In the age of Covid-19 and subsequent lockdowns, everything is going virtual – and property online auctions are no exception
WORDS: ATLEHANG RAMATHESELE
While some people may have found it intimidating to buy high-priced items like property online, current times see us becoming expert negotiators of big business in this new realm – with great results. As digital purchases continue to gain traction, online auctions are following suit. However, this wasn’t always the case.
Covid-19 and the enforced lockdown altered consumer behaviour in a way that would have taken five to ten years to change under pre-pandemic conditions – even with the ever increasing speed of the tech revolution. This is according to Joff van Reenen, director and lead auctioneer at High Street Auctions, a South African online auction company.
“Prior to Covid-19 most people would have bought a shirt online, but there’s almost no way they’d have bought a house,” he says. “Now not only will they just as easily buy a house or a building using an app; most will do so site unseen, after having completed a paperwork due diligence and a virtual 3D tour.”
WELCOME TO THE WORLD
John Jack, CEO of Galetti Corporate Real Estate, believes around 5% of real estate sales in South Africa are transacted using online bidding platforms. Given the growing popularity, one could expect it to increase to 25% in the next five years. “Influenced by Covid-19, the current market has led many industries online and auctions is one of them, breaking down previous perceptions of transacting digitally,” he says.
The South African Professional Auctioneers Association (SAPAA) defines online auctions as “the competitive marketing and disposal of goods or assets conducted on an internet-based platform for a predetermined period with each lot sequentially closing at a given time”. The optimisation of this process makes it more accessible all over the world.
“This opens the process up to the overseas market and gives embattled landlords access to a wider pool of prospective buyers,” Jack says. Like traditional in-person auctions, bid prices are updated in real time and the highest bidder is announced at the end of each auction.
EVERYONE CAN BID
It may be a common misconception that online auctions focus solely on foreclosures and are largely about commercial property, but they actually serve a much broader purpose and more consumers are actively participating. More homebuyers, who have already become used to searching for potential properties digitally, are finding that online property auctions are a safe and easy way to make a purchase. Online auctions in particular offer a myriad of benefits for buyers. “You can bid anywhere, anytime, anyhow and it’s really easy. The tech has also advanced massively in recent years, so it’s a very safe financial platform and it’s also extremely convenient,” says Van Reenen.
“The most important thing for people is to work with a company they trust; a reputable brand with market track records. Most of our sales last year were to buyers who couldn’t travel to view properties, and we sold a lot of coastal mansions and bush lodges to foreign investors who were bidding from their homes overseas.” According to MC du Toit, CEO of online auction company BidX1 South Africa, South Africans in general are increasingly tech savvy and confident with regard to concluding purchases online, and that includes a big-ticket purchase of a home – or in the case of an entrepreneur or business owner, acquiring a commercial property.
Du Toit says it’s also important to familiarise yourself with the registration process – such as providing FICA documentation and a deposit. Thereafter, he advises looking out for auction catalogues to stay abreast of opportunities that suit your needs. Learn all about the property you want and ensure you understand the conditions of sale. “You can also visit and inspect the property on show days,” he says. “Property brokers will assist with any queries and can also take you through a realistic bidding simulation so you know what to expect on the day and they are available to provide advice and assistance during the auction itself.”
ONLINE AUCTIONS VS VIRTUAL AUCTIONS
According to Van Reenen, exclusive, rare and sought-after properties are best suited for online auctions but the scope of this kind of auction has also changed considerably over time. “One is not physically present at an online auction. You’re bidding via a number of digital platforms on your laptop, tablet or smart phone and you don’t have any physical interaction with other bidders or the auctioneer,” he explains.
This is a big difference from the jostling and direct engagement at a physical auction where everyone gathers on the sale floor with the auctioneer at the front on the podium calling out bids and where all the bidders can see each other. Virtual auctions are a hybrid of the two, combining live and online elements. “A virtual auction brings together numerous electronic bidding platforms including Zoom and apps and incorporates them via live-stream on a sale day with a live audience and telephone bidding. It’s hugely interactive, very exciting and has global reach. High Street Auctions conducts both online auctions and virtual auctions,” he says.
TRADITIONAL SALES VS AUCTION
When comparing online auctions to traditional commercial property sales, Jack believes that each of these options have their merits and how they are approached should be determined on a case by case basis. “Mass exposure, a ‘quick’ transaction, transparency, qualified buyers and competitive pricing are key factors for auction,” he says. “Alternatively, if the seller wants to keep the asset ‘off market’ then a private treaty is best.” While Jack believes that there will always be a place for traditional commercial property sales, his Galetti team recently launched their new online platform, Galetti Auction Division, as an additional route to market for clients. “This is a new way for us to move commercial property and it’s backed by an experienced team,” Jack says.
STILL NOT SOLD?
While some homeowners might still want to opt for the more traditional route of selling their home through an agent, Van Reenen says auctions offer the fairest and most transparent means of selling property. ‘It’s also a lot faster and more immediate on auction, with the usual turnaround time from signing the mandate to sale at around six weeks,” he says. The seller also doesn’t pay any commission and sells by their conditions on to their attorney on their time. “Ultimately it’s market appetite for the lot that decides the price. There are no back room deals, no waiting months for those ‘promising’ prospects that lead to nothing and no putting life on hold waiting for a buyer to show interest,” he says.
TOP TIPS FOR ONLINE AUCTIONS
As with any significant purchase, ensure you know what you can afford and what you are willing to pay for the property, advises BidX1’s Du Toit. One of the key benefits of online auctions is that you won’t feel pressured in the way you might if you were physically present in a room with other bidders. “With online bidding, you have the privacy to make clear decisions without distraction, so remain calm and stick to bids that you are comfortable at – know your limit and stick to it on the day.”
When you have done your homework and decided you want to acquire the property, but don’t want to place your bids manually, you can specify the maximum bid price you are prepared to pay, Du Toit says. The system enters the bids for you – only as necessary to retain your position as the winning bidder and only up to the maximum bid price you’ve specified. This is a good option if you’re concerned about your internet connection, experience load shedding, or don’t have access to WiFi. “Be assured that your maximum bid cannot be viewed publicly, so only you will know how high you’re willing to go,” he says.