Auctioning is a format that dates back many centuries, having been the most effective platform for trading goods and property in the olden days. In recent years, it has emerged as an extremely successful model for buying and selling property, alongside the traditional agency and broker model, and is extremely popular in many countries such as the United Kingdom, the United States of America, Australia and New Zealand. Auctioning is now poised to become an integral part of the Indian realty sector, making the process of buying and selling property easier, efficient, more convenient and hassle-free. With the entire procedure from the listing to the exchange of contracts being achieved within six to eight weeks, auctions bring speed, simplicity and certainty to the process and are a fitting match for the changing dynamics of the Indian real estate economy.
The Indian real estate sector is currently a Buyer’s Market – that is to say, transaction volumes are at an all-time low. For the last three or four years, the market has seen sluggish demand and a disturbing supply/demand mismatch. Auctioning creates an alternative for the traditional broker-driven market, providing buyers a safe and conducive ecosystem where transactions are carried out in their physical presence. The real estate market is thus bound to benefit from the auctioning format, and bounce back due to increased buyer confidence.
This modern and dynamic approach not only allows for a faster and more certain alternative for buyers, but also offers a high-intensity experience. Scores of interested buyers, investors, first-time home- owners, corporate and high-net worth individuals gather under one roof to bid competitively against each other, with the hammer hitting the gravel to signal a sealed deal. The successful bidder is required to provide the details of the buyer and a payment of 10% of the purchase price. After a verification of the buyer’s identity and immediate clearance of deposited cheques, the Agreement to Sale is drafted in the auction room and given to the buyer to sign, with the proceedings being overseen by a solicitor. Auctioned properties can also be purchased after the actual event. If a particular property fails to reach its reserve in the room, some auction companies continue to market it, and the lot can be purchased days or even weeks after the sale auction.
A common notion about auctions is that only experienced real estate investors are able to successfully purchase properties using the format, while novices only have access to traditional channels which involve searching real estate listings and contacting agents. However, this notion is entirely unfounded, as auctions are a safe and simplistic arena where even new investors can make informed purchases. With auctions being available both live (in-person) and online, technology has made the process extremely convenient, transparent and accessible. As a result, real estate auctions are growing in popularity, especially for people looking for affordable properties.
Property buyers can take their time deciding upon the properties they want to bid for, since auctions are usually planned well in advance and auction houses publicly release a catalogue of listed properties ahead of time. The auction format has evolved with the times, too. Leading auction companies disseminate information about properties and upcoming auctions through e-mail and SMS to prospective buyers in their databases. Advertisements are also put out in national, trade and local press, in addition to listings being announced through PR, radio ads and hoardings. Each property is listed with a ‘guide price’, so buyers know the rough price expected for their preferred option. Some auction companies even organise Open Houses for potential bidders to walk through the properties before bidding. Descriptions about properties are also made available to ensure absolute transparency. In addition, auction companies offer a variety of other services, including valuation, creation of legal opinion notes and drafting agreements, to add further convenience for both buyers and sellers.
Another popular misconception is that only a ‘distressed’ property – that is, a property previously owned by people who did not complete their mortgage payment to a bank or the government – is put up at auctions. This is not true, as more and more non-distressed properties are being sold at auctions now, including office and apartment buildings, newly-built houses as well as luxury homes. Auctions also offer a first chance to grab certain properties, allowing buyers to purchase some of the best properties through the format. Moreover, the unconventional nature of auctions means properties can often purchased at comparatively lower prices.
Buying property through auctions is thus the fastest, securest and easiest method. With an absolute guarantee of transparency, investment in property becomes much simpler and convenient. Indian buyers are sure to rapidly adopt this format because it allows one to sidestep the entire broker nexus and get their hands on attractive, unmatched property deals that auctions offer.