We all witnessed the high profile failure of a property auction on Trade Me where the buyer wasn’t able to settle. This has been heralded by some as evidence that online auctions for property don’t work.
But the problems with this auction don’t prove that the concept itself is doomed. All we really know is that property auctions don’t work very well on Trade Me.
Actually, if we consider the interest from the wider community in this particular auction it has demonstrated that there is a lot of support for this type of sale.
Why they don’t work on TM
The reason why they don’t work on Trade Me is because Trade Me not a licensed agent – well not yet anyway (Under the new Act this will be an option for TM – read the eBook to find out how). Because they’re not a licensed agent, Trade Me can’t get involved. They can’t help, they can’t advise and they can’t assist with completing the sale.
With Trade Me, it’s a private sale and the sellers and buyers are on their own. It’s the private selling that’s the problem, not the marketing method itself and if the auction included the services of a licensed real estate agent, the results could be very different.
Traditional auctions are not popular with sellers
Many agents argue that online will never replace traditional auctions. They’re probably right. There is a small segment of the community who are keen on traditional auctions and this is unlikely to change even after the introduction of online auctions. But it does need to be acknowledged is that despite a decade of hard selling by agents, traditional auctions are not popular with sellers.
In fact, it would be fair to say that the vast majority of the population avoid auctions like the plague. There are no formal statistics available but a quick observation would suggest that less than 5% of properties are offered by traditional auction and that’s a poor result considering the effort that has gone into promoting them.
The reason why most people hate auctions is the same reason some agents love them. Auctions allow agent’s to exert control. Buyers and sellers are “taken out of their comfort zone” and are pressured into making decisions they might not otherwise make if they had more time to think.
But the population isn’t stupid. They know that when they enter an auction room they are entering a shark tank – but nobody wants to be prey – so they stay out of the water.
Online auctions are an improvement
Online auctions will eliminate this fundamental barrier. With online, people can make decisions in their own time, in the comfort and security of their own home. They won’t have to put up with agents circling the room pressuring them to bid – or to accept a bid. They will also avoid being under the public gaze. For these reasons, online auctions could attract a new and much larger group.
They could become hotter than hot.
Some problems to be resolved
Of course there are some problems that need to be resolved, like ensuring bidders are legitimate. But these are relatively easy to overcome and with good programming, online auctions will make it easier to be consistent by “hard wiring” the rules allowing everyone to be confident with the process.
The big question
The big question is not online versus traditional. This is a battle online can expect to win. The big questions are around the public’s enthusiasm for property auctions in general.
There are many people who have been so hurt by the auction process and terrified of the outcomes that they might be lost forever. The real question is whether or not we can win them back – whether or not property auctions themselves will ever be popular at all.
When online auctions come they could give the whole category a boost.
