If you are considering buying land or a house in online auctions, you are at the right place. This guide is going to answer all your questions about online land auctions and tell you how you can successfully buy property on online auctions.
Let’s get started.
Before we move ahead and discuss how you can win auctions, let us discuss a few points that make buying land at auction a better alternative than conventional land buying.
One of the biggest benefits of buying land in an auction is that you are confident about the seller’s commitment. Unlike the conventional land purchasing methods where the seller can start or stop the selling process according to his circumstances, auctions operate on a different level.
Land sellers often delay the deal or even back out of it in order to trade to a higher offer. This is not just a waste of your finances but also of the time you spent examining the property, doing research, preparing documentation, and so on.
In auctions, the seller is committed to the sale, and you can rest assured that the sale will take place according to the proposed manner on a certain date and time.
Our previous point leads us to this second most influential benefit, i.e., the time-bound selling procedure.
Auctions are a fast land buying process. If you are prepared for buying the property and have inspected it thoroughly, all you have to do is visit the auction site or website during the biddings and place your bids. If you win, the land is yours.
Also, the timeline of closing is often 30 days or less. So, if you have trained well for the auction, you can get the land in no time.
Another reason to buy land in an auction is that all the buyers are at the same level. Every buyer has equal information about the property and has to operate with the same terms as other buyers. The auction takes place at an exact time for all the interested buyers and there is fair competition.
The traditional method can be less transparent and influenced by negotiation skills, relationships, reputations. These can lead to unfair or unjust buying practices. Therefore, auctions are way more transparent as a method.
Another advantage of auctions is that you don’t have to deal with the hassle of negotiations. If you are not someone who likes to bargain or you find it difficult to negotiate, auctions are a fantastic alternative for you.
Negotiations demand your time, resources, efforts, and skills. Additionally, you may or may not negotiate satisfactorily to get the property at a fair price. Auctions eliminate this possibility by fixing a proper date and time for the sale. The whole process is more transparent than traditional buying.
Finally, auctions can help the price of a property arrive at the true fair market value. Unlike conventional procedures where the seller can sell the land according to their evaluations (often based upon inflamed or emotional opinions) and negotiation powers, auctions allow for a competitive bidding process and encourage smart investment. This helps buyers get a real-time sense of the market value of the property.
Terms to Remember Before Bidding on Auctions
The opening bid is a price stated online to attract your attention to the property and it is the starting point of the auction. Usually, the estimated bidding price is almost 50% to 75% of the amount the seller actually hopes to receive.
On many auction websites, you can find the estimated market value of the property. It is usually evaluated by examining comparable sales i.e, prices of closed sales within the past few months.
There are certain bidding requirements related to the amount of a subsequent bid, known as incremental bids. If the increment is $20,000, it means that you have to place your bids by increasing the current bid by at least $20,000. For example, if the current bud is $1,00,000, you have to place the second offer of $1,20,000. If you make it something like $1,00,500, it won’t be accepted.
Most of the time, sellers have a secret reserve price. If the bids don’t reach this price, the seller is not required to sell the property. For example, if the final bid goes to $3,00,00 but the seller has a reserved price of $4,00,000, the seller is not bound to sell and the auction won’t be finalized.
Here are the steps you should follow to buy land in auction:
- Once you have found a perfect home or land online and want to participate in online bidding, your first step will be creating an account on the auction website. For that, provide your accurate personal details, credit card details, etc. and your account will be ready.
- Most auction websites allow financing. So if you want to take a loan, you should also deal with a lender prior to joining the auction. This way, if you win the house, you can own it without lacking finances.
- Familiarize yourself with all the legal requirements and closing terms before making your bids. Also, earn commission from the sellers because auction properties also charge a “buyer’s premium” fee, almost 5% of the winning bid. Don’t forget to add it to your overall budget.
- If you are new to bidding, prior knowledge of the auction environment is necessary for you. Live bidding action moves fast, and you must possess a good understanding of bidding in order to win.
- On several land auction websites, you can watch live bidding. You can also make comprehensive research to learn about bidding strategies and techniques to make successful bids.
- Read everything about the bidding documentation and rules. Once you win the auction and you deny buying the property because of a misunderstanding at some points, you will lose your money deposit.
- On the auction day, log into your website account early to not miss anything important. Place your bids smartly & strategically and don’t be in any hurry.
- Observe other bidders, know their tactics, and monitor how much they are willing to pay for the property.
- Once the bids cross your budget, never ever try hard to get the property. There are tons of other properties for you. Because even if you buy the property after exceeding your limit, you will be at loss.
- If you make the final bid and win the property, a contract between buyers and sellers will be formed, and in some time, the house will be yours.