Online auctions: US trend drifts across the Pacific

Posted on 2/07/2008  

Just as property investors were getting to know all the tricks and traps of auctions, now the bidding process is moving into cyberspace. While the definition of a true online auction is elusive (some sites act purely as advertising or introductory conduits), the next step in virtual real estate marketing is catching on.

The growth of online house auctions has predictably led to calls for consumer affairs authorities to investigate. The borderless nature of cyberspace trading might cause some legal problems, as all states and territories have their own regulations when it comes to real estate and consumer law.

Online auctions are the logical extension of a developing trend for home buyers to use the Internet for their research. It's quite practicable to compile a short-list of properties before talking to a real estate agent or inspecting anything on the ground.

Let's make an important distinction between online auctions and online bidding systems. The latter simply allows someone in a remote location to log into a physical auction and make bids via the Internet. Bidders using this type of system will want to have done their homework and preferably inspected the property, as bids made via the keyboard are legally binding.

A new Sydney-based company, PTYauctions Ltd, has developed online bidding as an additional service to its physical auctions. Managing director Gavin Stewart says PTYauctions spent almost two years setting up its system and working with regulators to ensure the system was compliant.

The company sold its first property online in May, when a Melbourne-based bidder bought a house in Wahroonga in Sydney's north shore. Potential bidders have to register before bidding online.

"When you bid online at one of our auctions it's legally binding," Stewart says. "We still have a physical auction, we have an auctioneer and people attend the auction. The difference is that if you are registered you can log on and bid online from anywhere in the world."

The true online auction, however, is similar to the methods used by eBay and others to match up buyers and sellers in an online environment. The website About.com cautions that bidding in this environment may not be legally binding and also warns of myriad other potential hazards. Janet Wickell advises those interested in bidding online to carefully read the policy guidelines for each auction website.

The Real Estate Institute of Victoria was first to push for a compliance review, asking the Victorian Consumer Affairs Minister to intervene. REIV chief executive Enzo Raimondo says he's concerned that as the law stands, consumers have little or no protection when they conduct online sales. (Note: the REIV has never shown any concern for the protection of consumers in the past. It's more likely they are concerned about their members losing business).

"The law currently allows for a range of electronic transactions including conveyancing and to allow for the actual sales to occur online would complete the electronic sales transaction," Raimondo says. "Appropriate amendments to the Sale of Land Act are needed to allow people to participate in online real estate auctions."

The American innovation of selling real estate online has been growing in popularity in the US since the mid-1990s. eBay Real Estate (in the US) lists 1,900 homes for sale - many of them in Florida. However, according to real estate news service msnbc.com, online revenues are only a small fraction of the overall real estate auction figure in the US.

Your correspondent has attended more property auctions than most normal folk could stand and with hindsight and experience closes with this: There has been scepticism and claims of dirty tricks at property auctions for years - ‘Was that really a vendor's bid?' ‘Is there anyone on the other end of that telephone?' It may take a lot of spin to persuade the astute real estate investor to raise his bid against an unseen bidder out there in cyberspace.

ENDS

« Back