or on) price transparency. Importantly, only qualified buyers will be able to view the offer prices if this setting is turned on.
- Awarding a winner: If it is an online auction, the buyer with the highest bid above the reserve price secures the property. If it’s an online private treaty sale, the agent (on behalf of the seller) can choose any buyer – even if their offer wasn’t the highest price.
- Time constraints: Most online sales have a set timeline for offers to be placed, to create urgency in buyers. Both online auctions and private treaty sales can utilise a ‘dynamic closing’ or ‘final bidding stage’ format, featuring a countdown timer that resets or extends every time there is a new bid or offer. However, while a final bidding stage may be required in an online auction if there are at least 2 buyers, in a digital private treaty sale the agent can choose not to proceed and sell the property at any time, to any buyer they choose.
- Cooling off: If it is a true online auction, there is no cooling-off period and the buyer is contractually bound to the sale. Whereas, if a cooling-off period applies, that indicates the online sale falls under the private treaty framework.
- Conditional buyers: Buyers with flexible conditions (such as being subject to finance), are usually unable to participate in traditional auctions, and this can be the same for some online auctions. The Openn Negotiation online auction process allows these type of buyers (subject to the seller's approval) to join the bidding. For online private treaty sales, conditional buyers are able to participate at the seller’s discretion.
Not only are there nuances in the types of online auctions available, the process of buying and selling via them can also differ greatly depending on the platform facilitating the sale. See how buying a property through Openn works below:
Today there are a number of platforms offering online property sales in Australia, which makes it incredibly difficult to provide a detailed and accurate analysis, as there is no 'one-size-fits-all' experience for buyers or sellers. However, here are some key areas of difference to be aware of:
- Registration: Depending on the platform and sales method, the registration process for buyers can be more intensive. However, most will require ID verification, submission of any terms and conditions, as well as an opening offer or bid.
- Fees: There is usually no cost to buyers participating in an online sale. Some platforms require agents to pay a subscription, others offer a pay-per-listing basis. Agents can choose to on-charge the cost of using the platform to their seller, under vendor-paid-advertising costs.
- Negotiation: The ability to counter-offer faster and easier is one of the prevailing benefits of online property sale methods. Most platforms will notify buyers of a new bid or offer, giving them the ability to increase their own. However, while some may allow a buyer to set their own offer increase, typically the agent controls the minimum increment the offer price must be increased by.
To avoid disappointment and confusion during the sales process, it’s important to fully understand the type of online auction you are participating in. Ultimately, the listing agent is your best resource for any questions – so don’t hesitate to reach out!