The Real Estate Conversation
Online auctions will never replace traditional ones
Every so often a news story will trumpet an online real estate auction, which will supposedly replace the age-old traditional version.
Some online auction products have even been around for years, but I'm yet to see them make any dent in the popularity of real estate auctions as a successful selling method. The reason why is that online auctions aren't a modern day equivalent.
They're fundamentally different because they change the dynamic of why you sell by auction – which is competition and emotion combined.
An online auction is really just a tender by another name. Most of online auction products often also allow conditional bidders so straight away you're removing one of the primary reasons why you take a property to auction, which is delivering a contract that is in the seller's interest. Straight away that means that online auctions are detrimental to sellers and to agents, too.
Secondly, the reason why auctions have been around since the pyramids is because they rely on human emotion, which is when someone sees someone else potentially taking the prize off them.
Clearly, you can't do that behind a computer screen. There is no simulation or program that is ever going to replicate standing across from someone in an auction environment – unless they develop cloning technology. There are some products, such as Gavl, that require cash conditional contracts and also allow for people to bid remotely and are therefore included in the competitive environment, which is a much better system.
Even though online auctions might have a date and time allocated for bids, that still doesn't replace bidding face to face because you're competing against a faceless person who you probably won't get hot under the collar about. I also don't believe that online auctions are in the best interests of vendor, however, some people might like the idea from a privacy point of view.
But if that's the case, they can sell by private treaty or only allow registered bidders to attend the auction. If I was a buyer, I would be quite happy to be involved in an online auction, because the terms are in my favour, plus I know I won't get carried away because I won't be as emotional.
At the end of the day, real estate professionals have to recommend a sales method that we believe will be the most beneficial to our seller clients. And that is not an online auction in my opinion.